General Motors of Canada Ltd. wants financial help from Ottawa and Ontario to help relieve it of pension and retiree health care costs that are crippling its competitiveness, a senior company executive says.
The auto maker is undertaking several initiatives on its own to slash costs and become more competitive, David Paterson, GM Canada's vice-president of corporate and environmental affairs, said yesterday.
But he added that government assistance to deal with the legacy costs is necessary.
"Instead of carrying one work force like our competition at Honda and Toyota, we're effectively carrying three additional work forces out there and those will grow further," he said.
The company's ratio of retirees to active workers is more than two-to-one with 34,000 retirees and about 14,000 active employees.
That will climb even higher after the closings of a pickup truck plant in Oshawa, Ont., this spring and a transmission plant in Windsor, Ont., next year.
"We need to get at that reality now to be viable," Mr. Paterson said.
A senior Ontario government official said yesterday that the legacy costs under discussion include the considerable shortfall in GM Canada's pension funds.
One idea that has been floated internally by the government is to have the province assume responsibility for the pension liability, thus relieving GM of the obligation, said the official, who asked not to be identified.
"One of the issues is going to be how much [financial assistance] is provided in cash and how much is provided in kind, in addressing pension liabilities or otherwise," the official said. The legacy costs are a "big issue" for the company, he added.
Ontario Economic Development Minister Michael Bryant said any assistance with the legacy costs will be part of the overall financial aid package from the federal and Ontario governments. He said it appears at this point that the aid package will be proportional to Canada's share of GM's North American auto production, but that will become part of the negotiations.
"I am not going to draw the line now, but we are going to ensure that we get the best deal we can for taxpayers," Mr. Bryant said.
Federal officials say Prime Minister Stephen Harper has committed to working with GM to maintain Canada's share of production and expects to be asked to provide long-term loans to aid its restructuring. But one official said the Ontario government would have to act to ease GM's "crushing" pension obligations, since they fall under provincial law.
Ottawa is again waiting for a signal from the United States that the Obama administration is prepared to meet GM's requests for an additional $16.6-billion (U.S.) in government loans. Without a U.S. bailout, there is little Canadian governments can do to save GM Canada, the official said.
The request for money to help cut legacy costs is one component of a restructuring plan that will be submitted to the two levels of governments tomorrow as GM Canada discusses the terms of a $3-billion loan already offered and the deterioration in vehicle sales.
GM Canada's request will probably rise, Mr. Paterson said, adding that it won't be clear how much will be needed until talks with the Canadian Auto Workers on reducing labour costs are complete.
Chrysler Canada Inc. and Ford Motor Co. of Canada Ltd. face similar issues of a high number of retirees and a dwindling number of active employees. That presents the two governments with what could be a multibillion-dollar dilemma because providing such relief to GM would open the door to Chrysler and Ford to make the same demand.
GM Canada's pension funds had a shortfall of $4.5-billion as of November, 2007 - before 2008's stock market collapse.
The company has cut benefits for salaried workers and retirees and is reducing pay for executives and managers, Mr. Paterson said. But the restructuring plan also has some positive elements, he noted, including new vehicles to be built at plants in Oshawa and the Cami Automotive Inc. factory in Ingersoll, Ont. The new Chevrolet Camaro muscle car goes into production in Oshawa next month. It will be joined by two other cars and possibly another one, and those vehicles will include hybrid versions, he said.
Industry sources said yesterday they expect GM Canada to increase the amount of money it is seeking, based on its parent company raising its request of Washington. If Canada provided proportional assistance of 20 per cent, with the Canadian dollar trading at 80 cents, that could mean an additional $4-billion (Canadian) for GM Canada.
With files from reporter
Shawn McCarthy in Ottawa
