By Frank McGurty
TORONTO (Reuters) - Canada will follow the United States in providing C$4 billion ($3.3 billion) in emergency loans to the Canadian arms of Detroit's ailing automakers to keep them operating while they restructure their businesses, Prime Minister Stephen Harper said on Saturday.
The package, announced by Harper and Ontario Premier Dalton McGuinty, comes a day after the White House unveiled a $17.4 billion package to shore up Detroit's auto industry.
Harper also announced two new federal measures to help the overall industry -- one to help automotive suppliers and another to help consumers to get credit to buy cars.
The federal government will provide C$2.7 billion in short-term loans and Ontario C$1.3 billion. Harper said the government hopes to recover this money but recognizes some of it is at risk.
"There are literally across the country hundreds of thousands if not millions of potentially affected families by the distress of this industry," Harper said at a joint news conference.
"And we are obviously making sure at this Christmas time that within the confines of our responsibility for taxpayer money that we are also going to look after their interest."
Harper said the aid reflected Canada's 20 percent share of the production capacity of the North American market. He said Canada would not allow a restructuring of the industry on U.S. terms in a way that might cause the relocation of Canadian facilities to the United States.
"These are extraordinary circumstances that call for extraordinary measures," McGuinty said.
Harper said the aid to automotive suppliers would come in the form of additional account receivable insurance coverage through the federal Export Development Corp. The federal government will also create a new facility to support access to credit for consumers.
'SOME MONEY AT RISK'
He said the governments were attempting to attach some liens and secure some assets of the car companies "but I will not fool you -- there is obviously some money at risk here."
It was apparent any deal would need some concessions from the Canadian Auto Workers. Harper said all stakeholders would have to help in the restructuring.
The CAW said it was willing to work with industry to protect jobs but it said the crisis was not caused by overly generous compensation but by the overall troubles in the economy.
McGuinty also said the Asian automakers, which have facilities in Canada, backed the aid package on the grounds that if one of the Big Three companies fail they all would suffer because of the integration of the North American industry.
GM and Chrysler had asked for bridge loans and credit guarantees to keep them alive while restructuring. Ford has asked for a line of credit to be tapped if its finances worsen more than expected.
A collapse of the Detroit Three automakers would put nearly 600,000 Canadians out of work within five years, most of them in Ontario, according to a report released on Tuesday.
The study, commissioned by the Ontario Manufacturing Council, warned that their collapse would ripple through the entire economy, hitting creditors, suppliers, parts manufacturers and dealerships.
Harper is a Conservative who generally opposes state intervention in the economy but he said on Thursday that the government would be ending a 12-year string of budget surpluses and injecting C$20 billion to C$30 billion of stimulus into the economy next fiscal year.
($1=$1.20 Canadian)
(Additional reporting by Randall Palmer; Editing by Eric Beech)
