Nicolas Van Praet And Paul Vieira National Post - November 19, 2008

Detroit's three domestic auto manufacturers pleaded for emergency aid from the Canadian and U. S. governments yesterday, warning that failing to help them survive the current financial crisis would hurt average families and deal a "catastrophic" blow to the economy of both countries.

Rick Wagoner of General Motors Corp., Alan Mulally of Ford Motor Co. and Robert Nardelli of Chrysler LLC appeared before the U. S. Senate's banking committee, urging legislators to approve US$25-billion in emergency bridge loans. They said if one auto-maker is allowed to go bankrupt, the entire sector will crumble because they share the same suppliers, resulting in millions of lost jobs and diminished government tax revenue. "This is all about a lot more than just Detroit. It's about saving the U. S. economy from a catastrophic collapse," Mr. Wagoner told the lawmakers. "Such a level of economic devastation would far exceed the government support that our industry needs to weather this current crisis." Ford cars sit for sale in downtown in the economically struggling city of Detroit, Michigan. The big three U.S. automakers, General Motors, Ford and Chrysler, all based in Detroit, are appearing this week in Washington to ask for federal funds to curb the decline of the American auto industry. The city of Detroit would be hardest hit if the government let the automakers fall into bankruptcy. "The crippling of the industry would have severe and debilitating ramifications for the industrial base of the United States," Mr. Nardelli said in written testimony, arguing frozen credit markets have wiped away the financing consumers need to buy cars and that dealers require to place wholesale orders. "[It] would undermine our nation's ability to respond to military challenges and would threaten our national security." A top executive with GM's Canadian operations said Canada is similarly threatened. "What we need is liquidity because we're bumping up against our minimum cash levels now, as is Ford, as is Chrysler," David Paterson, GM of Canada's vice-president of corporate affairs, told the editorial board of the National Post. "If we want to take away the risk to the broader economy, there is a practical solution, which is government support." The Canadian arms of Detroit's Big Three automakers are asking the federal and Ontario governments for aid proportional to that being debated by U. S. lawmakers, Mr. Paterson said. He said no specific figure has been discussed, but agreed that based on the Canadian market being one-tenth of the U. S. market in terms of auto sales, it would be in the range of $2.5-billion. Based on Canada building roughly 26% of the Detroit Three volume in Canada and the United States last year, it could be as much as $6.5-billion. Mr. Paterson said direct taxpayer money need not be used, proposing instead that the Canadian government simply backstop loans GM and its peers would get from commercial banks "just like you co-sign a loan to somebody." Ottawa and Ontario are both weighing emergency aid to auto companies operating in Canada, knowing that future investment and jobs will go where assistance is given. Federal Industry Minister Tony Clement and Ontario Economic Development Minister Michael Bryant are scheduled to meet in Detroit with executives of the so-called Big Three automakers today. Tomorrow they will travel to Washington. GM has appealed to Canadian politicians for their support in obtaining financial assistance from Ottawa. In a letter to newly elected and reelected MPs, it said the liquidity crunch has left the auto-related companies without access to the credit needed to ride out the worst decline in U. S. new vehicle sales in nearly a quarter century. original link