The Canadians are going to supply Chrysler and General Motors (NYSE: GM) with a little over $3 billion in loans to help them through financial trouble that could put both companies into bankruptcy. The nation faces the same issue as America. If the car companies go bust,, tens of thousands of people will lose their jobs early next year. That would be a huge strain of the Canada tax base and the cost of its social services for the unemployed.
The money being offered to the two American cars companies is barely enough to last them for a couple of weeks based on the rate at which they are burning cash, so decisions by the U.S. Congress and the Obama administration will still be the sole determinant of what happens to the big firms.
According to Reuters, "General Motors of Canada Ltd is eligible for loans of up to $C3 billion and Chrysler Canada Inc for up to C$1 billion." The U.S. aid package is $17.4 billion, so capital coming from north of the border is barely a drop in the bucket.
The Canadians better start lobbying Washington and lobbying successfully. Otherwise their auto industry will go down with the one in the U.S.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
12-21-2008 @ 5:25PM
J.Somers said...
The opinions reflected by Mr Mc Intyre on the so called "Drop in the bucket" contribution made by the Canadian authorities is way off the mark . When comparing Canada with the US in an economic sense a factor of 10 must be used . Canada's population is about 32 million as of the last census or about one tenth of the US population. Therefore the contribution of 3.2 billion that Canada has offered would equate to 32 billion in comparative terms. Lets get the facts straight . !!!
12-21-2008 @ 5:39PM
Richard Quinn said...
The Canadian capital might be a drop in the bucket in a global sense, but as a Per Capita contribution, it represents quite a statement by the Canadian Federal and Ontario Provincial governments.
Even in their currently dysfunctional state, these two branches had the good sense to prop up a vital industry in a time of need. And they did so without requiring a public flogging like that seen in Washington.
12-21-2008 @ 10:59PM
edneedstoknow said...
Richard,
I agree with you. The $3B to GM is almost what they needed to make it through the month while the US Congress played their games. The trend of the blog posts seems to be so negative. The US has lost so much of it's manufacturing capability over the last few decades, that every effort should be made to keep what we have left. Unions have to come back to reality, and this crisis should accomplish that. We can become more competitive, keep manufacuring in the US, reduce the trade deficit, and come out of this crisis in better shape than we were. I'm sure our Canadian neighbors feel the same about their economy. Hats off to Canada.