MONTREAL - CANADIAN Prime Minister Stephen Harper announced on Saturday a C$3.3 billion (S$4 billion) rescue package for US automakers based in Ontario, saying it was 'regrettable but necessary'.

The bailout loans C$3 billion to General Motors (GM) and C$1 billion to Chrysler, Harper said in Toronto at a joint press conference with Ontario Premier Dalton McGuinty.

'This is a regrettable but necessary step to protect the Canadian economy,' Mr Harper said. 'Today's announcement is not a blank check.'

The Canadian government will loan C$2.7 billion and C$1.3 billion will come from Ontario province, the heart of Canada's auto industry, Mr McGuinty said.

'These are extraordinary circumstances that require extraordinary measures,' he added.

GM Canada President Arturo Elias welcomed the plan. 'The support announced today sends a significant signal of stability in the face of the economic and credit challenges faced by Canada's auto sector,' he said.

Ford, which has not requested government loans but rather a line of credit, applauded 'the swift and coordinated' action and welcomed new Canadian measures to facilitate access to affordable loans and leases for customers.

But, 'there is still much that needs to be done', the company warned in a statement, adding it would work with officials to 'provide long-term, sustainable growth for Canada's auto industry'.

The announcement came on the heels of a US$13.4 billion (S$19.5 billion) rescue package for US automakers announced on Friday by US President George W. Bush.

Under the plan, GM will get US$9.4 billion in two installments through mid-January, and Chrysler up to US$4 billion this month. The plan could include an additional US$4 billion from February for GM pending congressional action.

Canada's plan corresponds to 20 per cent of the US support package, representing the country's part in the North American automobile industry, Mr Harper said.

'We have an intention of seeing a restructured industry and we'll do what is necessary to make sure that all stakeholders play ball with that agenda,' said Mr Harper, adding that automakers should adjust their market prices and products.

The Canadian plan also goes beyond the US measures by extending insurance coverage for suppliers and creating a new service to support credit access for consumers. These two steps target Japanese carmakers in Canada, such as Toyota and Honda.

Canadian Auto Workers union president Ken Lewenza applauded the announcement as 'a very sound decision'.

'One of the most important components of this aid is that companies will have to maintain their current production share here in Canada on a proportionate level to the rest of the North American auto industry,' he added.

Earlier this month, Canadian subsidiaries of the US automakers asked for some C$4.8 billion from Ottawa to restructure their operations in Ontario.

A whopping 582,000 direct and indirect jobs would be lost in Canada over the next five years if Detroit's ailing Big Three - Chrysler, Ford and GM - shut down their Ontario operations, a study found on Tuesday.

The auto sector and parts industry employ roughly 219,000 Canadians nationwide. The Big Three directly employ about 34,000 workers while overseas car makers employ just under half that number, according to the report by the Ontario Manufacturing Council.

The country's largest manufacturing industry, the auto sector directly represents 14 per cent of the country's manufacturing output and 23 per cent of manufactured exports, according to the prime minister's office.

The province of Ontario is the biggest car-producing region in North America, ahead of the US state of Michigan. -- AFP