Feds not interested in giving loans to auto sector

OTTAWA — It seems Canada’s auto parts manufacturers and the federal government have different definitions of the word ‘help.’

The Auto Parts Manufacturers’ Association (APMA) recently sent a letter to the federal government, requesting approximately $1 billion in loan guarantees for its membership.

"Assistance is required immediately if our country has any hope of salvaging a once-vibrant and prosperous industry that is experiencing a temporary but very serious financial crisis," wrote Gerry Fedchun, president of the APMA, in a letter to federal Finance Minister Jim Flaherty and Ontario Finance Minister Dwight Duncan.

The APMA, which represents about 500 companies, says its major customers in the U.S. are taking longer to make payments. The financing would be used to pay bills, buy materials and essentially keep some businesses afloat until accounts receivables are paid. The APMA is looking to the federal government, as banks have been less than keen on extending credit to auto industry firms amidst the economy woes south of the border.

However, the feds aren’t interested. In an interview with Canwest News Service, Industry Minister Jim Prentice noted that loan guarantees are not necessary because the lending capacity of Export Development Canada (EDC) was raised by $2 billion just three weeks ago.

The big difference in the ideas is EDC does not use federal tax dollars. Instead, the Crown corporation raises lending money by issuing corporate bonds, which are guaranteed by the federal government. Funding from EDC is available to qualified export firms, including the auto sector.

It’s not the first time the APMA and the federal government have ended up on opposite sides of the road on an issue. Just last year, the APMA sought out $400 million from the federal government to aid manufacturers struggling to cope with Canada’s surging dollar.

The feds instead countered with reductions in corporate taxes and the elimination of capital taxes and surtaxes.

— with files from Canwest News Service and the Globe and Mail

Have your say

We won't publish or share your data