B2

Kristine Owram
THE CANADIAN PRESS

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TORONTO - The Canadian automotive parts industry has received a "positive response" to its plea for government loan guarantees, but the money can't come fast enough, said Gerry Fedchun, president of the Automotive Parts Manufacturers' Association.

"With bated breath we're waiting to know what the government's going to do because as time marches on, it's getting more and more difficult to hold on," Fedchun said in an interview with The Canadian Press.

The association held an emergency meeting in Toronto on Monday to discuss the future of the industry in light of a slump in U.S. vehicle sales, tight credit markets and a general economic slowdown.

Carlos Gomes, an economist with the Bank of Nova Scotia, said the Canadian auto parts industry has already lost 20,000 jobs in the last five years.

This is above and beyond the jobs lost on the assembly side of automotive production, where the so-called Detroit Three North American automakers - General Motors, Ford and Chrysler - have cut tens of thousands of jobs in an attempt to streamline operations and save cash.

Industry analyst Bill Pochiluk of AutomotiveCompass, who spoke at the meeting, said the Canadian auto parts industry will lose another 50,000 to 60,000 jobs if the government doesn't provide immediate assistance.

"You really get a domestic effect affecting hundreds of suppliers," said Pochiluk. "Once this house of cards starts to break down, the impact will be swift and it will be pervasive."

In total, Pochiluk estimated that between two and three million North American jobs could disappear within a year if the U.S. and Canadian governments don't provide financial assistance to the auto sector.

Fedchun sent a letter to the Ontario and federal finance ministers last month asking for immediate, short-term, low-interest loans, as well as a separate low-interest loan program to match a US$25 billion investment by the U.S. government in research and development programs for green technology.

Although the parts industry has yet to receive a penny, and has largely been left out of discussions about a possible assistance package for auto manufacturers, Fedchun said he is encouraged by Industry Minister Tony Clement's trip this week to Detroit and Washington to discuss the possibility of a cross-border aid package.

"They know that we need some cash, that it won't help to get the (auto assemblers) going if they have no parts, that's the reality," he said.

He said government help for auto manufacturers would eventually trickle down to the parts industry, but not fast enough.

"We'd need some direct loan guarantees so we could go to our banks and get cash right away because the trickle-down effect would just take too long and we wouldn't survive that long," he said.

Although most discussions of government aid for the automotive industry have focused on the Detroit Three, auto parts companies - including Canada-based Magna International Inc. (TSX:MG.A) and Linamar Corp. (TSX:LNR) - are actually more vital to the Canadian economy, said Gomes.

"The parts (makers) are basically twice the size of the assembly side in terms of employment, and the reality is that with the sharp cutbacks that the assemblers have made across North America, that has certainly put the parts industry in a very difficult position," he said.

Some smaller parts companies have already gone under, and it's likely more will disappear before the current crisis is over, said Gomes.

Fedchun said GM, Ford and Chrysler won't be able to rebound without a vibrant auto parts industry.

"The industry could start to topple, there'd be a domino effect, because for want of a couple of springs, the assembly plant closes," he said.

The U.S. Congress and White House are looking at ways to aid the auto industry but haven't come to a consensus about how much funding is needed.

In Canada, the federal Conservatives have long rejected direct intervention in the auto sector, but Finance Minister Jim Flaherty said recently he may be willing to invest what he calls "transformational money" in auto plants with viable prospects.