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Chrysler, Ford Say Canada Leasing Program May Help Revive Sales

Jan. 28 -- Chrysler LLC and Ford Motor Co. say a C$12 billion ($9.9 billion) proposal by Canada to buy pools of auto loans and leases may help revive slumping auto sales.

The federal budget yesterday included a government pledge to buy securities backed by loans and leases for autos and equipment. The so-called Canadian Secured Credit Facility is among measures aimed at boosting lending in Canada.

“Improving access to financing is critical medicine that the Canadian economy needs right now to return to health,” said Reid Bigland, president of Chrysler’s Canadian business. “The creation of the Canadian Secured Credit Facility to support financing of vehicles is a big step forward to helping automobile sales in Canada.”

Leasing has become less popular in Canada, in part because fewer carmakers offer it. Chrysler Financial and Detroit-based GMAC LLC stopped leasing in Canada in August after borrowing costs soared and the value of used vehicles tumbled amid a glut of unsold cars.

“This is definitely a most welcome effort,” Meredith Libbey, a spokeswoman for Ford Motor Credit Co., a unit of the Dearborn, Michigan-based automaker, said in an interview. “Obviously, the goal is to take some quick action and get funding out to the Canadian public.”

The percentage of Ford’s Canadian customers who lease vehicles has fallen to about 10 percent from 40 percent a year ago, David Mondragon, president of Ford’s Canadian unit, said in an interview earlier this month. For Chrysler, that figure dropped to zero from 53 percent, according to Bigland.

Fewer Leases

Leasing accounted for about 30 percent of Canadian car sales last year, according to the Power Information Network of J.D. Power & Associates. That’s down from almost 43 percent in 2007.

Many Chrysler customers haven’t been able to qualify for financing from traditional lenders due to tight credit markets, Bigland said in an interview from Toronto today. The government plan may prompt Chrysler to resume leasing, he said.

“We are interested in getting back into leasing,” Bigland said. “We’re hoping it will make vehicle purchases for those who want to purchase a vehicle accessible, and open up leasing options back to the Canadian marketplace.”

Auto sales in Canada fell 21 percent in December as the U.S. recession spread north. The December decline, the worst for that month since 1996, pushed nationwide sales down 1.1 percent in 2008.

Ford is the second-biggest U.S. automaker, after General Motors Corp. Chrysler, controlled by Cerberus Capital Management LP, ranks No. 3. Canada
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