A last-minute disagreement between Chrysler Corp. and the Canadian government over Canada's planned $200 million contribution to the auto company has delayed final federal approval of the overall Chrysler financial aid package, company officials said yesterday.
With Chrysler's requirements for an infusion of outside funds become critical, the federal loan guarantee board met yesterday to review details of the financing plan.
Robert Carswell, deputy Treasury secretary, said there will be no final decision until later in the week "because some elements of the package are still being completed. The board will meet again later this week."
Sources close to the negotiations said the disagreement between Canada and Chrysler isn't expected to block approval of the financing plan by the federal loan guarantee board, headed by Treasury Secretary G. William Miller.
Initially Chrysler asked Canadian federal and provincial governments to contribute $500 million in loans and grants to the company through its Canadian subsidiary.
But Canadian government officials indicated that they are willing to provide only $200 million.
Additionally, Canadian officials reportedly are seeking to protect any investment in Chrysler by requiring the auto company to maintain a certain level of jobs in its Canadian facilities and to buy parts and components in Canada. Details of the negotiations weren't disclosed.
Canadian officials have become increasingly sensitive over support for U.S. automakers in recent weeks, following the closing of a Ford plant in Windsor, Ont., Canadian sources said.
Canada had provided $67 million in grants to Ford to support construction of a new engine plant in Windsor. That plant is being built, but meantime Ford has closed another, older facility, and there will be a net loss in jobs when the new plant opens, Canadian sources said.
The Ford grant was made "with no strings attached" in the way of employment guarantees, one Canadian official said, and the federal and provincial governments don't plan to repeat such generosity, the official added.
Under the congressionally approved plan to save Chrysler, the auto company is required to raise $1.43 billion in outside assistance to qualify for $1.5 billion in federally guaranteed loans.
Part of the package reportedly will be $300 million raised from the sale of Chrysler assets, including $100 million in property and real estate in Canada and the United States.
Chrysler also had made plain it will have to reduce its operations substantially in the future in order to return to profitability.
The new, front-wheel-drive "K" cars which Chrysler will introduce this fall are being counted on to revive the company's sales. They are replacing the current lines of larger Aspens and Volares.