What is the plan for the auto sector?

As the U.S Government considers financial support for the auto industry, we must work on this side of the border to be in sync and deal with all eventualities.

The clock is ticking and we must be cognizant of the very real job and economic implications at stake. This is a time sensitive issue – this is not the time for government to procrastinate.

There is little doubt that today’s auto industry crisis is intimately connected to the investment bank meltdown on Wall Street. This has shattered consumer confidence and flattened access to loans.

Although the panic in the credit markets shows some signs of abating, the economic news is getting grimmer. Global demand is slumping as rich economies plunge into what, collectively, could be their deepest recession since the 1930’s.

The Premier has acknowledged, “an element of merit” in the argument that the Detroit automakers are the architects of their own misfortune and should be allowed to succumb to the discipline of the market.

I have a problem with this view.

We know that - as the heartland of Canada’s auto industry - Ontario would be the hardest hit if any of the ‘Big Three’ automakers filed for bankruptcy. Auto represents one in seven jobs in this country. Most of what we assemble goes to the States. It would be a devastating blow to the province which is already facing a $500 million – and likely more – deficit. And as we know this government has already guided us to the status of “have-not”.

The Canadian subsidiaries of the Detroit three – GM, Ford, and Chrysler – employ about 30,000 workers in Canada. The broader auto sector which includes parts makers - many in Simcoe and Tillsonburg - and dealers, employs about 400,000 people in Canada.

Mr. McGuinty has admitted that if one or more of the Big Three automakers collapses, the province has no plan B. He would not know what to do! He is,“not even going to think about that.”

The previous $500 million auto sector fund was not overtly linked to a viable plan. What did Ontario get in return?

That said, bailing out auto further would be an open invitation to companies elsewhere to apply for aid to survive the recession. Banks qualify for help because the entire economy depends upon their services.

Any discussion must also focus on auto parts and dealerships. Buying a new car is a long term gamble on there being dealers, spare parts, and a thriving second-hand market. Buyers expect their 60,000 mile warranties to be honoured, and their dealers not to have disappeared.

Recently, the federal government said Ottawa would provide additional support for the crippled auto sector – as well as the aerospace industry.

And what of pensions, if there was a major bankruptcy? Our house leader, Bob Runciman has pointed out, this government should be mindful that taxpayers may well be resentful for bailing out a pension plan – especially when many people don’t have pensions themselves.

Clearly any further aid to the auto sector must be attached to job and product guarantees. John Tory has pledged his support for aid on behalf of carmakers - as long as there is a viable plan.