Wednesday, October 29, 2008

Conservatives reject direct aid to auto parts companies

This is from the Star.
Now that the election is over the government will try as much as is possible in these times to go back to its standard ideological stance that the government should not be involved in bailouts. Of course do not be surprised if in time the government is forced to do so. It has already been forced to guarantee interbank loans in order to keep Canadian banks competitive internationally.
If one of the three big automakers goes bankrupt there could be a huge ripple effect. The steep decline in the dollar will no doubt help the auto parts makers in that it makes prices cheaper for US importers but if there is no demand that is not that much of a silver lining.

Direct aid to auto parts companies rejected TheStar.com - Canada - Direct aid to auto parts companies rejected
October 29, 2008 Les WhittingtonOttawa Bureau
OTTAWA–The Harper government is turning thumbs down on an urgent appeal for up to $1 billion in special help to save the Ontario-based auto parts sector.
A group representing auto parts firms, which employ 70,000 people in Ontario, said in a letter to the federal government that the sector might not survive the economic crisis without short-term loans and loan guarantees from Ottawa.
But, in an interview, Industry Minister Jim Prentice said the government doesn't plan to single out parts makers for assistance.
The best option for these companies is to apply for support from Export Development Canada (EDC) and the Business Development Bank, two federally owned agencies that provide financial help for all Canadian companies, he said.
Prentice said the federal government recently authorized a $2 billion increase in the borrowing capacity of the EDC, which provides financing support for exporters.
Gerry Fedchun, president of the Automotive Parts Manufacturers' Association, said he was disappointed by Prentice's response.
Fedchun said that, even with an increase in the EDC's borrowing capacity, it won't have the financial clout to provide help for auto parts makers because the EDC supports exporters in all industrial sectors.
"If that money is for all of manufacturing, then, frankly, it wouldn't be enough," he said in an interview.
Auto parts companies, which send most of their product to the U.S., are being hurt by the drop in vehicle sales south of the border. The problem is compounded by the liquidity crisis in which Canadian banks are less willing than usual to extend credit to corporate customers.

1 comment:

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