Liberal government writes off $1.1B US loan to Chrysler, plus interest, docs show

The Liberal government has quietly written off a $2.6-billion auto-sector loan that was cobbled together to save Chrysler during the 2009 global economic meltdown.

The write-off, among the largest ever for a taxpayer-funded bailout, is buried in a volume of the 2018 Public Accounts of Canada, tabled in Parliament on Friday.

The reference contains no explanation for the write-off, identifying neither the business that received the loan nor the sector of the economy.

But CBC News has confirmed the money was lent on March 30, 2009, to Chrysler LLC by the federal government – a non-performing loan that grew with interest over the following nine years. The loan was made by the Harper government, in co-operation with the Ontario government. 

"After exhausting all potential avenues for recovery, a $1.125 billion US principal plus accrued interest write-off in respect of 'Old Chrysler' occurred in March," said John Babcock of Global Affairs Canada, the department responsible.

"This amount is reflected in the Public Accounts."

At the time of the 2009 auto-sector bailouts in Canada and the United States, Chrysler was split in two: an "Old Chrysler" that went into bankruptcy and a "New Chrysler" that became viable and remains in operation today. Now called Fiat Chrysler, the international firm reported net profits of $4.3 billion US for 2017.

Another 2009 loan, to the restructured Chrysler Corp., was repaid in 2011, when the company paid $1.7 billion in principal and interest to the governments of Canada and Ontario.

CBC News reported earlier this year, drawing on heavily censored documents obtained through the Access to Information Act, that the Liberal government had forgiven a large auto-sector loan.

Similarly opaque

Officials at the time refused to provide details, including the amount or the business that benefited, saying they were protecting "commercial confidentiality."

Friday's Public Accounts documents were similarly opaque about the write-off, referring only to the precise value, $2,595,974,536 in Canadian funds.

Canada's auditor general has previously cited a lack of transparency over the bailouts.

"We found it impossible to gain a complete picture of the assistance provided, the difference the assistance made to the viability of the companies, and the amounts recovered and lost," Michael Ferguson said in his fall 2014 report.

"There was no comprehensive reporting of the information to Parliament."

The bare minimum condition for taxpayer support should be transparency- Aaron Wudrick, federal director, Canadian Taxpayers Federation

The now-defunct Chrysler loan was administered by Export Development Canada (EDC), which manages the Canada Account, a financial vehicle for making large loans and loan guarantees backed directly by the Government of Canada.

The Canada Account, for example, was used to finance Ottawa's multibillion-dollar purchase of Trans Mountain Pipeline on Aug. 31, 2018, from Kinder Morgan Energy Partners, in an effort to assure the construction of a pipeline expansion from Alberta to British Columbia.

EDC's Canada Account transactions currently show an outstanding loan to GM Corp. for more than $1 billion, originally made on April 29, 2009. The loan also appears to be attributed to a bankrupt version of the firm that was split off from a viable version of GM that year.

As part of GM's restructuring, the federal and Ontario governments also took multibillion-dollar equity stakes in the company. They sold the last of their GM shares in 2015.

A political scientist who has studied the auto-sector bailouts, Mark Milke, said in 2015 that the $13.7 billion that Ottawa delivered in 2009 eventually cost Canadian taxpayers about $3.7 billion in money that was never repaid.

In the dark

Industry Canada itself warned in 2014 that "neither Canada nor the U.S. expected any of the loans to be recovered from 'Old Chrysler'." It was not clear why the non-performing loan remained on the Canada Account books for four more years.

Aaron Wudrick, federal director of the Canadian Taxpayers Federation, said the Chrysler write-off is yet another example of governments keeping citizens in the dark about how their tax dollars bail out corporations.

"While our organization opposes taxpayer bailouts of private businesses as a rule, I think even for those who take a less stringent view, this case highlights the importance of transparency in government expenditures," he said.

"In short, the bare minimum condition for taxpayer support should be transparency — for the amount given and the terms attached to it. If a business is not even willing to meet that basic requirement in order to receive what are in many cases billions of free taxpayer dollars, they shouldn't get it at all."

Word of the Chrysler write-off comes as the Liberal government has been bracing for possible U.S. tariffs against Canada's auto exports, threatened by the Trump administration.

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