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Joint US-Canada Bailout being Contemplated

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WINNIPEG AND TORONTO — Federal Industry Minister Tony Clement said Friday he was investigating the feasibility of a joint Canada-U.S. bailout of the auto industry.

“That's the $64 question, or something slightly higher than $64,” he said during a Conservative Party policy convention in Winnipeg.

His comments came amid brewing fears that U.S. president-elect Barack Obama will force the Detroit Three auto makers to repatriate jobs by pulling production out of Canada and Mexico in return for American financial aid.

Mr. Clement said he was looking at setting up “direct information-gathering meetings in both Detroit and Washington, D.C., in the upcoming few days” to probe whether a joint bailout would work.

Workers install rearview mirrors onto the doors at the General Motors Canada assembly line in the Oshawa Truck Assembly Plant. The plant's 3,500 workers produce Chevrolet Silverados, GMC Sierras and GMC Sierra Denalis.

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Workers install rearview mirrors onto the doors at the General Motors Canada assembly line in the Oshawa Truck Assembly Plant. The plant's 3,500 workers produce Chevrolet Silverados, GMC Sierras and GMC Sierra Denalis. (Norm Betts/For The Globe and Mail)

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The Globe and Mail

“One of the things I want to do in my information gathering is to see how viable that theory is because people talk about … the need to have an integrated solution,” Mr. Clement said. “From a theoretical point of view that makes sense, but how viable is it? When you drill down on that, what exactly does that mean?” he said.

The Harper government is coming under mounting pressure to provide financial support to the Canadian auto sector, because every other region that produces cars and trucks, including the United States, the European Union and Australia, is putting up billions of dollars to get the industry back on a sound footing.

Mr. Clement said there appears to be growing agreement on the conditions of assistance to the Detroit-based auto sector and its Canadian subsidiaries.

“There is certainly what I am observing is a consensus of views both in the government of Canada and in the Ontario government and also from what president-elect Obama has been stating … it has to be about long-term solutions, not short-term cash infusions,” he said.

The heads of the Canadian subsidiaries of the Detroit Three made their case for financing directly to Ontario Premier Dalton McGuinty Friday during a one-hour meeting at the provincial legislature.

The executives did not attach a dollar figure to their request, Economic Development Minister Michael Bryant told reporters following the meeting. But he made it clear that the province's taxpayers will not tolerate a bailout of the sector and that any financing will come with strings attached.

“Governments are not the bank of last resort,” Mr. Bryant said.

Reid Bigland, president of Chrysler Canada Inc., said that both the federal and Ontario governments need to step in because the auto industry is such a significant player in the Canadian economy.

“I think [the Premier] fully understands the predicament we're in,” he said.

Mr. Bigland, the only executive who talked to reporters after the meeting, refused to say what kind of assistance his company, Ford Motor Company of Canada and General Motors of Canada Ltd. are seeking.

The presidents of Honda Canada Inc. and Toyota Canada Inc. were also at the meeting. Mr. Bryant stressed that those companies are not facing a liquidity crisis but wanted to ensure that any aid provided to the Detroit Three does not leave Honda and Toyota at a competitive disadvantage.

Mr. McGuinty said his government won't provide auto companies with any assistance unless they guarantee that they will maintain operations and jobs in the province.

“We are running a $500-million deficit [and] revenues are shrinking,” he said Friday before the meeting. “If we are going to come to the table in a way that is meaningful to the sector..., they're going to have to demonstrate to us that that somehow serves the greater public interest.”

Mr. Bryant said the fact that the fact that all the executives met with him and Mr. McGuinty attests to the urgency of the situation. But no decisions were made, other than to keep talking and monitor actions being taken by the U.S. government to bail out Detroit.

Asked about whether a speedy package is necessary, Mr. Clement said it looks like the U.S. is running into stumbling blocks in assembling its auto package –suggesting it may take longer for the American government to put forward aid.

He declined to say how soon the Harper government might cobble together aid for the auto industry.

“The worst thing to do is to make a quick decision that is the wrong decision.”

The industry minister declined to say whether Canada could afford to see the Big Three automakers go bankrupt.

“I think the last thing Canadians need from a government minister is to run around with our hair on fire.”

Mr. Clement said the auto sector will need to be drastically transformed as a result of deliberations currently underway.

“That means some things that are being done now won't be done in the future and other things that we can only barely contemplate now are going to be the driver, so to speak, of new jobs, new opportunity in the auto sector of the future.”

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