On the heels of last Friday's $17.4 billion U.S. automaker aid package, Prime Minister Stephen Harper and Ontario Premier Dalton McGuinty jointly announced yesterday, that as a "[n]ecessary step to protect the Canadian economy," the Government of Canada and the Government of Ontario have conditionally pledged CDN$4 billion in emergency term loans through the government's Canada Account managed by Export Development Canada (EDC) to support General Motors of Canada Limited and Chrysler Canada Inc., the Canadian subsidiaries of U.S. automakers General Motors Corp. and Chrysler LLC. Various news sources have reported that the Ontario Government will contribute approximately CDN$1.3 billion to the package and Ottawa will provide approximately CDN$2.7 billion. Accounting for currency conversion, the total CDN$4 billion financial aid package is roughly 20 percent of the U.S. package, and represents the proportionate amount of the Canadian subsidiaries' share of their parent companies' annual North American vehicle production. The automotive industry is the largest industry within the Canadian manufacturing sector, representing 14 per cent of the country’s manufacturing output, 23 per cent of manufactured exports, and directly employs over 150 000 Canadians. Premier McGuinty emphasized the importance of those jobs and the necessity of the aid package stating, "What the Prime Minister and I are saying is that those people and their jobs are worth fighting for."

The Canadian and Ontario governments have not released a formal term sheet detailing the aid package, unlike the Indicative Summary of Terms released by the U.S. Treasury of the secured term loan facilities for GM and Chrysler, however according to a "Backgrounder" released from Prime Minister Harper's office, the loans will 91-day renewable term loans up to a maximum of 3 years (renewals are subject to submissions of a restructuring plan submitted by February 20, 2009, that ensures the long-term viability of the borrower’s business operations, and evidence submitted by March 31, 2009, that the plan will proceed, including agreement with all stakeholders of needed reductions in structural costs required to restore competitiveness), interest will be charged at LIBOR plus 300 basis points, and the closing date for the term loans will be December 29, 2008, all subject to the following:

Loan Disbursement

  • General Motors of Canada is eligible for loans up to CDN$3 billion, payable at closing (CDN$0.8 billion), January 30, 2009 (CDN$1.2 billion), and February 27, 2009 (CDN$1.0 billion) and
  • Chrysler Canada is eligible for loans up to CDN$1 billion, payable at closing (CDN$0.4 billion), January 30, 2009 (CDN$0.4 billion), and February 27, 2009 (CDN$0.2 billion).


  • Access to loans will require a lien be put on Chrysler Canada’s unencumbered Canadian assets;
  • Access to loans by General Motors of Canada will require that the governments of Canada and Ontario be granted senior status for the demand loans to the extent permitted by law under existing agreements; and
  • The Canadian and Ontario Governments through EDC will receive warrants for non-voting common shares equal to 20 per cent of the loans made to the parent companies of Chrysler and General Motors’ Canadian operations.


  • Amounts owing to automotive parts suppliers to be paid according to reasonable automotive sector commercial terms and conditions including timing;
  • Borrowers must accept limits on executive compensation, including performance pay;
  • Borrowers must report material transactions (any business or other financial transaction with an associated value in excess of $125 million);
  • Weekly reports to be provided on cash and liquidity positions, production and revenues as well as rolling thrice-monthly projections; and
  • Federal and Ontario government officials or their duly-appointed contractors or agents shall have unimpeded access to the borrower’s records.

The Prime Minister also announced two additional steps the federal government will take to support the overall competitiveness of the auto industry. Automotive suppliers will be afforded greater access to accounts receivable insurance through EDC to compensate for the reduced availability of credit. Also, the federal government will create a new facility to support access to credit for consumers, "with particular attention paid to improve the accessibility of car loans and dealer financing."

The Canadian package, much like the U.S. Treasury package, has been an extensive ongoing effort. Earlier this month, the Honourable Tony Clement, Minister of Industry, and the Honourable Michael Bryant, Ontario's Minister of Economic Development, had confirmed that they had received restructuring plans, as requested, from Chrysler Canada Inc., Ford Motor Company of Canada, Limited, and General Motors of Canada Limited, to undertake all "necessary due diligence work to safeguard public dollars as we determine the best way to move forward to secure jobs and preserve prosperity."