Auto Sector Column

January 26, 2009

I have had great feedback from constituents on the upcoming budget and in particular the actions of the government concerning the auto sector. Constituents for the most part do not support a bail out of the auto sector, nor does our government. The actions taken in December were not an unconditional hand out of taxpayer’s dollars to GM and Chrysler.  The commitment of $4 billion, three billion from the Federal Government and one billion from the Ontario government was bridge financing offered to the two automakers to ensure they did not collapse and enter bankruptcy. To date neither automaker has drawn one nickel of this money.

The big three North American automakers have 20 percent of their operations in Canada. The American government has offered GM and Chrysler just over $17 billion as an assistance package. Our twenty percent share works out to 4 billion dollars and is why the government of Canada and Ontario has offered this amount. One must remember that 90% of automobiles built in Canada are shipped to the US. If we do not show support for these automakers and the US government does this could jeopardize the Canadian operations. The auto parts manufacturing sector will also be affected by any action or inaction of the Federal government. There are 500,000 workers in the auto manufacturing sector in Ontario.

The $4 billion offered to GM and Chrysler is repayable and further money that might be extended to the auto industry will only by approved upon a solid, achievable plan submitted by the auto sector that proves viability of their operations. One thing is certain, there will be plant and dealer closures, fewer jobs in the auto sector, and the jobs that remain will have a pay scale that will make the North American auto sector more competitive than it is today.

As British Columbians, the question being asked is: “Why not help the forest industry as they have more jobs at risk in Canada then does the auto sector?” The answer is straight forward. Canada has a Softwood Trade Agreement with the US and any subsidy would be challenged by the US Forest Industry. The Softwood Trade agreement is what has kept many mills operational and if this Trade Agreement is compromised we might lose access to the US market for our lumber.

No one can lay blame on our government for the economic downturn, most all Canadians look south of the border for the reasons. What our government will be judged on is the leadership we provide through this crisis.  As much as it is against the Conservative ideology for government to spend to sustain the economy, quite frankly, we have no other choice. The lack of consumer confidence and lack of capital investment by business has caused a lack of liquidity in the marketplace. Cash flow in the market place has dried up. Unless government takes action and spends money and invests in building of roads, bridges, water and sanitary infrastructure, and assorted capital projects the downturn will be catastrophic. The surpluses that were used to pay down debt over the past three years will be retrieved to assist our deficit spending. Canada entered this recession in a strong financial position and the depth of our downturn will be less and our recovery sooner if we manage our spending in a prudent way that will have long- term benefits to the economy.

Colin Mayes, MP
Okanagan-Shuswap