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Autos get a $12-billion boost

Globe and Mail Update

Auto dealers and buyers got a $12-billion boost to their available credit Tuesday as Finance Minister Jim Flaherty provided budget assistance to finance vehicles sales and leases, as well as dealer inventories.

Under the Canadian Secured Credit Facility unveiled in the federal budget, Ottawa will purchase from banks and other regulated financial institutions up to $12-billion worth of securities that are backed by auto loans and leases on vehicles and equipment.

The lenders, in turn, are expected to boost the credit available to the dealers to finance their own operations as well as increase lending for car loans and leases.

With the Canadian auto industry in crisis, Mr. Flaherty provided little direct aid to the major car makers or their suppliers, beyond the $3.7-billion bailout package for General Motors Corp. of Canada and Chrysler Canada that Prime Minister Stephen Harper announced last December.

While struggling parts suppliers sought up to $1-billion in direct assistance, they'll have to be satisfied with across-the-board measures to improve access to credit for Canadian companies, to be made available at commercial rates.

Mr. Flaherty announced an additional $69-billion in federal financing to increase lending, but $50-billion of that is expansion of a program that sees Canada Mortgage and Housing Corp. purchase mortgage-backed securities from banks to increase their lending.

The government will also boost the lending capacity of the Business Development Bank of Canada and Export Development Canada, and said a key beneficiary of that additional credit will be auto assemblers and parts suppliers.

The finance minister said his colleague, Industry Minister Tony Clement, will develop a strategy over the coming months to position Canada's automotive sector for long-term success.

But Canada's auto dealers were the big budget winners, after lobbying Ottawa for months to provide specific, auto-related credit assistance. Under the plan, all federally regulated financial institutions will be able to sell their auto-backed loans to the BDC, with the expectation that they will use the added liquidity to make new loans.

Finance officials said yesterday that auto makers' finance companies, like Toyota Credit or General Motors Acceptance Corp., will have to commit to becoming federally regulated institutions in order to qualify for the program. However, they won't have to wait for that qualification process to be completed before accessing federal assistance.

At the same time, hard-pressed auto suppliers will be able to tap into increased funding for Crown corporations like the Business Development Bank and Export Development Canada.

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