Section 3: Economic events

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Economic events in December

Canada

Chrysler announced the closure of all 30 of its North American plants from December 19 to January 19, 2009. Ford shut production at 10 assembly plants for an extra week in January on top of its normal two week shutdown. In Canada, GM closed plants in Oshawa and Ingersoll from December 22 to February 9, 2009.

Royal Dutch Shell withdrew its application to build its Carmon Creek oil sands project and postponed its Athabasca oil sands expansion. Nexen and OPTI Canada delayed a decision to expand their Long Lake project. Total SA pushed back the on-stream date of its Joslyn mine to 2014 from 2013. EnCana and PetroCanada cut 2009 capital spending plans by over $3 billion. Norwegian StatoilHydro ASA cancelled its $4 billion Kai Kos Dehesh upgrader. Irving Oil extended construction of its $8 billion Eider Rock oil refinery in Saint John from 4 years to 8 years.

Rio Tinto suspended an $800 million expansion of its iron ore operations in Labrador and $6 billion from spending on aluminium smelter projects in Quebec and British Columbia. Worldwide, Rio is slashing 2009 capital expenditures by over 50%, selling some key assets and cutting 14,000 jobs. FNX Mining halted production of nickel ore in Sudbury at both its Levack and McCreedy West mines indefinitely.

Potash Corp will cut 2009 potash output by 20% beginning in January due to declining demand. Agrium shut production at its Fort Saskatchewan nitrogen plant and will scale back output at other North American facilities.

Western Forest Products closed 10 manufacturing plants for a month, while three other west coast pulp and paper mills announced additional downtime over the holidays.

AbitibiBowater announced the permanent closure of its Newfoundland paper mill early in 2009 and an extended six-week shutdown of its newsprint mill in Liverpool, Nova Scotia.

The port of Prince Rupert will delay the $650 million expansion of its container terminal by at least 18 months.

The Bank of Canada lowered its key interest rate by 0.75% to 1.5%, the lowest since 1958.

The proposed $52 billion debt-financed takeover of BCE led by Ontario’s Teachers’ Pension Plan was cancelled.

World

On December 1, the National Bureau of Economic Research declared that the US economy had entered recession in December, 2007. On December 4, France unveiled a 26 billion Euro stimulus plan with money to be spent on public sector investments and loans for automakers.

On December 11, the Bank of America announced up to 35,000 job losses over three years following its takeover of Merrill Lynch in the new year. The ECB cut its key rate to 3.5% from 3.25%, while the Bank of England reduced rates from 3% to 2%.

Japan unveiled a package of emergency measures on December 12 pledging $44 billion (US) in spending and tax cuts. It also raised its limit for public funds injections for financial institutions to Y12,000 billion from Y2,000 billion.

On December 16, the US Federal Reserve slashed its key interest rate from 1% to a range of zero to 0.25%, the lowest on record. OPEC announced it would cut output by 2.2 million barrels a day, following a 1.7 million barrel cut over the past three months. On December 19, the Bank of Japan cut interest rates from 0.3% to 0.1%.

On December 19, the US government approved a bailout plan of $9.4 billion (US) to GM and $4 billion for Chrysler, with another $4 billion available in February 2009. The federal loan requires both companies to restructure their operations to demonstrate long-term viability. At year-end, GMAC received $6 billion in TARP funding and immediately lowered its credit financing on autos to between 0% and 5.9%. On December 20, the governments of Canada and Ontario offered $3.3 billion in loans to the auto industry.

The Swedish government provided its automakers, Volvo and Saab, with $3.5 billion (US) in credit guarantees and rescue loans. Fiat in Italy extended temporary plant closures by a month. Mitsubishi Motors in Japan will cut production by 110,000 vehicles by March, 2009. South Korean Hyundai announced wage freezes and reduced production in the US, China, and India.

Dow Chemical announced it would cut 5,000 jobs, close 20 plants in the US and Europe and idle a further 180 to cut costs. Kuwait cancelled a deal to form a $17.4 billion (US) petrochemical joint venture with Dow due to the difficulty in securing funding.

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