Canada Follows the U.S. Terms for GM/Chrysler; Harper Still Worrying About the “Eased” ‘Buy-American’ Clause in Stimulus Package

~~By InsightAnalytical-GRL

About a month ago we posted on the subject of how GM and Chrysler were begging from bailout money from the Canadian government. (See: The SCANNER–International/Political Edition, 2/24/09 (Which Deficit is Obama “Halving”?; Canada Rubs U.S. Nose into Its Stable Banking System; GM/Chrysler Beg for Bailout Help in Canada, Too; Half of Foreign Criminals in Canada Are Fleeing to the U.S. [???]).

Here’s the relevant excerpt:

GM, Chrysler ask for billions in Canadian aid

General Motors has outlined a restructuring plan that would cut its Canadian workforce to 7,000 and seek as much as $7 billion from the federal and Ontario governments, while Chrysler is requesting around $2.8 billion in aid.

GM didn’t specify how much it will ask for, but Reuters quoted federal Industry Minister Tony Clement as saying the company is asking for between $6 and $7 billion.

The Canadian government doesn’t seem to want to bailout CAW pensions…time will tell.

MORE

Here’s an update on what’s going on now…right in tandem with what the Obama Administration is doing:

GM, Chrysler scolded but given more time to restructure

Canada, Ontario provide $4 billion in loans to troubled manufacturers

Political leaders on both sides of the Canada-U.S. border are giving General Motors and Chrysler extensions on deadlines to come up with viable restructuring plans, saying the auto manufacturers fell short in their first attempts.

(SNIP)

Disappointment in Canada

Canadian politicians also expressed regret that GM and Chrysler could not come up with viable plans.

Federal Industry Minister Tony Clement, along with Finance Minister Jim Flaherty and Ontario Economic Development Minister Michael Bryant, said GM has 60 days to come up with a plan for its Canadian division, while Chrysler has 30 days to reach a deal with the Canadian Auto Workers union and with Fiat.

At the same time, Clement said the first of the $4 billion in interim loans to the two companies is going out. Chrysler will get $250 million on Monday of the $1 billion allocated, while the first of $3 billion in funds for GM will begin to flow in early April.

“We are making this strategic investment to support an orderly restructuring of a critical industry with [the] goal of ensuring that Canada maintains its 20 per cent production share in the future,” Clement said.

(SNIP)

Canadian Auto Workers president Ken Lewenza said the union won’t reopen its collective agreement with GM Canada despite pressure from politicians that more cost restructuring is needed.

“We did it once 10 months ago and we did it again less than a month ago,” he said. “Opening up bargaining won’t resolve this problem.”

Lewenza said the union is still trying to work out a new collective agreement with Chrysler in advance of a March 31 deadline.

The email newsletter I receive from Radio Canada International sums it all up this way:

OTTAWA: GOVERNMENT OFFERS INTERIM HELP TO AUTOMAKERS

Two struggling Canadian automakers, Chrysler and General Motors, were offered help on Monday by the federal government and the government of Ontario. The two companies will receive bridge loans totalling CDN$4 billion to help them to survive. Chrysler would receive CDN$1 billion and General Motors would get $CDN$3 billion. Further government loans will depend on whether the two companies can present acceptable restructuring plans. Tony Clement, Canada’s industry minister, has rejected plans that were submitted earlier, saying that they fail to ensure the companies’ long-term survival. General Motors has until the end of May to present its new plan. Chrysler has until the end of April. Chrysler’s plan must include the company’s merger with the Italian carmaker, Fiat, that was announced on Monday. The plans will depend in large measure on negotiations with the company’s unionized workers. The Canadian Autoworkers Union welcomed the Chrysler/Fiat merger as long as it preserves the Canadian auto industry. CAW’s negotiations with Chrysler will continue, but the CAW refused to renegotiate a deal with General Motors that was arranged within the past month. The CAW also welcomed the government’s insistence that the two American-based companies commit to maintaining 20 per cent of their North American production in Canada. The government offer also requires that company executives agree to limits on their compensation.

Now, here’s another rather ironic bit from the same newsletter, considering how tightly bound together Canada and U.S. are.  (See: What’s Going On North of the Border: The Canadian Economy and Stimulus Plan & THE PROPOSED NORTH AMERICAN COMMUNITY/NORTH AMERICAN UNION: 2010 Is Just Around the Corner)

WASHINGTON: PRIME MINISTER EXPRESSES CONCERN OVER GLOBAL PROTECTIONISM

Prime Minister Stephen Harper says the danger of protectionism is one of his major concerns in the global economic crisis. He’s worried that if protectionism becomes a global option, the world could face a depression similar to the one in the 1930s when countries introduced trade barriers to save homegrown industries. The measures only accelerated and deepened the global economic downturn. Mr. Harper is concerned that the United States stimulus plan includes Buy-American clauses for recipients of government bailout money. Such a plan could hurt Canadian exports to the United States. Mr. Harper made his comments as he prepares to attend a Group of 20 summit in London this week.

In early February, the Senate “eased” the Buy-American” clause as Obama proclaimed he didn’t want a “trade war”…The EU, Canada, and Japan had protested; only the UK hadn’t complained at that point.

US Senate eases “Buy-American Provision in Stimulus Package”

(SNIP)

The measure had sparked fears of retaliatory measures by US trading partners and a possible spiral of protectionism in an already reeling global economy.

The requirement to favour US-made supplies to be used in infrastructure projects, included in a nearly 900-billion-dollar package being considered by the Senate, was softened to allow for exceptions as required by US trade agreements, broadcaster MSNBC reported.

Apparently, Harper isn’t completely satisfied with the changes to the clause. Maybe he doesn’t trust Obama or the U.S. Senate…probably a wise stance to take.

What’s Going On North of the Border: The Canadian Economy and Stimulus Plan

~~By InsightAnalytical-GRL

Recently we posted information about how Canadian banks are moving into buy U.S. financial institutions (See: Canadian Banks On the Move Buying U.S. Banks While Bailout Recipient AIG Sells Canadian Life Insurance Business to Bank of Montreal (”Picking over the Carcasses”).

Things in Canada aren’t all rosy, of course. As of late January:

“The credit crisis and the global sell-off of commodities have started to hit Canada hard. The country lost more than 100,000 jobs in the last two months of 2008, and the central bank is predicting economic output will contract 4.8 percent in the first quarter.”

When Obama visited Canada last month (February 19, the two leaders pledged to work together:

Obama said the US and Canada were working closely together bilaterally and within the G8 and G20 – two blocs made up of the world’s largest economies – to see how to restore confidence in financial markets.

Like much of the world, both nations are battling a severe recession. In Canada, the world’s eighth-largest economy, the unemployment rate in January soared to a four-year high of 7.2 per cent. That rate was at 7.6 per cent in the US, the highest since 1992. Harper said he and Obama agreed that Canada and the US “must work closely to counter the global economic recession by implementing mutually beneficial stimulus measures.”He later said: “We know, as a small economy, we can’t recover without recovery in the United States.”

SNIP

NAFTA had threatened to become an acrimonious issue during this visit. On the presidential campaign trail, Obama had said that the US would threaten to pull out of NAFTA unless Canada and Mexico agreed to strengthen labour and environmental protections. But he has softened his stance since taking office.

Well, if you’re going to have a North American community, I guess some stances HAVE to be softened…

A few days before Obama hit town, The Hill Times, “Canada’s Politics and Government Newsweekly,” ran this story:

Canada needs whistleblowers to protect stimulus package

Given the $1-billion gun registry overrun and the sponsorship scandal, there’s little reason to trust that this unprecedented expenditure will be managed competently or even honestly.

Displaying start of article containing 755 words – Many Canadians rightly fear that the massive government spending recently announced may simply be wasted or the money end up in the wrong hands, without creating jobs or helping the economy. Given the track record of our corporations (with fiascos like Bre-X and Nortel) and past government waste and corruption (such as the $1-billion gun registry overrun and the sponsorship scandal) we have little reason to trust that this unprecedented expenditure will be managed competently or even honestly.

Sounds so familiar!

And the newsletter I receive from Radio Canada International had this tidbit one day:

TORONTO: CBC IN STRAITS

Canadian Broadcasting Corp. President Hubert Lacroix says the public broadcaster is considering reducing services in coming months to cope with budget problems. In a speech in Toronto, Mr. Lacroix says the CBC faces an advertising shortfall of as much as $65 million for the fiscal year ending March 31, as advertisers reduce spending amidst the ongoing economic crisis. Mr. Lacroix says that while the CBC will likely break even this year, the future is problematic. The president said the broadcaster may sell assets, consolidate local stations or introduce more U.S. television shows. Mr. Lacroix says he has asked for a meeting with the prime minister, Mr. Harper, not to ask for a bigger subsidy but possibly for a line of credit or an advance of funding allotted for future years. On Wednesday, a spokeswoman for Heritage Minister James Moore told The Globe and Mail newspaper that the government expects the CBC to manage with its $1-billion a year subsidy. Meanwhile, The Globe reported on Thursday that private broadcaster CTV plans to close money-losing television stations in Windsor and Wingham, ON.

Meanwhile,  Canadian Auto Worker union members will finish voting today on a tentative agreement which may or may not get the approval of the Canadian government. Although union negotiators have agreed to concessions, it’s not clear sailing:

The new deal is contingent on GM winning financial support from the governments of Canada and Ontario.

Federal Industry Minister Tony Clement has suggested the deal may not be acceptable to Ottawa, although he seemed more receptive today.

“I’m not here to pass judgment,” Clement said after a speech to the C.D. Howe Institute. “For government money to flow, there has to be the ability to be competitive in the new marketplace, there has to be a viable plan on a go-forward basis, there has to be the right kind of management decisions that have been made.”

Clement suggested that in the end, the only thing that will save the auto industry is the American consumer.

“If you’re asking me what will save the auto sector in North America, it’s what American consumers do and buy, not just what Canadians do and buy.”

GM and Chrysler have until March 31 to finalize restructuring plans to get access to Canadian government financial aid.

So, while Canada may not have the same problems with its financial institutions that we are  seeing  in the U.S.,  the spillover of the U.S. banking system’s crisis and our economic woes is unavoidable.  The condition of the Canadian financial system will have to be watched as Canadian banks assume more risk as they take over U.S. assets.

And, as of the moment, the Canadian government’s stimulus package remains hung up as the budget has still not passed the “Liberal-dominated Senate” as Opposition members demand “reports” on the details:

The reports, which detail the budget’s implementation and costs, are to be delivered this March, June and December ahead of opposition days in Parliament. This would give opposition parties the chance to move a no-confidence motion against the government if they wanted to trigger an election.

How about that? An opposition that could trigger a election.

Meanwhile, there was some fighting over the price tag in the bill to fund the government through September that passed yesterday. The $410 billion bill, on top of the $787 billion stimulus package approved in February is starting to bring out the rancor. But:

While most of the votes throughout the debate were along party lines, eight Republicans crossed the aisle to vote to end the weeklong debate on the legislation while three Democrats opposed it. The Senate approved the measure by a voice vote.

So much for a solid opposition here…

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More information on the Canadian stimulus plan and a comparison of the U.S. vs. the  Canadian situations and priorities

Canada’s Stimulus Plan–The Canadian plan focuses on infrastructure.  This article provides a list of measures and a chart of the action plan

Canada’s Fiscal Stimulus Package versus the Obama U.S. Plans