Auto firms to seek more aid, McGuinty says

Premier Dalton McGuinty says he expects GM and Chrysler to ask Ontario for more aid money and is gearing up to tackle those demands.

Premier Dalton McGuinty says he expects GM and Chrysler to ask Ontario for more aid money and is gearing up to tackle those demands.

The struggling automakers are asking the U.S. for billions more in government loans and cutting 50,000 jobs in an effort to turn operations around.

The companies are making a second round of Canadian demands Friday – and some estimate that means billions more for Canadian taxpayers.

Ottawa has already promised $4 billion in emergency aid – with Ontario responsible for $1.3 billion – but that money has yet to flow.

McGuinty says Ontario will have to wait and see what’s in those plans but acknowledges his government will have to do more for the auto sector.

He calls the apparent survival of Canadian jobs relatively good news but adds the auto industry remains unstable and more restructuring can be expected.

General Motors is slashing its global workforce by 47,000 jobs and Chrysler is eliminating another 3,000 positions in the U.S., but Canada appears to have dodged the axe under massive restructuring plans by the reeling auto giants.

Officials for the two Detroit-based companies, which are staying alive on billion-dollar lifelines in public aid, released sketchy submissions to the American government last night that didn’t disclose any plans for further cuts here.

GM Corp. revealed it will need up to $30 billion in total U.S. government financing to keep operating if economic conditions deteriorate, up from the $13.4 billion in loans it has already received.

In exchange, GM announced it would close five more plants and eliminate 20,000 jobs in the United States. Elsewhere, it plans to cut 27,000 more workers, but its submission didn’t target Canada. Some news reports suggested the company’s European operations at Opel and Saab would experience the brunt of the cuts.

GM also plans to reduce dramatically its dealer network and sell the Saturn brand, which was once thought to represent GM’s future as it attempted to win over Japanese car owners. The company will phase out the brand if there is no buyer by 2011.

If conditions improve, the company says it could become profitable again within two years. It aims to repay the loans by 2017.

In Canada, the company has already cut several operations and thousands of jobs in recent years.

“We are hopeful that we will be impacted in a minimal way,” said Ken Lewenza, president of the Canadian Auto Workers, which represents about 19,000 employees at GM and Chrysler. “At GM, I don’t think we could go much lower.”

GM of Canada Ltd. currently operates two major assembly plants in Oshawa and parts factories in St. Catharines and Windsor. It is closing a truck plant in Oshawa this May and the parts factory in Windsor next year.

“We’ve been in constant restructuring in our industry for the last 10 years,” Lewenza added.

He said productivity improvements and the earlier announced closings will reduce GM’s workforce in Canada from the current level of about 11,000 to about 7,000 by 2011.

The auto industry is experiencing its worst downturn in decades because of the global financial crisis that has tightened credit. Sales have slid more than 20 per cent in the U.S., the world’s biggest market, and triggered serious cash-flow problems for GM, Chrysler and Ford, which were already struggling.

Meanwhile, Chrysler LLC said it needs $9 billion of total government financing and it plans to cut 3,000 jobs — including a shift at one assembly plant — and eliminate the retro-style PT Cruiser model and the Aspen and Durango large sport utility vehicles as part of its restructuring.

The company, which has been kept alive by the $4 billion in government loans it already has received, said it has implemented or reached agreements on concessions with unions, dealers, suppliers and lenders to comply with the requirements of its government loans and make its labour costs competitive with those at foreign automakers’ U.S. plants.

The privately held automaker, which disclosed that it lost $8 billion in 2008, said it will get further price cuts from parts suppliers but analysts say that might be difficult because many of them are on the brink of bankruptcy as well.

Chief executive officer Robert Nardelli told reporters his company’s restructuring plan won’t adversely affect Canadian operations in Windsor, Brampton and Etobicoke.

But president Tom LaSorda, who was born and raised in Windsor, suggested Canadian operations still could be hit if current bleak market conditions persist.

The company operates assembly plants in Windsor and Brampton and a parts factory in Etobicoke. The local factory, which makes engine castings, has survived more than a decade of uncertainty over its future.

Thousands of Chrysler and GM workers in southern Ontario communities had braced for cuts while some analysts also predicted more casualties and “blood on the floor” in the industry.

“There sure was a lot of anxiety in our plant because of not knowing what was going to happen,” said Leon Rideout, president of CAW Local 1285 at Chrysler’s Brampton plant. “This is a relief to a lot of people.”

Industry watchers say reductions in operations over the years and steady productivity improvements has put Canada in a strong position to avoid new cuts.

“The (Canadian) plants are among the most productive in North America,” said U.S. analyst Bill Pochiluk.

But analysts noted that “blood on the floor” might still come in the form of concessions from workers next month.

As part of the plans, the United Auto Workers union confirmed it had reached agreements with GM, Chrysler and Ford Motor Co. for concessions, critical for the companies to qualify for the aid in the U.S. Ford has not tapped the governments in both countries for aid but is seeking a standby line of credit if conditions worsen.

Lewenza said UAW president Ron Gettelfinger informed him that his negotiators had bargained “minimal” pain for his members. A chart accompanying Chrysler’s deal contemplates wages and benefits of about $49 (U.S.).

The CAW says its members currently earn about $67 (or $53 U.S.) an hour but better productivity would put them at about the $49-an-hour level.

However, Lewenza stressed he had not seen the terms of the new labour contracts in the U.S., which need ratification by members.

“The CAW is going to have to make some compromises,” he acknowledged.

Meanwhile, GM and Chrysler must submit restructuring plans to qualify for up to $4 billion from the federal and Ontario governments by Friday night. Ontario Economic Development Minister Michael Bryant dispelled concerns that GM would close its operations here, saying the auto giant has invested heavily here in plants and workers.

However, Bryant and Premier Dalton McGuinty emphasized again that the restructuring plans will mean smaller companies and job losses. “Yes it will be a leaner industry … but ultimately a healthy and profitable one,” Bryant told reporters at Queen’s Park.

Bryant said GM could seek court protection from creditors in both countries but that could seriously harm consumer confidence and parts suppliers. “I think there is a consensus this is the last-case scenario anyone wants to enter into because of the volatility that would come with it,” he said.

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Files from Tanya Talaga and James Daw

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