I Own Chrysler Canada... And I'm Not Sure I Want To

Posted by Laura Steiner May 2, 2009

At a recent press conference Prime Minister Stephen Harper and Ontario Premier Dalton McGuinty announced they were buying a 2% interest in Chrysler Canada for $3.8 billion. And then Chrysler promptly announced it was seeking bankruptcy protection from certain creditors in the USA. They were both pleased; another step taken to get the auto industry back on the road to recovery.

But was it really such a good move?

Ever since this whole mess began I've had some misgivings. On the one hand, Ontario depends on the auto sector for thousands of jobs; and if we lose it the province will be in bad economic shape for a long time. It's become a case of: 'well we have to help them, if we don't we lose jobs, and the economy goes down the toilet.'

On the other hand, it almost seems like we're throwing good money after bad. In the early '90's Bob Rae declared numerous businesses including the automakers 'too big to fail.' This meant that no matter what happened, the Ontario government aka: us would cover retirees pensions if say Chrysler went bankrupt. With that legislation a fund was established into which companies 'too big to fail' contributed up to $5 million. Now that fund is up to only $100 million, enough for each Chrysler retiree to have only $1,000, like that gets you a lot. So that puts the burden to cover the pensions on this version of the Ontario government.

Since the last recession under Premier Bob Rae, Ontario has enjoyed prosperity as have the big three automakers who have allegedly underfunded their pensions. Things began worsening last December. Last month, Premier McGuinty said he wouldn't garauntee the pensions; a very logical thing to do because Ontario can't afford it.

In buying a 2% share in Chrysler we may have to afford the pensions. Ontario, and Canada have effectively become part of the employer, and what do employers do? They take care of their employees. Some auto industry experts say the bankruptcy could last as little as 5 days, while others say it will last longer. If it lasts longer, as the employer the province of Ontario and the country of Canada are going to be on the hook for potentially billions of dollars in pension.

That could break Ontario's financial back. The province is already forecast to be in a $14 billion deficit, government spending is going to be higher than it ever has been. Buying shares in a failing auto company just doesn't seem like good business sense to me.

There comes a point where throwing money at the problem doesn't solve it. And I think we've not only reached that point, we've gone past it. The taxpayers of this province shouldn't have to pay for business's mistakes; it's time to stop funding a failing business and prepare for what happens next.

To find out more about this issue please read: Chrysler Files For Bankruptcy