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Government support to the auto industry

Archived Backgrounder

Government support to the auto industry

Office of the Premier

As indicated in the November 2008 Speech from the Throne and, more recently, by the governments of Canada and Ontario, the Government of Canada is committed to supporting the auto industry.

Form of Assistance
The Government of Canada and the Government of Ontario will provide short-term loans through the government's Canada Account managed by Export Development Canada (EDC) payable to General Motors of Canada Limited and Chrysler Canada Inc.

EDC will also extend access to accounts receivable insurance coverage to Canadian automotive suppliers.

The Government of Canada will also support improved access to credit for Canadian households and businesses, which will improve access to car loans and dealer financing in Canada at a time when global credit markets are severely disrupted.

Loan Amounts
Terms loans will be provided up to $4 billion.

Allocation of Loans
General Motors of Canada is eligible for loans up to $3 billion, and Chrysler Canada is eligible for loans up to $1 billion.

Interest Rate
Interest charged on these instruments will be set at 300 basis points above the London Interbank Offered Three-Month Rate (Libor + 300 bps).

Closing Date on Loans
The closing date for these liquidity facilities is December 29, 2008.

Timing of Loan Disbursement and Terms

General Motors:
  • closing:$ 0.8 billion
  • January 30, 2009: $ 1.2 billion
  • February 27, 2009: $ 1.0 billion
  • closing:$ 0.4 billion
  • January 30, 2009: $ 0.4 billion
  • February 27, 2009: $ 0.2 billion

Access to loans will require a lien be put on Chrysler Canada's unencumbered Canadian assets. In the case of General Motors of Canada, access to loans will require that the governments of Canada and Ontario be granted senior status for the demand loans to the extent permitted by law under existing agreements. In exchange, the governments through EDC will receive warrants for non-voting common shares equal to 20 per cent of the loans made to the parent companies of Chrysler and General Motors' Canadian operations.

Terms of Loans
These are 91-day renewable loans, up to a maximum of three years. Renewals of these loans require that each borrower makes a submissions no later than February 20, 2009, of acceptable restructuring plans that include specific actions sufficient to ensure long-term viability of the borrower's business operations. Renewal will also require that each borrower demonstrate acceptable evidence no later than March 31, 2009, that the plan will proceed, including agreement with all stakeholders of needed reductions in structural costs required to restore competitiveness.

Uses of Funds
The funds will be used for general business purposes.


  • Amounts owing to automotive parts suppliers to be paid according to reasonable automotive sector commercial terms and conditions including timing.
  • Borrowers must accept limits on executive compensation, including performance pay.
  • Borrowers must provide fully-authorised warrants for non-voting stock.
  • Borrowers must report material transactions (any business or other financial transaction with an associated value in excess of $125 million).
  • Weekly reports to be provided on cash and liquidity positions, production and revenues as well as rolling thrice-monthly projections.
  • Federal and Ontario government officials or their duly-appointed contractors or agents shall have unimpeded access to the borrower's records.



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