I am pleased to report that Michael Bryant listened to me

Michael Bryant is my MPP. I contacted his office last week by phone and by email to make the point that any bailout of Chrysler needs to be treated differently than GM or Ford, by virtue of the fact that Chrysler is owned by private equity (Cerberus)

Chrysler rescue has strings

Dec 17, 2008 04:30 AM
Toronto Star

Rescue cash for Chrysler will have strict terms to prevent the privately-owned automaker from taking advantage of Canadian taxpayers, warns Ontario's economic development minister.

"Chrysler will have to be treated differently," Michael Bryant said yesterday.

He promised the Detroit Three automakers will get the life-saving financial "CPR" they need to prevent the eventual loss of over 500,000 jobs in Ontario predicted in a new study if General Motors, Ford and Chrysler were to go bust.

But there will be strings attached, particularly with Chrysler, which has major assembly operations in Brampton and Windsor.

The company's American parent is controlled by Cerberus Capital Management LP, a New York-based firm that manages $27 billion (U.S.) in assets and has been under fire in Washington for not putting more of its own money into the faltering automaker, which is seeking $1.6 billion (Cdn.) in Canada.

Details are "yet to be determined" but could include special warrants placing restrictions on any profits taken by Chrysler at the expense of taxpayers, Bryant added.

"We are working on the assumption that ... the government is just not going to be providing (money) and kissing goodbye."

But a leading auto industry analyst said it will be "extremely difficult" to put any conditions including job guarantees on financial aid for the reeling auto companies.

"They need to shed jobs, not create them," said Dennis DesRosiers, noting none of the automakers are investing so guarantees for future spending are difficult.

"There could be long-term promises regarding intellectual capital like research and development and some broad guarantees regarding greening," he said, referring to more green friendly vehicles. "But it's impossible to get into specifics."

Cerberus, a giant private equity firm, bought most of Chrysler from Daimler in 2007 but has been trying to unload it for months as losses mount.

Discussions involving Cerberus selling Chrysler to GM in exchange for GMAC Financial Services fizzled recently. Cerberus already owns 51 per cent of GMAC.

Chrysler has indicated it could run out of money to operate plants within weeks. The Detroit Three are seeking $6.8 billion (Cdn.) from the federal and Ontario governments.

The Bush administration yesterday said it was still evaluating options and suggested any deal would require major concessions by all sides. Complicating its task, lawmakers in both parties – having failed in their efforts to push a $14 billion rescue through Congress – were pressing for an array of terms and conditions they said should be part of any alternative plan.

"We are not going to be rushed into it," said presidential press secretary Dana Perino.

While the federal and provincial governments worked on conditions for aid, Prime Minister Stephen Harper met privately with Frank Stronach, chair and founder of auto parts giant Magna International Inc., in Ottawa.

One government official said the meeting was part of pre-federal budget talks. A source close to Stronach would not say if they talked about the auto aid package.

Bryant said the aid package is not just for the auto companies but more to preserve the jobs and livelihoods of tens of thousands "in the public interest" and protecting the economy from a deep recession.

His comments came at the release of a new report disclosing that Ontario would lose 517,000 jobs by 2014 if the Detroit Three go under.

The study by the Ontario Manufacturing Council, an arm's length provincial government panel, warned 582,000 jobs would be lost nationally within five years under that scenario as the impact of lost auto, supplier and dealership jobs rippled throughout the country.

Even if domestic output were cut in half, the province would lose up to 141,000 jobs and the country as a whole 157,400.

Ontario Finance Minister Dwight Duncan acknowledged the bailout – which now hinges on the prospect of U.S. government aid that remains in limbo – will put the province deeper into the red than its forecast $500 million budget shortfall this year.

Federal Industry Minister Tony Clement last week pegged Canadian emergency aid at 20 per cent of the U.S. level, which given the $14 billion congressional assistance package means $3.4 billion from Ottawa and Ontario.

No decisions have been made on how that amount might be split between the two governments.

Ontario NDP Leader Howard Hampton said the governments must get job and product guarantees for Canadian plants before handing out any money – particularly to Chrysler.

"Because the owner of Chrysler really doesn't have a commitment to making cars, they're only committed to making money quickly and getting out the door," he said.

With files from Associated Press