The move follows weeks of intense negotiations with the Canadian Autoworkers Union (CAW) and government officials on how to save to the financially troubled automaker. Recent speculation had either General Motors (GM) or Chrysler filing for bankruptcy protection.
Federal, Provincial Ownership Stake Part of Bailout
In a spirit of cooperation the governments of Ontario and Canada have collectively contributed $3.8 billion to bailing out Chrysler. This breaks down to a contribution from Ontario of $1.25 billion, and a federal government contribution of: $2.5 billion. Together the governments contributed enough to buy a 2% stake in the company.
In remarks published by the Canadian Press, Prime Minister Harper that bailing out the company wasn’t an ideal course of action, but it had to be done for the sake of the economy: “While this situation is not ideal, this is the best way forward for the Canadian economy.”
Premier Dalton McGuinty added his positive spin on the move. In remarks published by the Canadian Press, he pointed out the governments would have a seat at the table, as well as it would give the industry further stability: “This will give our two governments a seat at the boardroom table, and it will give Chrysler’s plants in Windsor and Brampton a new lease on life.”
Chrysler was under an April 30th deadline to present a new restructuring plan in order to qualify for federal bailout money.
Bankruptcy Claim Results In Plant Closure
Chrysler’s plants have been idled until further notice by the company’s claim for Chapter #11 protection. In Canada’s case, that closes plants in Windsor and Brampton forcing the company’s 94,000 employees onto a leave of unspecified length.
Canadian Autoworkers Union (CAW) President Ken Lewenza was surprised to hear of the bankruptcy. In comments published on cbc.ca he reminded workers to focus on making cars, instead of the ongoing chaos: “It is shocking that a company of Chrysler’s stature and history should be forced into bankruptcy protection. But this development is just one part of a bigger process that we hope will reposition the company for recovery and future success.” Lewenza’s words follow a period of tough negotiation resulting in an agreement that saw workers benefits cut.
Chrysler’s bankruptcy is expected to be short-term while the company finishes a technology-sharing deal with Italian automaker Fiat. The Canadian government has contributed an overall total of $3.775 billion CDN in its bid to save Chrysler. Chrysler LLC has 8 years in which to repay the loan.
