Bailout Watch 130: Oh Canada!
CTV News reports that Ontario’s ailing automobile sector is becoming another casualty of the U.S. credit crisis. Despite a Canadian dollar that’s free-fallen to $0.77, U.S. carmakers’ cash flow problems are taking their toll. Thanks to the tightening credit noose, these corporate customers can no longer finance the cost of buying Canadian parts at the volume to which the suppliers have grown accustomed. Jayson Myers, the head of Canadian Manufacturers and Exporters, says several Canadian companies dependent on exports to the U.S. automakers are in danger of going Tango Uniform. Canadian Minister of Industry Jim Prentice agrees, noting in typical political non-committal language that “What we have heard from the auto parts folks over the last several days relates to liquidity issues.” Myers, along with Ontario’s government, are now calling for the federal government to step in. They want federal loans guarantees for American/Canadian automakers. Like any good working girl, Myers doesn’t waste time naming his price. An immediate, short-term loan of $1b for Canadian parts makers. As a patriotic Canadian, I look forward to the day when my tax money is used to prop-up poor Frank Stronach’s crumbling empire.
I've spoken to some that have met/worked/dealt with Stonach, and they say he is the most ignorant, arrogant man alive, totally out of touch with reality, and that if it weren't for his partners who carry out the grunt work of upper management, Magna would have collapsed decades ago.
Oops; my bad. Sorry, Samir. Man, that was quick (change in relative value)!! I was so used to seeing the C$ ratio inverted, that I misread the chart! Good thing I'm not in the markets.
Well, that's quite the statement from Mr. Prentice, considering how, pre-election, he and finance minister Jim Flaherty were absolutely certain that Ontario's problems were all due to corporate tax rates, and the solution was to cut, cut, cut, never mind the free-fall of the automotive industry, the credit market and the rising dollar. Nope, it's all the provincial government's fault for tax rates. I wonder if the change in heart has to do with the less-than-stellar election numbers in Ontario, and the Federal Conservatives' inability to crack much of the province, largely due to said Conservative party's relative indifference to the economy? For reference, the Federal and Ontario governments are, currently, two different and not at all friendly political parties, and, in the interests of disclosure, I didn't vote for either.
Canada is in an even worse position that the US. Since the D3 are headquartered in the US, TTAC editorials aside, any bailout could come with a lot of strings that may address some of the root problems. Canada could only throw money at the problem. We will not be in any position to influence the final outcome.