Canada's 3,500 car dealers are at risk from the financial crisis and are asking Ottawa to help out despite a record year of sales.
The Canadian Automobile Dealers Association told a news conference last week that Canada's auto sector needs aid to survive, and that the credit crunch is even starting to impact dealers across the country.
"The cold reality facing decision- makers today is if Canadian-based manufacturers are not provided a bridge across the current economic crisis, then Canada's 3,500 small-business dealers will bear the brunt of that downturn,'' said president Richard Gauthier.
The federal government is considering providing financial aid to the Canadian subsidiaries of the Detroit Three carmakers, General Motors, Ford and Chrysler, and possibly auto parts companies. Such help in the form of loan guarantees and other measures would aim to save thousands of Canadian jobs threatened by the sudden drop in North American car sales.
Such aid, if it comes, would be part of a multibillion-dollar lifeline for GM, Ford and Chrysler being considered by the U.S. Congress. However, Democratic leaders say they won't help the beleaguered automakers until the companies present them with a plan showing how they will use federal assistance to stabilize and restructure their faltering business.
In Canada, a new concern is that banks are becoming reluctant to extend dealers credit so they can buy inventory and fill their lots with vehicles, added public affairs director Huw Williams.
The association said it wants Ottawa to enact measures to ensure that healthy car dealers, which employ about 140,000 Canadians, will have access to credit so they can continue operating.
Since the beginning of October, Canada's banks have been given more than $110 billion in cash injections in return for mostly mortgage-backed securities, but Williams said of late that cash is not finding its way to many dealers.
"We are seeing business-to-business transactions, the financing that dealers receive, dry up,'' said Williams. "We are not seeing consumer financing drive up.'' He said in some cases banks are demanding higher interest rates for their money and in some cases the financing is being withdrawn altogether.
Gauthier said the dealers are not asking Ottawa for a handout, but they are asking for measures that will help them obtain credit.
He would not give specifics on how the government can grease the money-markets specifically for dealers.