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Section 2: Economic events
Archived Content
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Canada
The Bank of Canada cut its overnight rate by 25 basis points to 0.25% and announced it would keep the rate unchanged until the end of the second quarter of 2010, conditional on its inflation outlook.
Alberta tabled its 2009-2010 fiscal budget with a projected $4.7 billion deficit this year and no major spending or tax changes.
The US imposed a temporary 10% tariff on softwood lumber from Quebec, Ontario, Saskatchewan and Manitoba until it collects $54.8 million (US), claiming the provinces shipped more lumber in 2007 than allowed under the 2006 Softwood Lumber Agreement.
Vale Inco will close all of its nickel operations in the Sudbury Basin for two months this summer, affecting 5,000 jobs. Xstrata PLC announced a shutdown of its smelter in Timmins, Ontario for two months due to falling demand for sulphuric acid. A Rio Tinto subsidiary will close its Quebec metallurgical complex and mine for the summer affecting 1,800 workers. PetroCanada announced 200 layoffs at its Fort Hills oilsands. Bombardier will cut 3,000 jobs (10% of its aerospace workforce) to reduce production of business jets by 25%. Canfor will shut six of its sawmills in BC and Alberta for one week over the next two months and will implement summer closures at all of its mill operations. Newsprint-maker AbitibiBowater filed for bankruptcy protection in the US and Canada when it was unable to refinance $6 billion in debt.
Toyota lifted its overtime freeze at its Woodstock, Ontario plant due to improved sales of its sport utility vehicle. Honda announced it will offer voluntary buyouts, cut workers’ pay and impose 13 additional non-production days at its plants in Canada and the US to reduce output by 62,000 vehicles. Ford announced a 10,000 vehicle increase in its second quarter production plans.
World
Chrysler filed for bankruptcy protection in the US at month end, receiving $4.2 billion (US) in debtor-in-possession financing and up to $5.4 billion in exit financing from the US government. It also announced an alliance with Fiat SpA giving the Italian carmaker a 20% stake. Production will resume in the US when its bankruptcy restructuring is completed. Chrysler did not file for bankruptcy in Canada and the Ontario and Federal governments will provide $2.42 billion in financing to help the company restructure. Production stopped in Canada as parts become unavailable.
As part of its restructuring plan due June 1, GM will eliminate its Pontiac brand, close 16 plants in the US by 2012, cut 23,000 factory jobs by 2011, reduce dealerships by 42%, swap $24 billion (US) of debt in a bond exchange offering lenders 10% of the company’s common shares, and reduce another $20 billion of debt by offering the US government and the UAW an 89% ownership stake. Governments in Canada and the US agreed to backstop the warranties on GM and Chrysler new car sales. GM will temporarily shut down 13 assembly plants in the US and Mexico between May and June to cut production by 190,000 vehicles or 40% of its maximum output. GM plants in Ontario will close for their usual two weeks between June 29 and July 6.
The European Central Bank cut its key interest rate to 1.25% from 1.5%.
Japan announced a $154 billion (US) stimulus package of subsidies and tax breaks to boost consumer spending.
G20 leaders agreed to the creation of a Financial Stability Board which will work with the International Monetary Fund to rescue nations from bankruptcy and to monitor worldwide credit, finance and banking systems. The $1 trillion in new credit is anchored by a commitment to add $500 billion to the resources of the IMF. Of this amount, $100 billion will come from the EU, $100 billion from Japan and $40 billion from China. Another $250 billion will be given to the IMF to support special drawing rights and $250 billion in trade finance will be channelled through the World Bank and export agencies.
The US Financial Accounting Standards Board relaxed its 'fair value' accounting rules which formerly made banks mark down the value of troubled securities, including mortgages, to market prices each quarter.
A H1N1 virus outbreak in Mexico quickly spread world-wide, prompting travel bans to the country.
