Auditor says that Canada green-lighted a $12.1 billion bailout for carmakers with limited data

Article by Andrew Christian, on November 28, 2014

The federal government of Canada wasn’t given all the information regarding the final restructuring plans of General Motors and Chrysler Group when it green-lighted a C$13.7-billion ($12.1 billion) bailout for them in 2009, the Auditor General of Canada said in a report. The submission of the final restructuring plans was one of the conditions agreed during negotiations for the loans.

Both the United States and Canada bailed out GM and Chrysler from financial collapse as they race to save the North American auto industry. The Canadian and Ontario governments granted C$10.8 billion in total loans to GM and another C$2.9 billion to Chrysler.

The government has since recovered C$3.8 billion from GM and C$1.7 billion from Chrysler and converted around C$9.8 billion of the loans to GM into equity, according to data compiled by Bloomberg. The government still own 110 million shares at the carmakers.

According to the audit, government officials only made limited analysis of the concessions accepted by stakeholders like unions and the extent of the carmakers’ health care and pension liabilities, as well as the ability of GM and Chrysler to repay the loans.

The audit emphasized that C$1 billion that was supposed to be used for GM Canada's pension plans was instead sent the parent company in September 2009.

The audit noted that since Industry Canada and Export Development Canada don’t have documents related to the use of the funds, they don’t know how the financial aid contributed to the viability of Chrysler Canada and GM Canada.

Topics: canada

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