Bail-out mania moves north of the border
posted at 12:30 pm on December 21, 2008 by Ed Morrissey
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Canada didn’t wait long to follow George Bush’s lead on bailing out the Big Three automakers and their operations in Canada. PM Stephen Harper and Ontario premiere Dalton McGuinty combined forces to offer over $4 billion Canadian in loans and supports, including credit lines to consumers to get people buying cars again:
Canada will follow the United States by providing C$4 billion ($3.3 billion) in emergency loans to the Canadian arms of Detroit’s ailing automakers to keep them operating while they restructure their businesses, Prime Minister Stephen Harper said on Saturday.
The package, announced by Harper and Ontario Premier Dalton McGuinty, comes a day after the White House unveiled a $17.4 billion package to shore up Detroit’s auto industry.
Harper also announced two new federal measures to support the overall industry — one to benefit automotive suppliers and a second to help consumers get credit to buy cars. …
A collapse of the Detroit Three automakers would put nearly 600,000 Canadians out of work within five years, most of them in Ontario, according to a recent report by provincial advisory panel.
This comes as much less of a surprise than the moves in the US. Despite the Conservative name, the Tories in Canada are closer to Democrats than Republicans in the US on economic policies. Politics in Canada more closely resembles Europe than the US and the center is more leftward than here.
Harper faced two significant pressures to act. First, the attempted “coup” by the three opposition parties may have flopped spectacularly, but the underlying emphasis on action rather than laissez-faire detachment from the economic crisis was a real political issue. Harper could have faced another no-confidence vote in January without some kind of government intervention, although if he had faced a vote the Conservatives would just as likely have gained seats as lost them in an election.
That was more of a secondary condition, though. American action on the TARP funds bailout put Canada in a bad position, competitively speaking. The funds might have encouraged GM and Chrysler to relocate some operations back to the US and take the cuts in Canada instead. Bush put Harper in a poor competitive position by essentially offering a massive subsidy to American automakers, and he had to protect his own manufacturing base by proposing a similar package.
We can expect to see this kind of domino effect around the globe, which may wind up in trade disputes over subsidies, which the US had strongly fought until the economic collapse. The EU’s agricultural supports and the Pacific Rim’s manufacturing subsidies had been a target of free traders and anti-globalists alike over the past decade. Now that we’re indulging them wholeheartedly, we can expect to see big setbacks in opening markets — which will eventually hammer global trade as protectionists begin to take the reins.
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The article doesn’t say how the 4 billion will encourage Canadians to keep buying cars that are specifically made by the Big 3, as opposed to cars made by others. Nor does it say how this 4 billion will encourage consumers that they should splurge on a new car at a time of worldwide financial crisis.
keep the change on December 21, 2008 at 12:37 PM
Are yopu suggesting that, under the B. Hussein Reign, the liberal action of bailing out the automakers will eventually hammer global trade? If so, I’ll support it.
That sounds better than going to war with the countries that produce terrorists, and barely supported President Bush.
Bring it on, baybeee!
DannoJyd on December 21, 2008 at 12:44 PM
…… and that not the point of this loan from the canadian government. I mean, it’s not that difficult to understand, it begins at the fourth freaking paragraph.
Seriously.
wise_man on December 21, 2008 at 12:49 PM
I thought Canadians were too good and wise to use evil, polluting things like autos.
Eh?
profitsbeard on December 21, 2008 at 1:00 PM
Seriously? How can a wiseman be so unwise? lol. There is no explanation of how giving money to the big 3 will encourage the public to buy cars they don’t want to buy. They might just as well take that 4 billion and write welfare checks directly to the public. That is all this does.
keep the change on December 21, 2008 at 1:19 PM
hey, you’re making fun of my screen name. How clever of you. Yes, the president of Canada is dumber than you, because all this does is to waste 4 billion bucks. If only you could be president of Canada. Then everything would be all right.
Moron.
wise_man on December 21, 2008 at 1:37 PM
Well that was a useless response to this thread. LOL.
keep the change on December 21, 2008 at 2:00 PM
I am going to assume wise-man is a troll. Otherwise, he seriously believes there is a president of Canada.
Flea on December 21, 2008 at 2:09 PM
BTW, there is no such thing as a president of Canada.
How old are you?
keep the change on December 21, 2008 at 2:10 PM
old enough not to give a sh*t that the canadians call their president a prime minister. and the fact remains that you are arrogant to think that you know better than him. And I am going to assume that flea is a high school hall monitor.
wise_man on December 21, 2008 at 2:14 PM
You sound like some 15 year-old. Do your parents know you are talking to adults on the internet?
keep the change on December 21, 2008 at 2:18 PM
wise_man:
A PM is not the same thing as a president by another name. In Canada there is a parliamentary system, very different than in the US. It’s not just semantics.
angryed on December 21, 2008 at 2:33 PM
“….the center is more leftward than here.”
That was true 20 years ago, but today the right in the US is also merely an arm of the left.
angelat0763 on December 21, 2008 at 2:39 PM
Not. One. More. Penny.
Ontario has enough already. They didn’t need this to begin with but they whined and cried enough like a spoiled child to get it. No more.
KillerKane on December 21, 2008 at 3:14 PM
After reading the above supercilious juvenile responses, I feel that I must inform you that the President is Chief of State of the United states and is elected by the people directly (through the electorial college). He is not appointed by Congress or any political party. The President may be in fact, even if the opposing party controls the entire Congress. The Prime Minister of Canada is NOT Chief of State and is selected by his party to lead if they can obtain a direct or coalition majority. The PM is not elected by the people, but by one riding and then his or her party. I think technically the Chief of State of Canada is ERII. Be sure to jump on me if I am wrong. I may be wrong because I’m just an ol’ country boy and live in fly-over country.
Old Country Boy on December 21, 2008 at 3:25 PM
Be carefuly about criticizing wiseman. The Royal Canadian Star Chamber may summons you.
JonRoss on December 21, 2008 at 3:37 PM
Well I don’t want that to happen. Thanks for the heads up.
wise_man on December 21, 2008 at 3:41 PM
As far as the RC Star Chamber commoning me, I have some relatives that may object: Mssrs. Sturm, Smith, Ruger, Wesson. Winchester, Remington, and Colt.
I am very happy that Canada is doing their part. I drive a Canadian made truck with the “Oklahoma options”. My #2 son often makes the oilpatch run from Tulsa to Calgary and Edmonton. Western Canada’s future and that of fly-over country U.S. are very closely dependent.
Old Country Boy on December 21, 2008 at 3:50 PM
Yeah, remember that Canada has about 1/10th the population of the US. That would be equivalent to a loss of 6 million jobs in the US, and we already have significantly higher unemployment.
ProfessorMiao on December 21, 2008 at 3:53 PM
Ed, I’ve been wondering about this for some time now. All you have to do is look at the WTO feud between Airbus and Boeing, over what kinds of funding constitutes government subsidies: a) no interest loans and loan guarantees (Airbus) vs 2) DoD research projects as seed funding for key technologies used in the commercial sector (Boeing). This fight has been going on for years.
In this insane bailout environment, I’m looking for one of the larger automakers outside the US, perhaps Toyota, to bring a case before WTO against GM and Chrysler on the same basis.
One bit I didn’t get from articles on the Canuck bailout, however: will the Canadian federal govt and Ontario govt have to issue new debt to cover the cost of this bailout?
If so, the capital investment markets are gonna shrink worse than that episode of Seinfeld where Costanza got out of swimming in cold water in front of Elaine…
/SIGH
Wanderlust on December 21, 2008 at 4:19 PM
wiseman writes “The article doesn’t say how the 4 billion will encourage Canadians to keep buying cars that are specifically made by the Big 3, as opposed to cars made by others. Nor does it say how this 4 billion will encourage consumers that they should splurge on a new car at a time of worldwide financial crisis”
Of course, it won’t, anymore than the billions the Americans are giving to Detroit will convince Americans, especially those without jobs, to buy Detroit cars. It’s a political move in both countries, without any economic rationale….
BillBC on December 21, 2008 at 4:31 PM
I fear that pragmatism wins over principles and good sense when the rice bowl is in danger. The popular divide between good sense and conservative principles, and the bread and circuses of the liberal marxist is too narrow for sensible and constructive decisions to be made by our political rulers. They don’t worry about a quiet middle classes in the fly-over. They worry about the violent union and organized minorities outside their front doors. It is going to be interesting to see how the Great Organizer handles all the little organizers of His party.
(metafor warning)
I don’t think there will be any WTO repercussions for the bailouts. Everybody is doing them. All the WTO members have the violent organizers outside their front doors. Nothing concentrates the liberal marxist mind then the impending blame for something they did. They will do anything, pay any amount of somebody elses money, to evade the blame. The interesting ingredient to this mix is the conjoining of the superaffluent wall street oligarcs with the violent organized masses. Say, isn’t this what happened at the beginning of the French revolution and during the of the major totalitarian government of our era? I wonder what will happen when those rich wall street dudes find they can’t control the organized masses.
Old Country Boy on December 21, 2008 at 5:36 PM
“I think technically the Chief of State of Canada is ERII.”… Old Country Boy
Queen Elizabeth II is the Head of State. Old Country Boy, you are wiser than the wise_man here.
Sounder on December 21, 2008 at 7:11 PM
Well first off Ford is not in any danger of collapse, so right off the bat we’re down to 400K lost jobs.
Of those 400K, you are assuming that every single person who works in the auto industry would be unemployed. Which is ridiculous. Those 400K include among others mechanics and employees at parts suppliers.
Mechanics will be fine since they work on used cars not build new cars.
And parts suppliers would simply supply the likes of Ford or Honda or Toyota who would quickly ramp up production to make up for the lost GM/Chrysler production.
But it’s easier to not think at thing gee 600K jobs lost? Man we better send GM and Chrysler some money ASAP!
angryed on December 21, 2008 at 7:32 PM
The salient point is that the demand for cars is the same whether GM exists or not. If the Big 3 were not in existence, the demand that they are currently filling would simply be transferred to the other brands, all of whom operate plants in the US and Canada, and would need to expand operations to handle the greater demand. So the number of jobs lost would be = 0. The only difference is that the UAW workers would now be working for a non-union operation.
This bailout has nothing to do with economics and everything to do with politics.
keep the change on December 21, 2008 at 8:06 PM
That’s because you’re an ignoramus about the global auto industry. Toyota and Honda (both of which are now operating in the red) have both come out in favor of US gov’t assistance to the domestic automakers. If GM collapses, taking many of its suppliers down with it, Toyota and Honda, which share about 50% of the suppliers to their US assembly operations with the domestic auto companies, will not be able to avoid disruption of their production. Since the yen is so expensive, importing cars from Japan is no solution.
Of course you’re ignoring the enormous help that Toyota and Nissan have gotten over the years from Japan’s Ministry of International Trade and Industry (MITI). Honda has gotten less aid, but that’s because MITI wanted Honda to make motorcycles, not cars. Honda’s major auto market is the US. As a matter of fact, Honda’s CEO has threatened to close their Japanese plants, move their HQ out of Japan and import cars to satisfy their Japanese market, where they are an also ran next to Toyota and Nissan.
rokemronnie on December 21, 2008 at 9:09 PM
… how much more American industry would you like to see decimated here at home and owned over seas?
wise_man on December 21, 2008 at 9:09 PM
As I just pointed out, if the Big 3 collapse, Toyota, Honda and the other transplant operations would be hard pressed to maintain current production levels, let alone satisfy the demand of even today’s withered 10 million unit domestic auto market. Add the fact that a Big 3 collapse would dump a 4-6 month supply of distressed merchandise – dealers will sell their inventory for pennies on the dollar just to get some cash, and then there’s the 4 month supply in GM, Ford & Chrysler storage lots. Toyota and Honda won’t sell many cars while the market absorbs those cars sold at fire sale prices.
But what do I know? I just get paid to write about cars and the auto industry.
rokemronnie on December 21, 2008 at 9:13 PM
Canada is concerned about their own industries, but look what they like to do when Congress passes laws with intent to educate consumers on the meat they are eating:
http://www.cattlenetwork.com/content.asp?contentid=272798
It’s a problem. Look at your meat case-do you like the label on your beef that says “product of United States, Mexico, and Canada”?
Trust me. Canada & Mexico don’t follow the same safety laws, use of drugs, pesticides etc in producing your meat as we American producers do.
Canada=two-faced.
Badger40 on December 22, 2008 at 12:24 PM
Originally, I don’t think that Stephen Harper was going to use Canadian taxpayer money for a bailout until the three stooges complained about it. If you heard Jack Layton, Gilles Duceppe and Stephane Dion, the three stooges of coup scam, that was one of their complaints about Harper and the Conservatives and one of the reasons for their plot to topple Canada’s newly-elected government. Sure, I think it’s unfortunate that Harper followed George Bush’s lead on bailing out, but I also believe he was pressured into it by the opposition, and had it been the liberals or the NDP (or both had the coup succeeded) handing out money, the amount of Canadian taxpayer money divied out would have been much higher than the $3.3 billion Harper agreed to. Boy, this world is changing fast. Just like 911 changed our world forever. I believe this world financial crisis has done the same. Our world is changing fast. We are entering into a new era.
apacalyps on December 22, 2008 at 6:28 PM
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