Tuesday, June 2, 2009

Canada gets 12 percent stake in 'bankrupt' GM

As General Motors filed for bankruptcy protection in New York Monday under pressure from President Barack Obama, Canada acquired 12 percent equity of the failed auto giant by investing $9.5 billion in its bailout.

Under bankruptcy protection, the US government will acquire about 60 percent of the equity of the 'new GM' on an investment of $30 billion in the company, in addition to $20 billion it has already spent to keep the once-mighty auto-maker going.

The auto industries in Canada and the US are deeply integrated, with Canadian plants of the three auto giants accounting for 20 percent of their overall production.

Canada's share of the cost to save GM is in proportion to its share of GM's total production, which will be maintained under the restructuring agreement. Ottawa will also appoint one independent director on the board of the restructured GM.

Since Canada faced the prospect of losing its auto industry, Prime Minister Stephen Harper told a press conference here Monday: "Today's announcement is a regrettable but necessary step to protect the Canadian economy during the worst global recession in half a century.

"I wish there were an alternative, but the alternative to what we're doing today would be vastly more costly and more risky.''

The prime minister said: "The Canada-US auto sector is heavily integrated and a viable GM will provide long-term security for thousands of Canadians who work for suppliers, research and development institutions, and other supporting industries.

"The Government of Canada thanks our partners, especially President Obama and the United States' government, for their close collaboration with Canada in the restructuring of GM. This cooperation makes possible a brighter future for GM and the auto industry in both of our countries.''

Welcoming the Canadian decision, Presiden Obama said: "I want to thank the governments of Canada and Ontario for making this investment in GM alongside the United States. Our countries share a stake in this company's future, and I look forward to our close partnership through this restructuring period.''

Most of GM's operations in based in Ontario province.

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