Prime Minister Stephen Harper and Ontario Premier Dalton McGuinty have announced a $4-billion aid package for Canada's struggling auto industry.

They said Canada's bailout, which they called a "short term loan," is proportionate to the Detroit Three's Canadian operations, which are estimated to be about 20 per cent of North American production.

The two leaders announced the package on Saturday morning at a joint press conference in Toronto.

Ontario will contribute about $1.3 billion to the package and Ottawa will provide $2.7 billion.

Harper told reporters the aid package "is not a blank cheque" and that he wants to see the car companies and their unions work together to restructure their operations.

"All stakeholders are going have to be part of the solution," Harper said.

The aid package will also:

  • give loan access to auto-parts manufacturers and other businesses that are part of the auto supply industry
  • give additional credit to consumers

GM and Chrysler had said they need credit and loans as they restructure their companies.

Meanwhile, Ford has said it does not need immediate help, but had asked for a line of credit.

Harper said the aid package was part of a "holistic approach" to save an industry that helps provide hundreds of thousands of jobs to Canadians.

He said governments need to act, especially in the wake of the financial sector economic crisis. The auto industry has been particularly hard hit by the credit crunch, which affected their consumers' access to loans.

An auto industry failure would have ripple affects well beyond Ontario, the centre of Canada's car manufacturing sector, Harper said.

"This is a huge problem that faces the Ontario economy and the Canadian economy by extension and it is critical that we work together," he said.

McGuinty said the economic crisis has created the need for bold action.

"These are extraordinary circumstances that require extraordinary measures," he said.

Today's announcement came on the heels of the proposed US$17.4 billion in aid to automakers that U.S. President George Bush announced on Friday.

Ontario NDP leader Howard Hampton said the loan package should suffice for now, but it would have been more useful had it been handed down earlier.

As credit has tightened, it has become harder for every part of the industry to function, said Hampton.

He added that everyone from buyers to car dealers, to the automakers themselves, need access to credit in order to keep the industry running.

"We saw that happening weeks ago," he said.

If the money had been handed down at that time, "it would have made an even bigger difference," Hampton said.

Auto industry analyst Dennis DesRosiers estimated that the combined loan packages from Canada and the U.S. would help keep the struggling North American automakers afloat only for the next quarter or so.

"It probably only buys them three months or four months where they can get their ducks in order ... and hopefully come up with a plan to get everything straightened out so that they can survive," he told CTV Newsnet on Saturday evening.

GM Canada spokesperson David Paterson said the Canadian response will provide a "great sigh of relief" across the industry, noting that the loans will help his company complete a transition it began in 2005. He said GM is moving towards creating more energy efficient cars, including hybrids and electric vehicles.

Paterson added that the bailouts show a "great signal of stability" for the industry.

$70 per hour?

Canadian Auto Workers president Ken Lewenza told CTV Newsnet the aid package is good for Ontario and the country.

He said he's pleased that the bailout includes commitments by the car makers about Canada's production share.

"I think the commitment of maintaining the production share in Canada at the existing level is a fairly good commitment," Lewenza.

"As long as we maintain our share in the Canadian market, which is part of this loan, I think we'll be part of the future investment and will continue to work with the

companies."

Paterson indicated that GM's plans are to continue production at the current level.

"Our plans for Canada right at the moment are to see us continue on at that (20 per cent) level, and this type of support, as we work out the details, will give us the ability to continue on roughly at that level," he said.

Meanwhile, Lewenza took issue with critics of union auto workers who have said they make too much money -- some quoting the questionable figure of more than $70 per hour, which has never applied to Canadian workers and has been debunked by some industry analysts.

He said "that based on our productivity" Canadian workers are as competitive as -- and more efficient than -- any other North American and foreign car producers.

"It's a little bit frustrating to concentrate on workers," he said.

He also reminded critics that only three months ago, Canadian unions had worked out a collective agreement that included wage freezes, and holiday and other concessions to help the auto companies.

He said he wants Ottawa to "concentrate on the root cause of the problem. We still think the root cause of the problem is unfair trade," he said.

Buzz Hargrove, former CAW president, called the Canadian aid package "good news for their workers and their families."

But he also said he was concerned that Harper told reporters that "everyone" will have to make concessions.

"Labour costs are not the problem," he told CTV Newsnet.

But Hargrove noted that the current union leadership will have to decide how to proceed to help make the Canadian auto industry economically viable in the years ahead.

Eddie Francis, the mayor of Windsor, Ont., which has been home to GM, Chrysler, and Ford plants, said, "There will be job losses ... it's something that is going to happen."

But he added, it's better to have some job losses rather than "not having the industry at all."

DesRosiers said it was inevitable that the unions would have to make concessions, no matter how painful they might be.

"If they don't make serious concessions, then GM, Ford and Chrysler will continue to lose market share and they'll lose their jobs anyway," he said.

He said it is likely unions will be asked to make concessions on selected perk benefits -- such as selected, non-holiday, paid absences and access to a legal defense fund -- before they are asked to take any wage cuts.