Auto parts makers 'out of cash' and 'going out of business,' group says
Workers from Progressive Moulded Products in Vaughan, Ont., milled about their idled plant July 3, 2008 after suddenly finding themselves jobless.(Colin Perkel/Canadian Press)
Canadian auto parts makers "are out of cash" and need fast, low-interest loans from the federal and Ontario governments to survive, the Toronto-based trade group that represents them says.
"At this point in time, we are left with no other choice and are forced to look to government for assistance," Gerry Fedchun, president of the Auto Parts Manufacturers' Association, said earlier this month in a letter to Finance Minister Jim Flaherty and his Ontario counterpart, Dwight Duncan.
Duncan, the provincial minister, told reporters Tuesday that Ontario is taking a "wait and see" approach for the moment and is "obviously going to need the federal government to be involved in this situation as well."
Companies "are going out of business daily" due to factors beyond their control, Fedchun said in the letter.
"Lack of profitability has been with us for two years already and many companies have exhausted their lines of credit. The industry now needs assistance to get through this temporary, but enormous crisis.
"I believe that I can honestly say that the weak companies are no longer with us and it is only the viable, progressive companies that remain — they are just out of cash."
Fedchun's plea was dated Oct. 10 but was not made public till Tuesday. His office would not confirm reports that the industry, which is concentrated in Ontario, seeks as much as $1 billion from the two governments.
"The answer is we simply don't know how much will be needed," his executive assistant, Janet Soutar, told CBC News by e-mail.
The association claims 400 member firms producing 90 per cent of Canadian auto parts not made by the major auto companies themselves. It says the parts industry employed about 92,000 people in 2006, before a wave of cuts that has put thousands temporarily or permanently out of work.
'Why do the governments believe that profitable business and employees should pay extra taxes to prop up businesses that are in trouble?'
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In the letter, Fedchun stressed that the companies need cash, not tax breaks, because most have no taxable income.
The immediate problem, he said, is a U.S. financial crisis that has dried up loans to would-be car buyers, even those with good credit, in the world's biggest market, the United States. "This is important to the Canadian automotive industry because 80 per cent of finished vehicles and 62 per cent of auto parts are exported to the U.S.," he said.
He said the industry needs four things "to weather this storm," to wit:
Immediate, short-term, low-interest loans.A separate loan package proportionately matching a $25 billion US program being launched in Washington to help U.S. automakers retool to make more fuel-efficient cars.Refundable tax credits for scientific research and experimental development expenses to let companies tap government cash even when they lack profits.Streamlined rules that make it easier for small and medium-sized companies to get the aid."Unfortunately, we no longer have the luxury of time on our side," he said.
"Assistance is required immediately if our country has any hope of salvaging a once vibrant and prosperous industry that is experiencing a temporary but very serious financial crisis."
In a press scrum at Queen's Park, Duncan, the Ontario finance minister did not directly answer a question about whether the parts makers' plea is getting serious consideration.
He noted that the province has money available in its Next Generation of Jobs Fund, a five-year, $1.15 billion fund aimed at a variety of industries.
"That has not been used up at this point, so we're going to continue to wait and see, see how things unfold and continue to respond in a positive fashion to the challenges faced in the auto sector," he said.
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