Canada Bailed Out GM And Chrysler Without Really Knowing Where $13.7 Billion Went

The Auditor General of Canada recently issued a report that makes at least one thing clear: it doesn't know how effective Canadian government loans given to both General Motors and Chrysler in 2009 were in ensuring the viability of both companies. That year, our Canadian government (and the province of Ontario) dished out $10.8 billion to GM and $2.9 billion to Chrysler, but hadn't yet sorted out precisely how the funds were to be used before disbursing them.

This happened in spite of the fact that, according to a piece in Bloomberg, the loans weren't meant to be handed out until authorities were clear on the manufacturers' plans for reorganization. In fact, federal officials hadn't finished establishing the concessions made by all the involved parties, the pension liabilities, nor the long-term soundness of the automakers' financial positions. On top of that, apparently it didn't keep close tabs on the money after loaning it: the report says that $1B should have been applied to GM Canada pension plans but was instead given to GM to use.

Chrysler repaid $1.7 billion, while GM handed back $3.8 billion and Bloomberg believes the feds in Ottawa still own 110 million shares of General Motors, which, at the stock price as of writing, would be good for another $3.9 billion. Those were mad, bad days, though, and we're not sure what point the Bloomberg report serves, other than to say, "Oh, by the way...."

The auditor general's office also went on to recommended that those entities involved in the bailout, along with other relevant players, should publish a report with clear information on the financial help provided to Chrysler and General Motors, such as total cash disbursed and how it was used.

It also called on the government to explain what kind of impact the support had on the health of the companies. The government responded by saying it would publish a final report on the financial help given to GM and Chrysler before the end of the year.

"The financial assistance provided to Chrysler and General Motors ... for their restructuring involved complex transactions, high uncertainty, and tight time frames during its development and execution," the report said.

"These circumstances had an impact on what Industry Canada could do to manage this assistance."

Otherwise, Ferguson's team had few gripes with the way in which the government handled its support for Canada's struggling auto sector when the global economy took a nose dive in 2008.

At the time, the credit crunch made it difficult for people to get car loans. The sharp drop in sales hurt automakers such as Chrysler and GM, which could no longer generate enough cash to run their operations. The car companies couldn't turn to the flagging financial markets for help, so they looked to the government.

The federal and Ontario governments contributed a combined $13.7 billion to Chrysler Canada and GM Canada in 2009. The auditor general concluded that Industry Canada, Finance and EDC each managed the support in a way that increased the "viability" of the auto companies and boosted competitiveness in the Canadian industry over the short and medium terms.

The report also found while there were some weaknesses in the management and reporting of assistance, Industry Canada "adequately assessed" the recovery prospects of Chrysler and GM. It added that Finance "adequately estimated" the financial risks of helping the car manufacturers and EDC "adequately administered and executed" the loans and associated documents for the assistance.

Original Article
Source: ca.autoblog.com/
Author: By Autoblog