TORONTO — Bailing out the Canadian branches of two ailing U.S. automakers is proving to be an expensive proposition, but the alternative was losing “thousands and thousands” of jobs to the United States, says federal Finance Minister Jim Flaherty.
“The alternative is this: all the jobs, all the assembly goes to the United States for the Detroit Three, and that would have been the result given that the Americans had decided they were going to support the auto industry,” Flaherty told reporters after a funding announcement Friday.
Federal officials have said the total cost to Ottawa of bailing out General Motors’ and Chrysler’s Canadian operations will be in the $10-billion range, adding about $7 billion more to the federal deficit than previously booked in the January budget.
If Ontario’s one-third share is included, the Canadian portion of the rescue package for the two Detroit-based automakers approaches $15 billion.
The estimates have been the source of some controversy after Flaherty disclosed earlier this week that Ottawa’s deficit will balloon to over $50 billion, up from the January estimate of $34 billion.
Flaherty said the bailout was a “major decision” that he admitted is “turning out to be expensive,” but said the government has taken careful steps to make sure it’s getting its money’s worth.
GM presented a restructuring plan to governments in the United States and Canada at the end of March, but both countries said it didn’t go far enough. Since then, the company has been working with its unions, bondholders and other stakeholders to come up with a new cost-cutting plan.
In Canada, the company reached a new labour agreement with the Canadian Auto Workers — its third in a year — that slashes labour costs by a total of about $22 an hour.
The company will present a new restructuring plan on Monday which will likely see it file for Chapter 11 bankruptcy in the United States.
Flaherty said Ottawa and the Ontario government have been involved in the negotiations since day one and are doing what they can to make sure they get a fair deal. The governments will take a stake in GM and will likely demand that the company maintain a certain percentage of its manufacturing footprint in Canada, although those details are still being worked out.
Flaherty said Canada plans to stay in the auto business and its doing what it can to make sure that happens.
“We want to have a viable, vibrant auto sector in Canada, not just in assembly,” Flaherty said.
“This business of automobiles is much more than that, it’s also the parts business, the intellectual property that’s there, and all of these dealerships, all of which, in the case of General Motors, would have been lost in this country if the company went out of business.”