Friday, May 8, 2009

GM Canada gets $500M government bridge loan

General Motors of Canada is drawing $500 million out of the emergency fund promised by the federal and Ontario governments as it works to complete its restructuring plan.

The governments said Monday that the interim bridge loan can only be used for working capital while the company finalizes its plan.

GM has until June 1 to provide the two levels of government with a plan that ensures its long-term viability in order to secure billions of dollars in funding.

The governments promised $4 billion in emergency aid in December to help keep GM and Chrysler afloat. But they rejected GM's initial plan in March and asked the company to do more to prove it can continue operating competitively.

The interim loan is being provided through Export Development Canada under commercial terms, with two-thirds of the money coming from the federal government and one-third from Ontario.

"The federal government advanced this interim loan to support the orderly restructuring of a critical industry," Industry Minister Tony Clement said in a release.

"Our job is to work toward a solution that will help restore the industry's long-term viability, and maintain our proportionate share of North American production as the auto sector emerges from restructuring on its path towards long-term competitiveness," Clement said.

"The Ontario government provided this support so that the company can do what is necessary to achieve viability," said provincial Economic Development Minister Bryant. "This will help to anchor auto production and jobs in Ontario."

Chrysler submitted its restructuring plans last week, securing a total of $3.8 billion in government loans.

Chrysler's money is coming in three parts — an interim loan of $1.2 billion, a contribution of $1.45 billion to the U.S. debtor-in-possesssion financing for the parent company and a restructuring loan of about $1.1 billion.

The loans were authorized after Chrysler negotiated concessions from the Canadian Auto Workers union and forged an alliance with Fiat SpA. It also agreed to maintain a minimum of 20 per cent of its production in Canada, along with 20 per cent of its product-related investment.

With files from The Canadian Press