Canada extends lifeline, takes stake in Chrysler
By John McCrank and Pav Jordan
TORONTO (Reuters) - Canada's government will take an ownership stake in troubled automaker Chrysler in exchange for more than $2 billion in loans, under a sweeping North American rescue plan, government officials said on Thursday.
Chrysler filed for Chapter 11 bankruptcy protection in the United States earlier in the day and also entered into an alliance with Italian automaker Fiat SpA.
Ottawa and Washington demanded the Detroit company partner with Fiat by Thursday as a condition for funding.
The Canadian government, along with the province of Ontario, will provide $2.42 billion in financing to assist with the restructuring process. Under the terms of the deal, Canada will take a 2 percent stake in the revamped Chrysler and will have one director on its nine-member board.
The deal also launches a restructuring of Canada's massive auto sector, and may form the blueprint for a similar arrangement with struggling General Motors Corp.
"This decision is not a perfect decision, but one that will ensure a viable Chrysler, and ultimately be a part of a viable auto sector coming out of the recession, which Canada must have," Prime Minister Stephen Harper told a news conference.
The political and economic costs of an auto industry collapse in Canada would be exorbitant, and Harper said it would mean half a million jobs losses overnight.
Ontario produces more vehicles per capita than any other jurisdiction in the world, and is also home to plants owned by GM, Ford, Toyota and Honda. Continued...