TORONTO — Federal Finance Minister Jim Flaherty says the issue of whether the government should bail out struggling auto manufacturers is controversial, and people in his own Ontario riding - the Canadian home of General Motors - are telling him not to do it.

"There are many people saying we should do something with respect to the auto sector," Flaherty said Wednesday at a conference of economists.

"But I can tell you even in my own riding, where I was yesterday, in Whitby-Oshawa ... there are lots of people who say, 'Don't do anything. Don't use my tax money to bail out an enterprise that may not survive."'

"These are not highfalutin rich people that are saying this to me - these are people on the street."

Automakers have said they need more than $1 billion in loan guarantees to help tide over the sector until demand in the U.S. recovers for North American-produced vehicles.

The three U.S.-based automakers have been pressing for an additional $50 billion in loans from Congress to help them survive the tough economy and pay for health-care obligations for retirees. That's on top of a previously approved $25-billion government loan package for new technology.

On Friday, GM reported a $2.5-billion loss in the third quarter and warned that its cash levels could fall below what's needed to run its business by the end of the year if the U.S. economy doesn't turn around and it doesn't get government aid.

The federal Conservatives have long rejected direct intervention in the auto sector.

But Flaherty suggested for the first time Sunday that Ottawa may be willing to help, with the proviso that aid is targeted at auto plants with viable prospects.

On Wednesday, he confirmed that discussions with Canada's Big Three auto manufacturers are in progress, and reiterated there is money to be spent under certain conditions.

"We have been having discussions with the Detroit Three here in Canada," Flaherty said.

"We have money available for innovation - transformational money, if I may call it that. Because at the end of the day, we need car makers who are making cars people want to buy."

Flaherty stressed the government must ensure any bailout would be tied to the "sustainability" of the sector, or the government risks a taxpayer backlash.

"We need to find a way, if we are going to be able to do something, find a way to ensure sustainability, survivability," he said.

"That has to be the goal, otherwise ... there's a backlash to governments using taxpayers' money in what is perceived to be a bailout of a failing business."

Ontario Premier Dalton McGuinty said Wednesday night that government should take the time to listen to industry representatives, "find out exactly what the issues are."

"It's more of a listening opportunity for me," said McGuinty, who confirmed he's to meet with industry officials on Friday. "The questions they will expect from me is, tell me exactly why we should do this, what are we going to get out of this, we've provided support in the past and we've experienced job losses nonetheless, what assurances can you provide to the long term viability?"

About 400,000 direct and indirect jobs are related to auto in Ontario, McGuinty said. "It's the mainstay of 12 Ontario communities."

Chris Buckley, president of CAW Local 222 in Oshawa, said it's "absolutely disgusting" that Flaherty says he's only monitoring the situation when immediate action is required.

Buckley said Canada can't wait for the United States and president-elect Barack Obama to take office in January, saying he's worried GM in Canada could be gone by then.

"We're asking Flaherty and (Prime Minister Stephen) Harper to react immediately and not wait for the U.S. to take some kind of action," Buckley said in a phone interview.

"This is not just about autoworkers - this is about good-paying Canadian jobs, and as they evaporate, what it does to our community."

He said it would "be absolutely devastating" if the Harper Conservatives decide against financial help for automakers.

Any money for the auto industry should not be viewed as a bailout but an investment in the Canadian economy, said CAW national president Ken Lewenza.

"It can't be just giving...cash," Lewenza said, noting any solution should also address the growth of vehicles imported into Canada while North American automakers can't sell equal numbers into foreign markets.

In a meeting with Harper on Wednesday ahead of next week's throne speech, NDP Leader Jack Layton called on the prime minister to match a bailout proposal for the auto sector being floated in the United States.

Federal Industry Minister Tony Clement said the government does have a plan for the auto sector, but he didn't say whether the industry has made a formal request for financial aid.

"Certainly they've given me a real good sense on the ground as to what they're facing," Clement said. "We're examining our options."

However, Clement said the situation changes day by day, and Ottawa will act in the long-term interests of the industry.

"There's no point making a decision that affects cash flow in the industry for three or four months and then is of no further use or help," he said.

"We believe in the long-term viability of this industry in Canada."

Clement also said he's willing to talk to the CAW about what the union can do to help, but insisted that doesn't equate to a request for concessions.

While willing to talk, Lewenza said the new minister showed he has more to learn about the sacrifices autoworkers have already made.

"We have enhanced the industry by improving the productivity where the Canadian plants...have got to the top over the last five or six years," Lewenza said.

Ontario Progressive Conservative Leader John Tory said Ontario should look at appointing an "auto czar," an idea floated by Obama for the U.S.

Tory said it would be ideal to appoint "someone who is a person who understands the automobile industry and that could sit down with all the people involved ... and say, 'What could we do and how could we do it most effectively?"'

While the government has avoided direct help for the auto sector, it again came to the aid of Canadian banks Wednesday, announcing it will buy another $50 billion in residential mortgages to ease the credit crunch, tripling the amount of insured mortgages Ottawa can buy from banks by the end of the fiscal year.