December 9, 2008 / 7:01 PM / in 9 years

Canada under pressure as U.S. auto package nears

TORONTO (Reuters) - An agreement on a U.S. aid package for the auto sector would turn up the heat on Canada to bring forward its own support plan, Dalton McGuinty, premier of the province of Ontario, which is home to most of Canada’s auto industry, said on Tuesday.

<p>A General Motors employee inspects Chevrolet Impalas on the production line in Oshawa, Canada August 21, 2006.REUTERS/J.P. Moczulski</p>

“I expect that if Washington comes forward with an interim support package -- a bridge to Obama, as they’re calling it -- there will be a heightened pressure on us to respond with an interim package as well,” he told reporters.

The White House said it was making progress in negotiations with Congress on a $15 billion rescue package for Ford Motor Co, General Motors Corp, and Chrysler LLC.

It said that while a number of issues were still unresolved, it was possible a plan could be ready on Tuesday or Wednesday.

In Ontario, McGuinty said he remained convinced Canada will have to find a way to support the Detroit Three, the 400,000 jobs related to the auto sector in the province and the C$20 billion ($15.9 billion) a year they bring to the Canadian economy.

The companies are looking for about C$6 billion in loans, loan guarantees and lines of credit in Canada.

They presented restructuring proposals to the Ontario and Canadian governments on Friday. McGuinty said a team of experts was “poring over the proposals... with a fine-toothed comb,” and would make recommendations on a plan once that process was finished.

McGuinty refused to comment on a report in the Globe and Mail newspaper that said Chrysler Canada may shift production from two of its plants in Ontario to the United States if it fails to get the C$1.6 billion loan it asked for in Canada. That would eliminate more than 8,000 Canadian jobs, the paper said, citing people who had been briefed on the company’s restructuring plan.

The president of the Canadian Auto Workers union, Ken Lewenza, said he was surprised at the report. Lewenza said Canadian auto plants have labor costs that are competitive with those in the United States and urged the government to impose a condition on automakers that if they want access to the Canadian market, they should manufacture in the country.

“We’ve always said if you want to sell in Canada you ought to manufacture in Canada,” Lewenza told reporters after a meeting with Industry Minister Tony Clement.

The paper said Chrysler could move its minivan production out of Windsor, Ontario, to a plant in St. Louis, Missouri, that is now idled, and transfer production of large sedans made in Brampton, Ontario, to a plant in Detroit.

“The fact of the matter is both of those plants are very productive, both of those plants have had significant investment, both of those plants deserve better, and that’s a message I’ll send Chrysler,” Lewenza said.

Chrysler said it would not comment on confidential information submitted in its proposal, but it reiterated in a statement it wanted “to ensure Chrysler Canada’s substantial Canadian manufacturing and operational footprint is protected”.

In an interview with Reuters last Friday, Reid Bigland, president and chief executive at Chrysler Canada, underlined his push for a made-in-Canada aid package.

“If we are successful in securing funds in the United States, we firmly believe that those funds will be used to promote U.S. jobs and promote U.S. investment, and if they don’t respond in kind here in Canada, our concern is that all product mandates will go into the United States and in Canada we are going to have a bit of a slow burn with respect to jobs.”

The CAW said it has not had any talks with the Canadian government on taking private equity stakes in any of the Detroit automakers, in exchange for concessions.

The United Auto Workers union in the United States said on Monday that it was seeking a stake in General Motors Corp and a seat on its board in exchange for any concessions intended to cut costs for the ailing automaker so it could qualify for government aid.

($1=$1.26 Canadian)

Additional reporting by Louise Egan; editing by Peter Galloway

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