Ken Lewenza, president of the CAW, speaks during a press conference in Toronto, Monday, March 30, 2009.

Canadian automakers given marching orders for bailouts

Updated: Mon Mar. 30 2009 3:34:05 PM

CTV.ca News Staff

The federal and Ontario governments have followed the lead of U.S. President Barack Obama, saying General Motors and Chrysler’s Canadian restructuring plans are unrealistic and the companies must go further.

Industry Minister Tony Clement said he believes "in the long-term viability of these companies" but the companies must make deeper cuts in order to receive billions in taxpayer funding.

"I’m here today to say the plans submitted by General Motors and Chrysler to the government of Canada do not go far enough to ensure the long-term viability of these companies. Therefore we have not certified their restructuring plans," said Clement.

However, $4 billion in interim loans will still go forward to keep the companies alive while they rework their plans, Clement said Monday morning alongside Finance Minister Jim Flaherty and Ontario Economic Development Minister Michael Bryant.

The deadline for the two automakers was extended from March 31 for both companies, with necessary markers set out for the companies if they hope to receive bailout funds.

Chrysler has been given 30 days to work out a viable contract with the Canadian Auto Workers and organize a deal with Italian automaker Fiat SpA.

GM has 60 days to revise their plan to include serious cuts to labour and other costs.

"The companies must demonstrate their future competitiveness and that they have secured appropriate contributions from all stakeholders to improve their overall cost structures," Clement said.

"We have said all along, no profitable plan, no money," Bryant added.

Chrysler will receive $1 billion of the $4 billion in temporary funding, while GM will receive $3 billion. Money is expected to begin flowing immediately.

CAW responds

Canadian Auto Workers President Ken Lewenza said that his union will not reopen its contract with Generals Motors despite the pressure of the Canadian government for more cost-cutting.

He said reopening the recently completed contract, which featured a number of concessions, won’t solve the problems facing the beleaguered industry.

"We can’t resolve the crisis that we have in the auto industry at the bargaining table," Lewenza said at an afternoon news conference in Toronto.

Lewenza said that his union will continue bargaining with Chrysler Canada and said that CAW approves of the possibility of a Chrysler-Fiat merger.

He said the union is willing to look at legacy costs -- pensions and health-care -- but those costs are the responsibility of the employer.

"We’re prepared to talk about the issue, but there’s nothing we can do in collective bargaining about legacy costs," Lewenza said.

He said that if one of the auto companies goes under it would turn "a recession into a depression."

Lewenza said over and over again that his union could work for free but until the public starts buying cars, the industry can’t recover.

CTV parliamentary correspondent Graham Richardson said that "senior government officials have told me that the union has conceded a lot . . . but I’ve been told that bond owners of the company are not taking cuts."

Richardson noted that when the steel industry ran into trouble, bond owners made concessions.

Richardson said that the main problem the government seems to have with the auto companies’ restructuring plans is that their projections for future sales are overly optimistic.

"(In the government’s view) these companies are being far too rosy on market conditions and how many cars they are going to sell," he said.

The Canadian announcement echoes one earlier in the day from U.S. President Barack Obama who said the two companies’ plans in the U.S. did not go "far enough to warrant the substantial new investment."

On the weekend, the White House recommended that GM CEO Rick Wagoner step down, which he did shortly afterwards.

Obama said GM and Chrysler’s U.S. operations must make "painful" concessions if they hope to receive government funds, and stay in business.

Both Wall Street and Bay Street responded unfavorably to the moves. The Toronto Stock Exchange dropped more that 350 points, while New York’s Dow Jones industrial average dropped 302 points, ending March’s market rally.