GM, Chrysler get Canadian aid of $3.2 billion
GM is eligible for up to C$3 billion in bridge loans and the government said it hoped to close that deal "very soon". 100 years of GM | GM's restructuring plan
By Agencies |
TORONTO/OTTAWA:Canada said on Monday plans set out by the Canadian units of General Motors Corpand Chrysler don't go far enough to make them viable, but it offered C$4 billion($3.2 billion) in bridge loans to tide the automakers over while theyrestructure.
The governmentsof Canada and the province of Ontario said they would provide Chrysler with C$1billion, advancing C$250 million right away. It will distribute another C$500million in early April and the remainder as of May 1.
"Very clearly, if the moneyhad not been forwarded today, (Chrysler) would not have been able to meetpayroll today or tomorrow," Tony Clement, Canada's industry minister, toldreporters in Ottawa.
"So wewere faced with this choice of a disorderly bankruptcy ... we felt now was thetime to announce this."
GM iseligible for up to C$3 billion in bridge loans and the government said it hopedto close that deal "very soon".
Ottawa and Ontario firstannounced the short-term financing in December but neither company has drawn onit.
Canada will provide nofurther financing unless acceptable plans are produced. If they aren't, thegovernment would have the option of calling the loans.
"The plans submitted byGeneral Motors and Chrysler to the government of Canada do not go far enough toensure the long-term viability of these companies," Clement said.
In addition to proving theirviability, the companies will have to commit to maintaining 20 percent of theirNorth American production in Canada.
On Monday, Washingtondemanded tough new restructuring plans at GM and Chrysler and forced out GM'schief executive.
Clement saidthe Canadian and U.S. governments were working closely on the file. He saidOttawa endorsed plans arrived at jointly with the United States under whichChrysler would have until the end of April to come up with a viability plan thatmust include a link-up with Italy's Fiat SpA.
LABOURCONCESSIONS
Chrysler will alsohave to find a compromise with the Canadian Auto Workers union on cutting laborcosts, while Canada says a deal that the union already cut with GM does not gofar enough.
The union recentlyagreed to reopen the three-year contract deals it reached with the companieslast May to help GM and Chrysler qualify for government aid.
Earlier this month, the CAWreached a deal with GM that the company said will eliminate nearly C$1 billionof costs related to its retired workers from its books, on top of cutting activelabor costs by more than C$7 an hour.
Chrysler has said it needs abetter deal from the union, or it could be forced to pull its operations out ofCanada.
Clement said theGM-CAW deal falls short of what's required.
The Canadian government is"expecting General Motors and the CAW to continue their discussions,particularly on the issue of legacy costs where it has become apparent therewasn't as much progress as we would have liked to have seen," he said, referringto costs related to retiree benefits
But CAW President Ken Lewenzadismissed the idea of reopening the contract with GM to address legacy costs,saying there was nothing the union could do even if it wanted to.
"You can't do it inbargaining, and nor will we," he said at a press conference in Toronto.
"I mean, at the end of theday, it's not legal to say to pensioners that you're not entitled to the pensionbenefits that you left on."
Lewenza said the union wouldbe willing to sit down with the federal and provincial governments, and thecompanies, to look at the possibility of setting up a plan similar to what theUnited Auto Workers union and the companies have agreed.
In the United States, GM andChrysler have obligations to a retiree healthcare trust, known as a VoluntaryEmployee Beneficiary Association, and are pushing the UAW to allow them to paythe union in stock rather than cash for half of the remaining obligations.
That is proving to be a majorissue preventing tentative concession deals between the UAW and the companies.
GM has until the end the Mayto present its plan. If the companies fail to prove they are viable, bankruptcyis an option, Clement said.
"While we believe in thelong-term viability of these companies, I agree with (U.S.) President (Barack)Obama that we must also consider the possibility of court-supervisedrestructuring," he said.
The governmentsof Canada and the province of Ontario said they would provide Chrysler with C$1billion, advancing C$250 million right away. It will distribute another C$500million in early April and the remainder as of May 1.
"Very clearly, if the moneyhad not been forwarded today, (Chrysler) would not have been able to meetpayroll today or tomorrow," Tony Clement, Canada's industry minister, toldreporters in Ottawa.
"So wewere faced with this choice of a disorderly bankruptcy ... we felt now was thetime to announce this."
GM iseligible for up to C$3 billion in bridge loans and the government said it hopedto close that deal "very soon".
Ottawa and Ontario firstannounced the short-term financing in December but neither company has drawn onit.
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Canada will provide nofurther financing unless acceptable plans are produced. If they aren't, thegovernment would have the option of calling the loans.
"The plans submitted byGeneral Motors and Chrysler to the government of Canada do not go far enough toensure the long-term viability of these companies," Clement said.
In addition to proving theirviability, the companies will have to commit to maintaining 20 percent of theirNorth American production in Canada.
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On Monday, Washingtondemanded tough new restructuring plans at GM and Chrysler and forced out GM'schief executive.
Clement saidthe Canadian and U.S. governments were working closely on the file. He saidOttawa endorsed plans arrived at jointly with the United States under whichChrysler would have until the end of April to come up with a viability plan thatmust include a link-up with Italy's Fiat SpA
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LABOURCONCESSIONS
Chrysler will alsohave to find a compromise with the Canadian Auto Workers union on cutting laborcosts, while Canada says a deal that the union already cut with GM does not gofar enough.
The union recentlyagreed to reopen the three-year contract deals it reached with the companieslast May to help GM and Chrysler qualify for government aid.
Earlier this month, the CAWreached a deal with GM that the company said will eliminate nearly C$1 billionof costs related to its retired workers from its books, on top of cutting activelabor costs by more than C$7 an hour.
Chrysler has said it needs abetter deal from the union, or it could be forced to pull its operations out ofCanada.
Clement said theGM-CAW deal falls short of what's required.
The Canadian government is"expecting General Motors and the CAW to continue their discussions,particularly on the issue of legacy costs where it has become apparent therewasn't as much progress as we would have liked to have seen," he said, referringto costs related to retiree benefits
But CAW President Ken Lewenzadismissed the idea of reopening the contract with GM to address legacy costs,saying there was nothing the union could do even if it wanted to.
"You can't do it inbargaining, and nor will we," he said at a press conference in Toronto.
"I mean, at the end of theday, it's not legal to say to pensioners that you're not entitled to the pensionbenefits that you left on."
Lewenza said the union wouldbe willing to sit down with the federal and provincial governments, and thecompanies, to look at the possibility of setting up a plan similar to what theUnited Auto Workers union and the companies have agreed.
In the United States, GM andChrysler have obligations to a retiree healthcare trust, known as a VoluntaryEmployee Beneficiary Association, and are pushing the UAW to allow them to paythe union in stock rather than cash for half of the remaining obligations.
That is proving to be a majorissue preventing tentative concession deals between the UAW and the companies.
GM has until the end the Mayto present its plan. If the companies fail to prove they are viable, bankruptcyis an option, Clement said.
"While we believe in thelong-term viability of these companies, I agree with (U.S.) President (Barack)Obama that we must also consider the possibility of court-supervisedrestructuring," he said.
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