The financial health of General Motors of Canada Ltd. pension plans improved in 2015, but the auto maker still faces a deficit of $3-billion and retirees are worried about how their pensions will be financed if the company closes its Oshawa, Ont., assembly plants.
The combined deficit in GM Canada's salaried and hourly pension plans improved to $3-billion as of Sept. 30, 2015, from $3.6-billion a year earlier, the annual valuations of the plans show. The plans cover retirees from existing plants in Oshawa, St. Catharines, Ont., and a parts warehouse in Woodstock, Ont., as well as former employees of factories in Oshawa, Windsor, Ont., Ste.-Thérèse, Que., London, Ont., and Toronto.
The state of the pensions will be an issue in negotiations on a new contract between the company and Unifor, which represents hourly workers in Oshawa, St. Catharines and Woodstock, union president Jerry Dias said.
But the key issue will be ensuring that General Motors Co. allocates new vehicles to the Oshawa complex so that it continues to operate once production of the cars made there now ceases later this decade, Mr. Dias said.
At stake in the talks are 2,500 direct jobs at the Oshawa complex, which is a key source of revenue for GM Canada that helps finance the pensions of more than 36,000 retirees. The negotiations begin next month.
GM Canada's public position on the future of Oshawa is that no decisions will be made until after an agreement on a new labour contract is reached with Unifor, and the auto maker has assessed how the government's Automotive Innovation Fund and other federal policies might affect the company's competitive position.
"We're quite comfortable with how our pension is funded and how we're progressing on that," GM Canada president Stephen Carlisle said in Oshawa last month as the auto maker announced the hiring of 700 new engineers. "We're fully committed to fully funding it according to the [regulations]."
Ontario regulations require an annual solvency deficiency in the pension plans to be eliminated within five years.
But retiree Chris White noted that the combined solvency deficiency still stands at $3-billion, despite an increase of 11 per cent in the assets of the plan for hourly workers in 2015. The solvency deficiency in the hourly plan, if it were to be wound up, stood at $2.6-billion.
The good news, Mr. White said, is that if the plan were wound up, pensioners would receive 78 per cent of what they were promised, up from 72 per cent a year earlier. But that still means they would be subject to losing almost one-quarter of their pensions.
"A real concern for me is, without the Oshawa plant, would GM Canada have enough revenue to support the ongoing payments to the plan?" he asked. "Would this be a deciding factor to wind down their Canadian operations?"
One possibility is that its Detroit-based parent would take over responsibility for the pension payments.
The auto maker's assembly plant in Ingersoll, Ont., is operating on three shifts and overtime to crank out hot-selling crossover utilities that are among its most popular vehicles in Canada and the United States.
One salaried retiree said he's holding off on purchasing a new vehicle until the future of the Oshawa plants is decided.
"No Oshawa production, no GM vehicle," the retiree said.
The two Oshawa plants produced 203,183 vehicles last year, but output will decline this year at what is called the flex plant because production of the Chevrolet Camaro was shifted to Lansing, Mich., last November.
The other plant, known as the consolidated plant, is scheduled to cease production in 2017, although that closing date has been extended five times.