Chevrolet cars offer huge sales at a General Motors dealership in Toronto.NATHAN DENETTE/The Canadian Press
The federal and Ontario governments would become substantial shareholders of Detroit-based General Motors Corp. in exchange for nearly $11-billion in loans in a bailout plan being negotiated by Ottawa, the U.S. government and the company.
Government negotiators continued to hammer out details of the proposal late Thursday as GM prepared for bankruptcy protection after winning a debt-for-equity deal with a committee of key bondholders.
New details of the proposed $50-billion (U.S.) bailout emerged yesterday from filings at the U.S. Securities and Exchange Commission (SEC) and briefings by American officials.
GM is expected to file for Chapter 11 bankruptcy protection on Sunday or Monday, the deadline for the company to submit credible restructuring plans to the U.S. and Canadian governments to win support for the government loans.
The U.S. Treasury - which has already lent GM nearly $20-billion - will provide another $30-billion in debtor-in-possession financing to keep the company operating during bankruptcy protection.
U.S. officials told reporters there that Canadian governments would provide $10.8-billion (Canadian) - or 18 per cent of the financing.
In a filing with the SEC, GM said the U.S. Treasury would own 72.5 per cent of the pared-down company that emerges from bankruptcy protection.
The company said the U.S. Treasury would allocate a portion of equity to the governments of Canada and Ontario in return for Canadian participation in the loans. It did not say what proportion of that equity stake Canada would take.
In the $15-billion (U.S.) bailout of Chrysler, the Canadian governments provided 20 per cent of the loans - $3.8-billion (Canadian) - and received 20 per cent of governments' overall 10-per-cent equity stake, as well as seats on the board.
If Canadian governments received 18 per cent of proposed government equity in GM - proportionate to their expected loan contribution - they would end up with a 13-per-cent stake in the company.
Debt holders will get as much as 15 per cent in the new company, compared with a previous offer of 10 per cent in return for swapping $27-billion (U.S.) in debt. However, some bondholders continued yesterday to oppose the deal and may opt to fight it in bankruptcy court.
U.S. officials expect GM to remain under bankruptcy protection for 60 to 90 days, but it remains unclear whether the company would shut down production for that amount of time, as Chrysler has done pending its emergence from Chapter 11 protection.
GM must also decide whether its General Motors of Canada Ltd. subsidiary will file for bankruptcy protection under the Companies' Creditors Arrangement Act, and whether GM Canada plants would be shut while the parent restructures.
The closing of the two companies' assembly plants would put a major financial strain on Canadian auto parts manufacturers, which are already suffering from a decline in sales and the extended industry shutdowns last winter.
Ontario Finance Minister Dwight Duncan refused to discuss the likelihood of Canadian taxpayers owning a piece of GM, while federal Industry Minister Tony Clement was unavailable for comment.
"The truth is that these discussions are still going on," Mr. Duncan said. "There's too many moving parts in this."
He said he is optimistic about the future of GM in Canada, even if, as expected, the company files for bankruptcy protection. The restructuring deal will give Canada a chance to start again and rebuild the industry, he said.
"I am optimistic that we will continue to have a viable presence of GM in Oshawa, in St. Catharines, in Ingersoll and that we will protect the footprint of the industry in Ontario," he said. "It will be very different, it may not be as large as it was at one time."
With files from reporter Karen Howlett and Associated Press