Relatively fresh off the United States government teat to the tune of umpteen-eleventy billion US dollars, General Motors of Canada announced they would ask the federal and Ontario governments for $6B to keep their rusty, rat-infested ship afloat.
Find out why GM believes they are so deserving after the jump.
GM of Canada say they deserve this loan because they have done such a good job hacking away at costs. Salaries have been cut over the last few years. They’ve also reduced pensions and benefits, lowering their future obligation exposure. Finally, the company president Arturo Elias has committed to a 10% pay cut for company executives and forego any bonuses this year.
So far GM of Canada has merged two car assembly plants in Oshawa and shuttered a truck facility. Later in 2009 a Windsor transmission shop gets the axe.
Elias states the emergency funds are needed for further restructuring that would allow 17% to 20% of GM’s North American production to remain in Canada. Further, Elias predicts up to six new vehicle launches, including the first Canadian-hatched hybrid by any manufacturer.
In a remarkable show of self-preservation, the Canadian Auto Workers union agreed to a concession that would freeze wages, up health benefit costs, and reduce retiree expenses. Presumably, however, they would get to keep their jobs. This is all predicated on the governments coughing up the requisite funds.
“Through changes to our business model and salaried worker cost reductions we will be able to make over a billion dollars in annual reductions to our operational and structural costs,” Elias said last week in a letter to the general public.
“Now, in addition to that, with the new ratified CAW agreement, active hourly costs will now be comparable with our U.S.-based competition and our legacy costs and obligations in Canada will be significantly reduced.”
Of course, Chrysler Canada is jumping on the bandwagon and asking for $2.9B from the same federal and Ontario governments. They too have been talking to the CAW but talks have stalled due to disagreements on labour costs. The CAW would like the same deal to which GM agreed, but Chrysler needs bigger labour cuts to make the math work.
Both companies have until the end of March to submit their restructuring plans to the governments. As the spring daffodils bloom and thrive in the warm sun, perhaps too shall the US-based auto manufacturers.
[ thestar.com ]