December 20, 2008 - Prime Minister Stephen Harper and Premier Dalton McGuinty, Toronto Ontario

In an effort to avoid a "catastrophic" collapse of the auto industry, the federal and Ontario governments have announced a $4-billion bailout package for the Canadian subsidiaries of the Big Three automakers.

The announcement by Prime Minister Stephen Harper and Premier Dalton McGuinty in Toronto came a day after U.S. President George W. Bush offered $17.4-billion U.S. in emergency loans to General Motors and Chrysler.

The Canadian plan will provide General Motors Canada with loans of up to $3 billion and Chrysler Canada will receive up to $1 billion. The companies will get the money in three instalments, with the first portion coming Dec. 29.

"We are doing this on the assumption that we cannot afford either in the U.S. or in Canada a catastrophic short-term collapse," said Mr. Harper.

Mr. McGuinty, whose government will provide $1.3 billion of the total emergency loans package to General Motors and Chrysler, put a human face on the crisis that has hit the auto industry.

"Here in Ontario we have 400,000 people and their families who rely on the auto industry so that they can put food on the table and keep a roof over their heads," said the Ontario premier who thanked Mr. Harper for the support.

"What the prime minister and I are saying today is that those people and their jobs are worth fighting for."

Mr. Harper, however, warned that today's announcement "is not a blank cheque" for the industry, suggesting both the companies and their employees will have to make concessions.

"Canadian taxpayers expect their money will be used to restructure and renew the automotive industry in this country," said Mr. Harper.

"They expect all stakeholders, and I emphasize all stakeholders to come to the table and work together towards sustainable long-tern solutions and they expect that Canada will maintain our current production share of the North American market."

General Motors of Canada welcomed the announcement, with president Arturo Elias calling the package a "welcome financial bridge" in a news release.

"We will work closely with the governments and all our stakeholders to complete the major business transformation we initiated in 2005 to ensure a lean, green and sustainable business," Mr. Elias said in the release.

"GM Canada intends to earn the trust being placed in us."

Mr. Harper's statement was also applauded by Canadian Auto Workers president Ken Lewenza.

"I want to acknowledge a key component to this condition, and that is we maintain our current production share in Canada," Mr. Lewenza said shortly after the announcement was made.

"That was one of the reasons the CAW was working so hard to lobby government and meet with all levels of government... to ensure the Canadian industry was protected through the investment of the Canadian taxpayers and obviously, the support of government," Mr. Lewenza said.

But similar to the U.S. auto bailout package, the Canadian aid package comes with strings attached.

According to the plan, the money will come with several conditions, including a request that the parts suppliers get the money they are owed, that borrowers accept limits on executive compensation, and that they provide the government with warrants for non-voting stock.

Mr. McGuinty warned that the money will only be delivered after auto companies agree to meet conditions set by the governments.

"Those conditions include limits on executive compensations. The loans will only stay in place beyond March 31, 2009 if our governments are satisfied there are solid restructuring plans in place and underway."

The car makers are suffering from their slowest sales in 26 years and dwindling operating cash.

Original Story - Globe and Mail