11-010-XIB
Canadian Economic Observer
August 2008

Canada

The federal government announced it will stop guaranteeing 40-year and zero down-payment mortgage loans starting October 15.

Potash Corp increased its expansion plans to add 2.7 million tonnes of capacity at three of its Saskatchewan mines at an additional cost of $1.6 billion.  Saskatchewan and US-based Mosaic agreed to sell a nitrogen fertilizer plant near Regina to Norway’s Yara International ASA for $1.6 billion.

Ford revealed it had its largest quarterly loss in its history ($8.7 billion) in the second quarter, due to slumping sales of trucks and SUVs. It delayed the addition of a third shift and hundreds of jobs at its Oakville assembly plant indefinitely because of an abrupt downturn in crossover vehicle sales.  GM will cut 15% (5,100 jobs) of its salaried US and Canadian workforce by November 1 and has suspended its dividend for the first time since 1922 to improve liquidity.  Auto-parts makers Progressive Moulded and Polywheels Manufacturing ceased production, eliminating over 2,000 jobs.

BCE announced it will cut 2,500 management jobs (6% of its workforce) to provide an annual saving of $300 million.  A $52 billion leveraged buyout of BCE is to be completed in December by a group led by the Ontario Teachers’ Pension Plan and US private equity buyers.

Royal Dutch Shell PLC will buy Duvernay Oil and its stake in BC’s shale gas at Montney for $5.23 billion.  TransCanada Corp is moving forward with its $7 billion expansion of its Keystone pipeline project.

World

The European Central Bank raised its benchmark interest rate a quarter point to 4.25%.

Twenty of China’s aluminium producers, the largest in the world, agreed to cut output by up to 10% to ease a power shortage, sending metal prices to a record high on world markets.

Nissan will offer buyouts to 6,000 employees at two plants in Tennessee and eliminate a night shift at one plant due to weak sales of trucks and SUVs.