- The Washington Times - Monday, March 30, 2009

TORONTO (AP) - Canadian officials said Monday they agree with President Barack Obama that neither General Motors nor Chrysler has proposed changes comprehensive enough to justify further long-term bailouts.

But Canada will go ahead with up to 4 billion Canadian dollars ($3.2 billion) in interim loans to keep the companies afloat temporarily. Canadian Industry Minister Tony Clement said that without the interim funding Chrysler would not have been able to meet payroll demands.

“That was the stark choice we were faced with,” Clement said after announcing that the first installment of 250 million Canadian dollars ($198 million) would be loaned to Chrysler by the end of Monday.

Obama asserted unprecedented government control over the auto industry Monday, rejecting turnaround plans from General Motors Corp. and Chrysler LLC and raising the prospect of controlled bankruptcy for either ailing auto giant.

Clement said he agreed with Obama that they must consider the possibility of court supervised restructuring.

Clement said GM and Chrysler must present plans that lead to a viable North American industry and maintain the 20 percent Canadian share of production.

“In conjunction with our American colleagues we have determined that further fundamental changes for both companies are needed,” Clement said.

Clement said GM and the Canadian Auto Workers union will have to reopen their recent agreement and agree on even more cost-cutting measures because they didn’t make enough progress on legacy costs.

“We are expecting General Motors and the CAW to continue their discussions particularly on the issue of legacy costs where it has become apparent there wasn’t as much progress as we would have liked to have seen,” Clement said.

GM Canada didn’t return messages seeking comment.

Canadian Auto Workers President Ken Lewenza said they wouldn’t open the agreement again just a month after first reopening the GM agreement.

“There’s no reason for us to go back to the bargaining table with General Motors,” Lewenza said. “We can’t resolve the crisis that we have in the auto industry at the bargaining table so the answer today is no.”

Lewenza said he was shocked by the developments and added that he now knows why he was unable to reach a new agreement with Chrysler last week.

Obama said Chrysler’s situation is more perilous, and the government will give the company 30 days to overcome hurdles to a merger with Fiat SpA, the Italian automaker. If they are successful “we will consider lending up to $6 billion to help their plan succeed,” Obama said.

The Bush administration late last year approved $17 billion in federal funds to help GM and Chrysler survive. It also demanded both companies submit restructuring plans that the Obama administration would review.

Canadian officials said they are working in tandem with the U.S. to maintain the current 20 percent share of North American auto production in Canada. As a result, Canada will be anteing up roughly one-fifth the U.S. financial bailout package.

The auto industry directly employs over 150,000 Canadians plus another 340,000 Canadians indirectly.

“We’ve worked closely with the governments of Canada on GM and Chrysler as both those companies have extensive operations there. The Canadian government has indicated its support for our approach,” Obama said in Washington.

Ottawa and Ontario first offered the 4 billion Canadian dollars ($3.2 billion) in interim loans in December but they’ve yet to be drawn upon. They are prepared to lend GM about 3 billion Canadian dollar ($2.4 billion) and Chrysler 1 billion Canadian dollars ($793 million) to stay in business until they present restructuring plans acceptable to the governments.

“These companies will not look the same after the restructuring takes place,” Clement said.

Another 500 million Canadian dollars ($396 million) will be loaned to Chrysler in early April and the remainder by May 1. The schedule of loans to GM is still being worked out.

Ottawa and Ontario, which are contributing two-thirds and one-third respectively, say they will be paid a minimum of five percent interest on the three-year loans.

The governments are placing other conditions, including that none of the money be used for executive compensation or to pay back taxes.

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