INPLANT REPORT
July 27, 2009

Last week the United Auto Workers union (UAW) made adjustments to their VEBA agreement with the Ford Motor Company. The VEBA is responsible for providing retirees with their health care benefits. Earlier in the year, the UAW signed an agreement that allowed Ford to cover half of their contributions to this fund with stock instead of cash. The fixed stock price that was agreed to was roughly $2 per share. The UAW has now agreed that the stock contributions of the VEBA will be funded at market value instead of the $2 per share price. This could literally mean a savings of billions of dollars for Ford and will also mean the share prices will remain higher than if the original agreement had been maintained. The UAW retirees were in for somewhat of a windfall before, but now their benefit levels are tied directly to the success of the company.  This is an enormous amount of money to hand over to the company with one agreement.

It's important to also remember that the US government recently awarded Ford access to 5.9 billion dollars in retooling funds as long as the vehicles they produce off of the investment are 25% more fuel efficient than the previous model. In reality, you would have to question why any automaker would make large investments in a new vehicle and not get at least a 25% increase in efficiency, regardless of whether the money is coming out of their own pocket or if the government is providing it. In my opinion, this is straight cash for the retooling of Fords US plants. Ford has committed to invest nearly 14 billion in the US over the next seven years. We need the Canadian governments to establish a real auto policy that makes concrete moves to protect our jobs. Harper needs to get off his ass and realize that we can't let the 'free market' dictate what happens here in Canada. Handing out loans is one thing, but true leadership comes from developing a plan.

Last week Ford posted a $2.3 billion profit. While this was great news, unfortunately most of the profit came from one time special items. An example would be the $3.4 billion gain related to debt reduction actions. In North America, Ford reported a loss of $851 million. This is still better than the loss of $1.3 billion from a year ago. Worldwide automotive revenue was $24 billion, down from $34.1 billion a year ago. The company is still not expected to turn a true profit until 2011. Market share is steadily increasing and there are several new vehicles to be released. It appears that the company has likely borrowed enough money to survive the current downturn. Once we're through this period, the future looks very bright for the Ford Motor Company.

Ford's current Canadian manufacturing footprint is roughly 14%. If they were to close the St Thomas location, this would drop to around 8%. This is by far the most important issue we will be addressing in bargaining come September 8th. We will be demanding that our active members and retirees are treated with the respect they deserve.

In Solidarity,
Kim Clout
Plant Chairperson
905-454-6030
kimclout@hotmail.com

Taurus ads to take on luxury cars

Bryce G. Hoffman / The Detroit News
July 31, 2009

Dearborn -- Ford Motor Co. will launch a marketing campaign next week that not only pits its new Taurus against the competition, but against the competition's luxury brands.

The online ads place the Taurus, which starts at less than $26,000, against offerings from the likes of Lexus, Infiniti and Acura that cost well over $60,000. They are part of a broader marketing push aimed at changing the way consumers think about Ford's flagship sedan, which will soon hit dealer showrooms.

"It is very expensive to build a new brand," said Mike Crowley, Ford marketing manager. "With a 'wow' product and the right communications messages, we can distance ourselves from the images that Taurus represents today."

The original Taurus rocked the automotive world when it debuted in 1986, but the car was ultimately relegated to rental car fleets. Ford pulled the plug in 2006, but revived the name for its new sedan.

While print and TV spots highlight the Taurus' reviews and technology, the online ads pit it against cars costing nearly three times more.

In one spot, the Taurus and the $67,000 Infiniti M45X have their radar systems challenged by an obstacle course and a pair of aggressive drivers.

It is designed to show the Taurus' blind-spot detection system, which the Infiniti doesn't have.

"We're flattered that Ford would pick us," said Infiniti spokesman Kyle Bazemore. "But features don't tell the whole story. The M45X is a world-class luxury sedan. Our entry-level Infiniti G beat the Taurus in a head-to-head test by Edmunds.com."

In another spot, a Taurus and a $69,000 Lexus LS trail behind a gravel truck spilling its load to test each car's paint quality.

"Only one aspect of the car is being featured and we're not sure what the basis of any claims would be," said Deborah Senior, Lexus corporate marketing manager. "The LS and the Taurus tend to appeal to different audiences so it will be interesting to see how the message resonates with consumers."

Ford said the ads are not designed to win customers from the foreign luxury brands.

"Our goal is not to position this car as a luxury product," said Matt Vandyke, U.S. marketing communications director for Ford. "We have very different customers.... They're not looking for a badge. But they are people who absolutely want advanced technology."

Analyst Jim Hall of 2953 Analytics LLP said Ford's approach is smart and necessary. "None of the cars in its segment have these features," he said. "And when people think of your car as more upscale than it is, it's only going to help you when they see the price."

But Hall said Ford's ads do not address the difference between the old and new models.

"The Taurus is still perceived as a mid-sized car, and the target buyer for this vehicle is not looking for a mid-sized car," he said. "They're talking about the technology -- which is great -- but you've got to communicate with those buyers."

Mulally plans to stay in
driver's seat at Ford

Bryce G. Hoffman / The Detroit News
July 30, 2009

Ford Motor Co. CEO Alan Mulally says he has no intention of retiring before restoring the Dearborn automaker to sustained profitability.

Mulally turns 64 next month, and Ford executives have typically retired by age 65. If he followed that policy, the chief architect of Ford's turnaround plan would leave before reaching his long-stated goal of returning Ford to full-year profitability. But Mulally told The Detroit News he intends to stay.

"As long as I'm contributing, I'm honored to serve Ford," he said last week. "But I'm one person on a fabulous team."

That may be, but many on Wall Street see Mulally as the star. And as Ford's fortunes rise, some analysts and investors are becoming increasingly concerned about Ford's future without him. As one fund manager who controls a sizable chunk of Ford's stock and bonds put it: "I'm not worried about suppliers or sales. The biggest threat to Ford's future is that Mulally steps off the curb tomorrow and gets hit by a bus."

Such sentiments, blunt as they may be, are a testament to the progress Ford has made since Mulally took over as CEO in September of 2006. He predicts the company should settle into profitability by late 2011.

The only American automaker to eschew a federal bailout, Ford has avoided bankruptcy and last week surprised Wall Street with a $2.3 billion second-quarter profit. Though that profit was due to onetime gains, Ford's shares have soared, hitting a new 52-week high of $7.32 Wednesday before falling back to close at $7.12.

Mulally is no stranger to success. Executive Chairman Bill Ford Jr. recruited him from the Boeing Co., where he was credited with saving the commercial aviation division after the 2001 terrorist attacks prompted the world's airlines to cancel nearly all orders.

He did it by slashing jobs, negotiating a more competitive contract with Boeing's unions and simplifying the company's product lineup.

"Mulally brought his playbook from Boeing to Ford. He gained union concessions, refined the number of platforms and standardized parts," said analyst Eric Selle of JPMorgan. "His value has been evident since he got there. He's been an agent of change."

Analysts like Selle are not Mulally's only fans. For many Ford employees, he has rock-star status -- significant for a company historically troubled by cults of personality.

When Mulally took over from Bill Ford, the "Way Forward" restructuring plan implemented by Ford Americas President Mark Fields had been outpaced by the rapid unraveling of the truck and sport utility vehicle market in the United States.

Mulally responded with deeper cuts and won painful concessions from the United Auto Workers that finally put Ford's labor costs in line with Asian manufacturers in the southern U.S. He has radically simplified Ford's brand portfolio and product lineup, going from 97 nameplates in 2006 to 59 by the end of last year.

And he has pushed engineers to use common platforms and components wherever possible worldwide and merged Ford's often disparate regional divisions into a single global entity that he refers to as "One Ford."

Most importantly, Mulally secured a $23 billion financing deal that has provided Ford with the cash to weather the current economic crisis and avoid the fate of General Motors Co. and the Chrysler Group LLC, both of which were forced to file for bankruptcy.

Some of the credit for these accomplishments belongs to other Ford executives.

Former Chief Financial Officer Don Leclair and then-CEO Bill Ford began assembling the financing plan before Mulally was hired, and much of the cost reductions that have trimmed billions from Ford's North American operations were the results of Fields' "Way Forward" plan or part of an accelerated effort that he and Leclair had already drafted.

But Mulally has done something that no other Ford executive in history has been able to: taken a sledgehammer to Ford's infamously careerist corporate culture, which too often put individual advancement ahead of the company's long-term success.

"The only scary thing is what happens when Mulally leaves," said Sean McAlinden, chief economist for the Center for Automotive Research.

"The family feuds could start again."

Mulally says he is making sure they will not.

"Ford is in a different place. It's running itself like a business," he said.

"One of my highest priorities is to develop a process inside Ford that is very reliable."

By way of example, he points to his now-famous Thursday morning meetings. Officially known as "Business Plan Reviews," these star-chamber sessions are designed to identify any threats to Ford's plan and take immediate corrective action. They also ensure that all key executives are literally on the same page, using the same data and adhering to the same metrics.

Mulally said these and other practices are becoming a permanent part of Ford's corporate culture.

He also pointed to recent moves like the promotion of Ford of Europe chief Lewis Booth to CFO and global sales and marketing head Jim Farley's new responsibility for the company's Canadian and Mexican operations as proof that Ford is actively cultivating in-house talent.

"I think Ford is going to be just fine," Mulally said. "But I am walking on the sidewalk. I like it here."

Delphi to drop pensions

Thursday, July 30, 2009
David Shepardson / Detroit News Washington Bureau

New York -- A U.S. bankruptcy judge gave Delphi Corp. the go-ahead to abandon its pension obligations, bringing the supplier another step closer to exiting bankruptcy.

The Troy-based auto supplier was poised to win approval from a bankruptcy court judge as early as today.

U.S. Bankruptcy Judge Robert Drain denied objections from more than 1,000 retirees and three small unions to Delphi's plan to end its pension obligations. Drain said he wouldn't make a final ruling until this morning on approving the revised plan.. Drain said late Wednesday that Delphi had "exercised valid business judgment" in formulating its revised bankruptcy exit plan.

Delphi disclosed last week it would move to cancel its pension obligations in an attempt to finally exit bankruptcy after nearly four years. Delphi attorney Jack Butler told reporters that Delphi is targeting an exit date of Aug. 31, but is more likely to exit by Sept. 30.

The company had initially vowed to continue to pay its pension obligations, but as the auto industry has deteriorated, Delphi has had to slash expenses and develop a new exit plan.

Abandoning its pension obligations would saddle the Pension Benefit Guaranty Corp. with a $6.2 billion liability. Some younger retirees could see a 50 percent cut in their benefits.

"The reality of the world we are in right now is that we are not able to finance these plans," Delphi lawyer Jack Butler said.

Delphi has already canceled its life insurance and health insurance for salaried retirees, saving $70 million annually. The company has $200 million in unpaid salaried pension plans that are due now and are underfunded by $3 billion.

The pensions "cannot be funded going forward," Drain ruled, saying Delphi had properly exercised its business judgment.

General Motors Co. will make up the losses of UAW hourly retirees who see a reduction in their pension benefits. But GM didn't do the same for 120 hourly workers and retirees represented by three smaller unions. Drain rejected the unions' objections.

Drain also dismissed some objections over severance from 600 former employees, saying a deal with the lenders resolved them. The plan allows for payment of 75 percent of a former employee's remaining severance payments, in a lump sum, immediately.

Drain rejected an objection from the Michigan Workers Compensation Agency, which said Delphi owes $121 million in claims and $24 million in annual payments. Drain said Michigan had failed to file a timely claim and that Delphi's "resources are not sufficient" to pay all of its creditors.

He also said federal bankruptcy law pre-empts state laws that require priority for payment of workers' compensation claims. Wednesday's hearing came after a lengthy auction. The auction began at 1 p.m. Sunday and ended at 7 p.m. Monday.

Late Monday, the company's board agreed to back a bid for most of Delphi's assets offered by those that had loaned it $3.5 billion during bankruptcy.

Delphi's lenders include Elliott Management, Silver Point Capital and Monarch Alternative Capital. They have hired automotive consultants and are poised to take control of Delphi.

The board rejected a bid that had been backed by the Treasury Department and GM. A California private equity fund, Platinum Equity LLC, had agreed to buy Delphi in a $3.6 billion deal with $2.5 billion financing from GM.

When Delphi emerges, it will be a shadow of its former self. The company had 37 U.S. factories and about 80,000 U.S. employees after GM spun off the parts maker in 1999.

But by late this year, Delphi will have shrunk to four U.S. plants, including one in Warren, and trimmed its U.S. work force to 12,700 employees.

2010 Ford Flex EcoBoost:
More power, less engine

Jul 29, 2009

Special to the Star

BOULDER, Colo.–We have previously waxed semi-lyrical here in Wheels about the Ford Flex, the reigning Canadian Utility Vehicle of the Year.

Colleague John LeBlanc last week rated it first in a three-way comparison with Chevrolet's impressive Traverse and Chrysler's Town and Country minivan, citing its roominess, quietness, high-quality interior finish, and, most notably, its superior driving dynamics. By the standards of the class, anyway.

Now, drop in the turbocharged direct injection V6 EcoBoost engine lifted more-or-less directly from the SHO Taurus. It bumps horsepower by 35 per cent, which knocks about a second and a half off the 0-to-100 km/h sprint time with little or no increase in fuel consumption – and how bad could it be?

Not bad at all, is the answer.

In Canada, the new EcoBoost engine will be offered only in the Limited trim level, with the full-time four-wheel-drive system borrowed from the vehicle's progenitor, the Volvo S80.

It will be on sale later this summer, starting at $46,599, a $3,400 hit over the non-turbocharged four-wheel-drive Limited.

EcoBoost is Ford's engine concept of the present and near-future. Spraying fuel directly into the combustion chamber instead of into the manifold and compressing intake air with a pair of turbine-powered compressors sounds like diesel technology, and it is. Adapting it to gasoline engines isn't new, but has until recently been restricted to high-performance engines.

As the project evolved, Ford's management realized this was a concept that had much broader appeal.

The engine is, in fact, debuting in various Ford and Lincoln sedans and crossovers; the F-Series will get it in due course, and by 2013, more than 90 per cent of Ford models will have a variation of it.

In Flex, it is rated at 355 horsepower, 93 more than the non-blown Flex V6, but 10 hp fewer than the SHO Taurus, due to different tuning more befitting this style of vehicle, rather than a high-performance sports sedan.

It is mated to a beefed-up six-speed automatic transmission, which gains a Manumatic mode. Slide the lever back from Drive into "M," and you can shift from the steering wheel.

New as well is a variation on Honda's Grade Logic system – heading downhill, pull that lever back into M, a brief tap on the brake pedal to engage this feature, and it will downshift by itself as needed to help keep the car from speeding up too much.

While on the transmission, I must toss in my usual Ford whine that you cannot slide the shifter from Drive to Neutral without depressing the thumb button (as you might want to in a hurry in an incipient skid). This greatly increases the chances of sliding all the way into Park, with very expensive results.

Flex with EcoBoost also gets electric power-assisted steering, which enables a couple of new features.

The coolest one is called "Active Park Assist." Touch a button, drive slowly past a parking spot, and if the ultrasonic sensors determine that the space at least 1.2 times the length of the vehicle, you need only follow the prompts on the dash – pull forward, engage reverse, remove your hands from the wheel, govern the throttle and brake – and the car will do the steering for you.

Ford brought along a Lexus LS, which was the first car to offer such a system. The Ford was two to three times faster in operation, and got the car much closer to the curb.

This may be a sort of party trick deal: you may show it to your friends once and never use it again.

But it sure is fun to watch.

The second feature is "Pull Drift Compensation," which automatically corrects for steering disturbances caused by crowns in the road or crosswinds.

New for all Flexes is a telescoping feature added to the tilt mechanism of the steering wheel. Ford says this was the result mainly of complaints from the media. Next time we should whine about the gear lever.

Flex with EcoBoost gets a sport suspension set-up, which includes a 10 mm lower ride height. You'll need pretty good eyesight to notice this, but it does give the Flex with EcoBoost a nice stance. Dampers are 20 per cent stiffer, and spring rates increase by 12 per cent.

Trailer-towing is a big deal for large vehicles, and Flex with EcoBoost offers a Class III package for $500 that allows for up to 2,040 kg. This might not handle your entire herd of race horses, but according to Ford it covers the majority of civilian towing – two snowmobiles, jet skis, a fishing boat, that sort of thing.

Included with this package is Trailer Sway Control, which senses through inputs on the tow hitch if the trailer is starting to develop a mind of its own. Working with the standard Electronic Stability Control system, it can reduce engine power and apply slight pressure to one or more brakes to bring the rig back under control.

This was Ford's party, so you can hardly blame it for holding it at a venue that really suited its own vehicle. Boulder is about an hour from the Mile High City of Denver, and one of the major advantages of a turbocharged engine is that it is less susceptible to power drop-off due to altitude.

Because the air is less dense the higher you go, naturally aspirated engines lose about 3 per cent of their power for every 304 metres of elevation. By the time we got to where the demonstrations were taking place, we were nigh on 2,400 m up, meaning the competitive vehicles were down on power some 25 per cent.

Turbo engines are affected by altitude as well, but not as severely because they don't rely on atmospheric pressure. They can blow more air into the engine – more air means more gasoline can be burned, which means more power.

But our first exercise was to show how a turbo engine can also run efficiently if you don't lean on it very hard.

We were asked to reset the fuel economy computer, and see who could get there using the least amount of fuel.

The PR guys said most people were hitting the mid-20s (miles per U.S. gallon, roughly 9.4 L/100 km), with one "out-of-range" result of 30 m.p.g. (7.8 L/100 km).

Ha – I got 33.3 m.p.g. (7.06 L/100 km).

More impressive was the performance of Flex, especially when towing trailers (which Ford had also conveniently arranged). The car just dug in and sped away.

Again conveniently, several competitive makes were on hand with similar trailer loads. The Toyota Sequoia has more peak torque than Flex with EcoBoost, at least at sea level. But because the Flex's turbos spool up quickly, they build maximum torque at a diesel-like 1500 r.p.m. By the time the Sequoia gets on the boil, you're half-way to the cottage in your Flex.

I also ran the trailer-laden Flex against a Traverse, a vehicle I really like. But in this contest – well, there was no contest; the Flex just walked all over the Chevy.

Without the trailers, the Flex is, as we've said, a very pleasant vehicle to drive, and even more so with this sport suspension.

Strong performance, decent handling, smooth quiet ride.

Flex's "H-point" (h for "hip," and I don't mean cool) is about where it was on the old Ford 500/Taurus. That's tall for a sedan but low for a utility vehicle: you open the door, pivot and your bum is pretty close to seat cushion height. In you get, easy as can be.

Loads of room in the middle row of seats too. These can be adjusted to vary the people/cargo space.

I do wish, though, that fold-down armrests were included back there – it'd be even more comfortable sitting back there.

The back seat easily clears my beats-walking-home-in-the-rain criterion, but adults won't want to ride very far back there.

With the EcoBoost model, Ford has tossed a very quick cat amongst the pigeons in the full-size crossover category. To an already excellent vehicle, EcoBoost dials up the performance level substantially, with little increase in fuel use.

Canadians have invested more than $14 billion to save General Motors and Chrysler, and now own a part of each of them, but both companies refuse to disclose the salaries of their top executives in Canada.

Spokespeople for the ailing automakers say they are private companies and won't reveal compensation packages for senior officials such as GM of Canada Ltd. president Arturo Elias and Chrysler Canada chief executive Reid Bigland.

The refusal comes after massive restructurings and public aid packages that saved the teetering auto giants. They left the U.S. and Canadian governments with 72 per cent of parent GM and 10 per cent of Chrysler.

"The data you have asked for is not available to the public," said Stew Low, director of communications at GM of Canada.

However, Joseph D'Cruz, professor at the University of Toronto's Rotman School of Management, said since the firms "accepted public money here, they must be prepared to conform to a higher level of accountability and transparency."

The federal and Ontario governments provided $10.5 billion in loans to GM for 11.7 per cent of the company, and another $3.8 billion to Chrysler for a 2 per cent share.

Low said GM will be the most "public private" company in North America in terms of financial reporting. But that doesn't mean the automaker will reveal private information about employees or competitive secrets, he said.

Still, some experts say that while the two automakers are privately owned and their stock is no longer traded publicly, investors such as governments and taxpayers have a right to know more.

"These companies are effectively publicly owned and therefore need to follow the rules governing public-sector organizations, such as universities and hospitals, where salaries of high-income earners are disclosed," said D'Cruz.

In the U.S., Fritz Henderson, GM's new chief executive officer, said last month the automaker is "committed to open communications." He added: "I am personally putting a high priority on transparency."

In the U.S., the Obama administration is pushing for more openness and dictating the level of executive compensation at GM because of its shareholder clout.

GM disclosed a few weeks ago in filings to the U.S. Securities and Exchange Commission that Henderson will receive a monthly salary of $105,000 (U.S.), or $1.26 million this year.

GM also revealed last week that its new directors, including Carol Stephenson, appointed as the Ontario and federal government's representative, will receive $200,000 annually, plus use of a car.

Stephenson, dean of the Richard Ivey School of Business at the University of Western Ontario, said in a statement she could not discuss the subject of disclosure of executive compensation in companies where the public holds a financial stake.

At Chrysler, a spokesperson would not comment on the issue because there "is lots to be reviewed over the coming weeks." However, last week another Chrysler official in the U.S. would not reveal compensation details for directors or executives.

When they were public companies, parent GM and Chrysler disclosed details of pay packages including bonuses, stock options, loans and benefits for their top executive in annual filings with U.S. securities regulators.

Senior officials in Canada did not make that list because executives with the parent U.S. companies always received more pay. There is no requirement under Canadian securities law for executives of subsidiaries of international firms to divulge compensation information.

Canadian Auto Workers president Ken Lewenza said the public and government closely scrutinized his members' wages and benefits during recent restructuring talks and there should be similar examination of executive compensation.

But Premier Dalton McGuinty has said his government's priority in aiding key companies is strengthening the economy and creating jobs.

"I'm not looking for a kind of collateral benefit, so to speak, to reach in and interfere with salaries awarded to executives."

Metro Detroit auto dealers busy as 'cash for clunkers' begins

David Shepardson / Detroit News Washington Bureau

Metro Detroit auto dealers reported heavy interest from buyers Monday for the $1 billion "cash for clunkers" program.

Nearly 16,000 auto dealers have been registered to participate in the program approved by Congress, which offers consumers up to $4,500 to junk their older vehicles.

Some dealers initially had trouble getting registered. Village Ford in Dearborn was finally able to get registered at around 11:30 a.m. Monday, said Jay Sturtz, the office manager. Showroom traffic was double or triple a normal Monday, and all 20 of his salespeople were busy, he said.

By late afternoon, he said they had made 16 cash for clunkers deals, and over the last two weeks took deposits in anticipation of the program for about 45 vehicles. In some cases, a few customers who didn't qualify to trade in their old car still bought a new one because of other incentives.

"There is just amazing buzz over this program. It's everywhere," Sturtz said. "People are feeling like a frenzy mentality -- I am getting left behind because the money is going to run out and there's only a finite number of dollars."

The money will provide vouchers for about 250,000 vehicles and will expire Nov. 1 if it hasn't been used. Transportation Secretary Ray LaHood said it wasn't clear if the administration will seek additional funds if the vouchers are snapped up quickly.

"We need to see if the program is successful. We think it will be," LaHood said. "We're going to know pretty quickly if we are going to run through the billion dollars or not."

A boost would help automakers in the U.S., where sales were down 35 percent in the first half of this year.

Since Friday, 1.5 million people visited cars.gov, the federal Web site that outlines the Car Allowance Rebate System program, bringing the total to more than 4 million people since it went online this month. In addition, more than 45,000 people have called a government hotline -- (866) CAR-7891 -- seeking information.

The clunker must be no more than 25 years old and have a combined highway/city mileage of 18 miles per gallon or less. It must be in driveable condition and have been owned and insured for the previous year. Consumers who buy a vehicle with 4 to 9 mpg higher than the older vehicle get a $3,500 voucher; if they trade it in for a vehicle that's 10 mpg or better than the old one, they get a $4,500 voucher.

Consumers can go to cars.gov to find out if their vehicle is eligible and if their local dealer is participating. NHTSA is launching a $10 million advertising campaign to highlight the program.

Restore sanity - and regulation
to the Canadian airline industry

Air Canada's second brush with bankruptcy
proves that deregulation has been a failure

Jul 27, 2009
Peggy Nash
Toronto Star

As chief negotiator for the CAW in the recent round of talks with Air Canada, I have seen first-hand the shortcomings of privatizing and deregulating key sectors of our economy.

After months of bargaining, all five Air Canada unions have now agreed to cost-neutral collective agreements for a period of 21 months. We've joined the retirees in agreeing to allow Air Canada a funding moratorium on past contributions to the pension plan for the same period. This is a funding risk that will be borne by the employees and retirees in order to help Air Canada through bad times.

Air Canada is once again teetering on the brink of bankruptcy protection (CCAA), after just emerging from CCAA six years ago.

At that time, the courts approved a plan that saw Air Canada Enterprises (ACE) take on the role of major shareholder of Air Canada. ACE spun off key profitable segments of Air Canada, such as the Aeroplan rewards program, the maintenance section, and its regional carrier, Air Canada Jazz.

These were sold for huge profits that benefited the investors, especially U.S. hedge funds, and the key executives, including Robert Milton, who happily pocketed his share. This is the kind of irresponsible corporate behaviour that is driving Americans crazy but doesn't seem to attract much notice here in Canada.

Throughout this process, Air Canada workers have borne the brunt of the restructuring. Under bankruptcy they gave up more than $2 billion in cost savings to Air Canada only to see this money travel right into the pockets of the investors.

The airline is so short-staffed that when bad weather hit last December during the holiday period, Canadian air travel ground to a halt and there was not enough staff to deal with the crisis. The travelling public took out its frustrations on the same workers who were trying to hold the operation together.

Opposition to so-called Big Government and the Nanny State fostered the climate that led to Air Canada's current precarious state. In Canada and around the world, governments of all stripes fell into the trap of "the private sector does it better."

Certainly this philosophy made some people very rich, but it also left some governments nearly bankrupt, eroded key services like health care and transportation, and exposed a philosophy of greed that works against the public interest. Ask anyone affected by the financial meltdown inflicted on the world by Wall Street how effective the unregulated private sector can be.

Airline deregulation has led to the bankruptcy and disappearance of dozens of companies with all the usual pain and heartache for the staff and travelling public. Since Air Canada was privatized it has lost a grand total of almost $6 billion.

The latest downturn in the economy has created a crisis for many of the world's airlines, but for companies like Air Canada, which was already in a precarious state, the loss of revenue, the poor hedging of fuel prices, currency fluctuations, and the poor state of pension plan investments added to its economic difficulty.

Competing companies like West Jet and Porter predictably react by adding more airline capacity to the market, even when travel is declining, in the hope of further damaging Air Canada so that they can gain more market share. This illogical behaviour is encouraged under our current "anything goes" air travel regime.

Unions have once again done the responsible thing by holding the line and trying to keep the company out of bankruptcy, with retirees joining in the effort. But ultimately, we need some sanity and some regulation restored to our air travel.

This doesn't mean returning to the old ways. A modern regulatory system would prevent the dramatic swings in the airline sector by imposing responsible limits on the overall capacity growth of carriers. It would stop the destructive attacks of one company on another through excess capacity.

It would also mean our federal government taking an equity stake in Air Canada – not buying the whole company or running the day-to-day operation, but helping with its long-term financial stability.

If the alternative is a complete foreign takeover, such as happened with our railway system, keeping our government involved in our national air carrier is definitely preferable.

The travelling public in Canada, and the workforce who serve them, have endured enough.

Let's not let another travel business needlessly go under. It's time to put some sanity back into our national airline.

Peggy Nash is the assistant to CAW national president Ken Lewenza and a former NDP MP for Parkdale-High Park.

July selling rate bodes well
for '09 auto sales

Christine Tierney and Bryce G. Hoffman / The Detroit News

U.S. auto sales have gathered pace this month, bolstering expectations that the auto market is starting to recover from 25-year lows in the first half of the year.

Several forecasters predict that the annualized selling rate for July will exceed 10 million vehicles for the first time this year.

That pace is likely to increase after the government's $1 billion cash-for-clunkers incentive program goes into effect on Monday.

Online auto research site Edmunds.com predicts that sales in July will total 950,000 cars and light trucks.

While that would be 16.3 percent lower than last July's sales, it would represent an increase in the annualized selling rate to nearly 10.5 million vehicles from less than 10 million in each of the first six months of 2009.

Edmunds analyst Jesse Toprak attributes part of the improvement to traditional summer sales. "Glimmers of hope about the economy and the buzz generated by the cash-for-clunkers program are also working in the auto industry's favor," he said.

The cash-for-clunkers program is designed to increase demand and get some of the most environmentally unfriendly vehicles off the road by rewarding consumers with a federal rebate of up to $4,500 for swapping older vehicles for new models.

With $1 billion in funding, it will help to finance around 250,000 vehicle sales directly. But analysts say the buzz generated by the program and automakers' additional incentives will probably boost sales further. Chrysler Group LLC, for example, is offering an additional $4,500 rebate of its own.

Edmunds predicts that Hyundai Motor Co., which is already offering its own cash-for-clunkers deals, will record an 8 percent sales rise for July from prior-year levels.

Several auto executives and industry analysts report rising showroom traffic, suggesting that shoppers who were holding off may be ready now to buy.

"We already see little signs of improvement," said Yoshimi Inaba, chairman of Toyota Motor Sales USA. He said Toyota's U.S. dealers were seeing more prospective shoppers.

"Some leading indicators are providing encouraging signs," Ford Motor Co. Chief Executive Alan Mulally said Thursday during the company's earnings teleconference. "Financial markets remain challenging but have improved in recent weeks."

Ford expects the market to recover slightly in the second half, resulting in full-year sales between 10.5 million and 11 million, compared with 13.2 million last year and 16.1 million in 2007.

Forecasting firm J.D. Power and Associates estimates the selling rate in July at 10 million units, or 8.2 million excluding sales to rental companies and other fleet customers.

Financial analysts were cautiously optimistic. "We're not saying auto sales are ready to take off for the moon," said JPMorgan analyst Himanshu Patel. But, he added, "we are seeing signs of a modest recovery taking hold."

JPMorgan estimates this month's selling rate at 9.9 million cars and light trucks.

Investment firm Deutsche Bank estimates that underlying demand is close to June levels, when the selling rate was 9.7 million units. But it expects a late-month surge from cash-for-clunkers deals to boost the rate to 10.2 million vehicles in July.

Deutsche Bank analyst Rod Lache estimates Ford will again perform better than the industry as a whole and post a 10 percent sales decline in a market forecast to shrink 21 percent.

General Motors Co. executives said sales were soft in July, with many customers holding off in anticipation of the cash-for-clunkers deal.

"We're all at the starting gate ready to go, programs and Web sites are locked and loaded, the question is will consumers respond?" said Mike DiGiovanni, GM's executive director of global market and industry analysis.

'Cash for clunkers'
US program expands

Rebates start Monday; new rules target fraud, include more vehicles

David Shepardson / Detroit News Washington Bureau
Saturday, July 25, 2009

Washington -- The long-awaited cash for clunkers program, which starts Monday, will include more vehicles than previously expected, thanks to changes unveiled in the final rules that were officially released Friday.

In the National Highway Traffic Safety Administration's final regulation, some new provisions were included to broaden the number of eligible clunkers and new cars, and dealers were told they will be responsible for disabling the engines of clunkers before they get sent to the junkyard.

NHTSA's Web site said consumers can start getting rebates Monday. NHTSA spokesman Rae Tyson said more than 1,700 dealers were approved to take part the first day, while another 2,100 were pending approval or in the draft stage.

Another 148 applicants had been rejected.

Congress said new eligible vehicles must have a manufacturer's suggested retail price of no more than $45,000, but that applies only to the base price -- meaning customers could pick out a pricier car loaded with options and still use the rebate.

Consumer purchases after July 1 can be eligible for the program, which offers a rebate of up to $4,500, if they meet all the requirements.

Under the rules set by Congress, most clunkers must average no more than 18 miles per gallon in combined highway/city driving.

In the 2008 model year, the Environmental Protection Agency revised its mpg calculations, dropping the average mileage by about 10 percent.

"Older vehicles can qualify if the vehicles meet the 18 mpg or less under the newer test procedures. Eligibility is determined by the revised ratings rather than the original EPA sticker on the vehicle," NHTSA's regulation says.

Another new detail in the program: Dealers will have to disable the clunkers' engines.

Dealers will have to remove "the engine oil from the crankcase, replacing it with a 40 percent solution of sodium silicate (a substance used in similar concentrations in many common vehicle applications, including patching mufflers and radiators), and (run) the engine for a short period of time at low speeds (rendering) the engine inoperable," NHTSA said. In a July 21 letter, the National Automobile Dealers Association argued that Congress did not assign the task of making the engine inoperable to the dealers, and that if required to do so, the dealers should be paid.

"We believe that having the engine permanently disabled at the dealer greatly reduces the risk of fraud," said NHTSA, adding that disabling the engines will cost dealers no more than $30.

NHTSA will spend $33 million running the new program and hire about 230 people. It also will launch a $10 million advertising campaign to promote it.

NHTSA said officials from Texas, California and Germany, which all have programs to pay consumers to scrap older vehicles, cautioned the agency "to be vigilant to guard against fraud."

CAW, Federal, Provincial and Municipal Politicians Urge Ford to Keep St. Thomas Plant Open

July 24, 2009

(Toronto) - CAW officials met with federal, provincial and municipal politicians yesterday at Queen’s Park to discuss the future of the Ford St. Thomas plant. Elgin-Middlesex/London MPP Steve Peters and Elgin-Middlesex/London MP Joe Preston, along with other municipal mayors were in attendance.

"Ford has an obligation to work with the CAW and the federal, provincial and municipal governments to maintain jobs in the St. Thomas facility,” said CAW President Ken Lewenza. “It’s unacceptable to the CAW and the workers in this facility that Ford has no product beyond 2011 for this plant."

There is a clear consensus that Ford must find a solution to this very difficult situation. Ford has shed over 50 per cent of their Canadian workforce over the past number of years and their footprint in Canada will be less than eight per cent.
  
"We have been working incredibly hard at the local level to maintain high quality and high productivity of the popular vehicles that we build,” said Scott Smith, Chairperson Local 1520, St. Thomas Plant. “For over 30 years our members were committed to this facility. We have done everything we could locally to commence forward to maintain operations in our community."

$2.3B profit boosts outlook for Ford

Bryce G. Hoffman / The Detroit News
July 24, 2009

Ford Motor Co.'s unexpected $2.3 billion second-quarter profit could signal the end of the worst downturn in recent automotive history for at least one of Detroit's automakers, but Ford's recovery still depends on the broader economy.

Though Ford's profit was due largely to one-time gains, consistent improvements in its underlying financials are sparking optimism among investors, analysts and union leaders that has not been seen for some time.

Ford shares gained 60 cents Thursday on the results, closing up 9.4 percent at $6.98 after a day of heavy trading that helped push the Dow over 9,000.

The company also said it has reached a new agreement with the United Auto Workers that will allow Ford to cover billions in retiree health care obligations with company stock priced at current market values -- previously, the UAW said the shares had to be valued no lower than about $2.

That's a vote of confidence in Ford's future, said Sean McAlinden, chief economist at the Center for Automotive Research.

"This is a stock that, when this economy recovers, is going to $20," he said. "I'd say we've got a hot auto company here in Michigan again."

McAlinden predicted that Ford will replace General Motors Co. as the nation's largest automaker. By next year, he said, more UAW members will work at Ford than at GM for the first time in history.

Ford's loss narrows

Thursday's numbers offered a sharp contrast to the staggering $8.7 billion loss Ford posted in the same quarter a year ago. Excluding one-time items, Ford still surprised analysts with a loss from continuing operations of $424 million, about half what Wall Street expected and a $609 million improvement over 2008.

Ford cut its cash burn rate by more than two-thirds, from $3.7 billion in the first quarter to $1 billion. It also saw the amount it makes on each product increase in key markets such the United States, and gained 2 percentage points in U.S. market share over the same period last year despite lower incentives.

"Those are real proof points that the plan is working," CEO Alan Mulally told The Detroit News. "We're moving into a different phase now. We're starting to grow."

He attributed the gains to aggressive cost-cutting, new products and better use of the company's global assets.

"Mulally has recognized what was right at Ford and leveraged it, putting Ford in a strong position relative to its competition," said analyst John Murphy of Merrill Lynch. "A good second quarter, and liquidity appears solid."

Economy among obstacles

But Mulally stressed that Ford still faces some real challenges, not the least of which is the broader economy.

"Clearly, the business environment remains difficult," he said. "While we still expect the economy to begin to improve in the second half of the year, the recovery is likely to be more modest than many of us had hoped."

The potential for disruption in the U.S. supply base is another risk, said Chief Financial Officer Lewis Booth.

Some important Ford suppliers, including Visteon Corp., have filed for Chapter 11 bankruptcy and many more are teetering on the brink.

"In some cases, we've had to lend them money," Booth said. "It's going to hurt our profits a little bit."

Analyst Shelly Lombard of Gimme Credit said Ford clearly benefited from the problems facing GM and Chrysler Group LLC, but said it is hard to tell whether those gains can be sustained.

"Ford delivered exactly what we wanted to see -- lower cash burn," she said. "But it's still too early to tell whether Ford has got its swagger back since some of the improvement was due to market share and price gains that Ford probably picked up at General Motors and Chrysler's expense while they were in bankruptcy."

Lombard warned that the gains made in the second quarter will be hard to match in the third quarter, which has historically been weak for Ford.

The company made the same point to analysts in a conference call Thursday.

If Ford's stock remains high, some analysts expect the company to pursue another debt-for-equity swap. In May, Ford issued 345 million new shares of common stock, raising $1.6 billion, and helping it trim $10.1 billion in debt from its balance sheet since the beginning of the year.

Ford ended the second quarter with $21 billion in available cash, but still needs to improve its balance sheet to address lingering concerns that GM's bankruptcy put the Detroit automaker on a stronger financial footing.

The new UAW deal should help. It would allow Ford to cover up to half of its $13 billion obligation to a union-run trust fund with company stock priced at current market value.

The UAW had agreed earlier this year to accept Ford stock in lieu of cash, but had fixed its value at about $2 a share. At the time, Ford's shares were trading at that level, and the move was aimed at preventing the company from exercising this option if their value fell below that. But what was intended as a floor quickly became a ceiling as Ford's shares rallied, preventing the company from taking advantage of the deal.

Ford and United Auto Workers agree on stock deal for union trust

Bryce G. Hoffman / The Detroit News
July 23, 2009

Ford Motor Co. today announced that it has reached a new agreement with the United Auto Workers that will allow the company to cover half its obligations to a union-run trust fund with company stock at current market values.

The Dearborn automaker had reached an agreement earlier this year that allowed it to make half of its payments to the voluntary employees' beneficiary association, or VEBA, in stock, but that deal set the price at around $2 a share. Since then, Ford shares have more than tripled in value, making that an unattractive option for the company.

The new deal is expected to save the company billions in cash and is also expected to be less dilutive for existing shareholders.

Chief Financial Officer Lewis Booth said Ford does not expect any additional changes to the UAW contract in the near term.

"We have potential opportunities in the longer term," he said.

Ford posts second-quarter
profit of $2.3 billion

Bryce G. Hoffman / The Detroit News
July 23, 2009

Ford Motor Co. posted a surprise profit of $2.3 billion for the second quarter -- a sharp contrast to the whopping $8.7 billion loss it reported for the same period a year ago -- but the profit was largely due to one-time gains related to its debt reduction moves.

Even with those special items removed, the Dearborn automaker surprised Wall Street with a pre-tax operating loss of $424 million for the second quarter of 2009, excluding special items -- a $609 million improvement compared with the second quarter of 2008.

After taxes and excluding special items, Ford posted an operating loss of $638 million in the second quarter, or 21 cents per share, compared with a loss of $1.4 billion, 63 cents per share, a year ago. That also was a marked improvement over the $1.4 billion loss -- $1.8 billion after taxes and excluding special items -- that Ford reported for the first three months of the year, when it lost 75 cents per share.

Wall Street had been anticipating a loss of 52 cents per share, after taxes and excluding special items, according to a survey of a dozen analysts by Thomson Reuters prior to today's announcement.

"While the business environment remained extremely challenging around the world, we made significant progress on our transformation plan," said CEO Alan Mulally. "Our underlying business is growing progressively stronger as we introduce great new products that customers want and value, while continuing to aggressively restructure our business and strengthen our balance sheet."

Ford is alone among American carmakers in refusing a government bailout and avoiding bankruptcy. Analysts say it has benefited from the woes of its cross-town rivals.

"Ford production in North America and Europe improved sequentially in the second quarter of 2009 as consumer concern over GM and Chrysler's prospects helped Ford gain market share in the U.S. while scrappage programs boosted demand in Europe," said Brian Johnson of Barclays Capital. "We estimate North American production of 445,000 units, up 27.5 percent sequentially."

While Ford's share of the U.S. market has increased, the industry as a whole remains depressed.

Ford had hoped to see new vehicle sales rebound by the end of the quarter, but they have continued to lag. Earlier this week, Ford Americas President Mark Fields said the U.S. car market has finally bottomed out, though he said the recovery could be slow and long.

Ford had also hoped to find a buyer for its Swedish Volvo brand by the end of June, but that also has not materialized. Global credit markets remain tight, and Volvo remains unprofitable.

But Ford's relative strength in the U.S. market has allowed it to increase margins on many of its vehicles, bolstering its bottom line. Johnson said Ford has cut its incentive spending in the United States by nearly $250 per vehicle compared to the first three months of the year, a savings of about $105 million.

"With Ford gaining market share over the past two quarters at the same time it reduced its average incentives per vehicle, Ford's return on incentive spending is tracking above historical levels," he said, adding that Ford also is benefitting from stabilization in the raw materials market.

But Johnson and other analysts say Ford needs to do more to improve its balance sheet to reduce its $38.5 billion debt load. On Tuesday, Mulally told reporters that Ford already has cut its debt by more than $10 billion this year through debt-for-equity swaps and similar actions, saving about $500 million in interest expenses.

Mulally said that strategy will continue, which could mean further dilution for shareholders.

In May, Ford issued 345 million new shares of common stock and used the proceeds of that sale -- about $1.5 billion -- to cover its obligations to the union-run voluntary employees' beneficiary association, or VEBA, that is assuming responsibility for hourly retiree health care and to bolster its balance sheet.

Several analysts expect Ford to make a similar move if its shares rise sharply on today's numbers. Yesterday, Ford shares closed up 2.9 percent at $6.38 despite a downturn in the market as a whole.

Ford finished the second quarter with $21 billion in cash, compared with $21.3 billion at the end of the first quarter -- a dramatic reduction of its cash burn rate, which had been a source of concern for Wall Street. Ford's automotive operations burned through about $1 billion during the quarter, compared to $3.7 billion in the first three months of the year.

"Ford delivered a very solid quarter, and our transformation plan remains well on track," said Chief Financial Officer Lewis Booth, "We strengthened our balance sheet, reduced cash outflows and improved our year-over-year financial results despite sharply lower industry volumes."

Ford said it remains on track to return to profitability in 2011.

bhoffman@detnews.com (313) 222-2443

Pension Fund Corp. takes over Delphi retirement benefits

David Shepardson / Detroit News Washington Bureau

Washington -- The Pension Benefit Guaranty Corp.'s takeover of the pension plans of 70,000 workers and retirees of Delphi Corp. will result in the cutting of benefits by about $800 million and won't be the last government assumption of an auto supplier pension plan by the government insurer.

Troy-based Delphi said Wednesday it would shift hourly and salaried pension plans to the agency in a move that will cost the government's insurer of pensions about $6.25 billion. The government-owned corporation's takeover of Delphi's plans is the second largest in history by the amount of money the PBGC will pay out -- behind the termination of United Airlines pensions, said Vincent Snowbarger, the acting director of the PBGC, in an interview.

He said the PBGC has been in talks with several unnamed auto suppliers about potentially also assuming their pension plans.

"I can tell you that we have not seen the end of plan terminations in the supplier sector," Snowbarger said.

"We've been working with Delphi over the last nearly five years in their bankruptcy in the hope that they would be able to keep the (pensions) in place," Snowbarger said. "As their fate has turned for the worse, it became less and less likely they would be able to do that."

But the termination may help pave the way for Delphi to exit bankruptcy, which sought court protection in October 2005. Delphi has an auction for its assets Friday and hopes to reach a final deal to sell the bulk of them next week.

Under current estimates, retirees and workers will lose at least $800 million in what they were owed over the maximum that PBGC will pay. But early indications are that number is expected to increase after the PBGC does more in-depth calculations.

The PBGC is funded through premiums from businesses and funds from pensions taken over. It doesn't receive any taxpayer funds, but many in Congress think taxpayers will eventually have to bail out the PBGC, which has a $33.5 billion deficit.

In May, the PBGC said it was closely monitoring companies in the auto manufacturing and auto supply industries. According to PBGC estimates, auto sector pensions are underfunded by about $77 billion, of which $42 billion would be guaranteed by PBGC.

But the PBGC said the prospects for the sector improved when General Motors Co. and Chrysler Group LLC exited bankruptcy protection without terminating their pension plans. GM will use some of its $50 billion in government loans to make a catch-up payment of up to $13 billion for its pension plans.

The government's assumption of responsibility of both of Delphi's hourly and salaried pension plans could take months, and at least six months before pension recipients find out how much less they will receive. The auto supplier said it won't cancel its hourly pension plan until it gets court permission. Within about three years, Delphi recipients will get a final calculation of their benefits and will learn whether they have to repay any benefits to the government insurer.

Delphi had previously announced it would cancel its salaried pension plan as it struggled to emerge from bankruptcy. But when GM emerged from bankruptcy without setting aside any money to assume Delphi's hourly pension plan, it became clear that the PBGC would have to step in, Snowbarger said.

That brought harsh words from Michigan members of Congress.

Rep. Bart Stupak, D-Menominee, called Delphi's decision "immoral." He said some young retirees could see a 50 percent cut in their pensions as a result.

"It's huge, especially up in my district where a lot of retirees live," Stupak said. "You can see what the corporations are doing: declaring bankruptcy, going to court and dumping it on the taxpayers, which I think is really immoral. Corporations used to take care of their workers; now they don't anymore."

Rep. Thaddeus McCotter, R-Livonia, said the announcement was "another huge piece of bad news for the state of Michigan."

As part of the deal, the PBGC will receive a $3 billion general unsecured claim against Delphi's assets. PBGC spokesman Jeffrey Speicher said, "Accounting rules require us to book losses before they come in. Bankrupt since 2005, Delphi has been on our books for a while."Delphi's hourly pension plan covers 47,000 participants and has about $3.7 billion in assets and more than $8 billion in liabilities, according to PBGC estimates.

The PBGC expects to be responsible for about $4 billion of the hourly plan's shortfall of nearly $4.4 billion. The Delphi salaried pension plan covers about 20,000 workers and retirees, and has $2.4 billion in assets and liabilities of $5 billion, according to PBGC estimates. The PBGC expects to be responsible for about $2.2 billion of the salaried plan's estimated $2.6 billion in underfunding.

Additionally, the agency will be responsible for $50 million in underfunding of four smaller Delphi plans with 2,000 participants.

The PBGC will pay pension benefits up to the limits set by law, but in some cases, especially for younger retirees, they will get far less.

The PBGC does not insure pension benefits above the legal limits, health benefits or other types of employee benefits.

GM will give the PBGC $70 million, as well as part of future distributions to GM from the new company that acquires Delphi assets. The PBGC needs court permission to take over the Delphi plans and filed six lawsuits Wednesday in U.S. district courts across the country to start the process.

INPLANT REPORT
July 22, 2009

The membership has anxiously been awaiting news on whether or not we will be entering negotiations with the Ford Motor Company. We appreciate your patience. As usual, we have been very careful not to put out any information that is based on speculation or rumours. There have been several discussions with not only the company, but also amongst the CAW/Ford Master Bargaining Committee and CAW/Ford Council as a whole.

With that being said, it is our intention to open bargaining with Ford on September 8, 2009. The challenges we face still exist and we expect this to be an extremely difficult set of negotiations. The company has requested that the CAW maintain the principle of pattern bargaining and negotiate an agreement similar to the ones recently ratified at GM and Chrysler.

The most important issue for us during this bargaining will be securing jobs for our Brothers and Sisters. As everyone is well aware, the company has stated that there is no product for St Thomas beyond 2011. Also of major concern is their position that Oakville needs to make some dramatic gains in productivity, quality and health and safety.

It's easy for the company to try and place the blame for the issues on the workers in a broad sense. Evaluating these figures and costs will be a major component of bargaining. Our understanding is that a decision on where the next generation of Oakville's vehicles are built will be made very soon. It is essential that Ford make a serious, long lasting commitment to our CAW members here in Canada if they hope to negotiate an agreement with the union. Sales in Canada have been on the rise and our expectation is that they will continue to climb.

Recently the company refused to pay out the $1,700 vacation bonus on the date that was expected. Our expectation is that this bonus will be paid out on the new date in August, PP #33. The company's refusal to pay the $1,700 a second time would obviously create a major complication and anger both your leadership and the membership. To date, we have received no notice from Ford that this will not be paid out as expected.

Thank you again for your continued patience and solidarity as we move forward. The Inplant will continue to update the membership whenever possible.

In Solidarity,
Kim Clout
Plant Chair
CAW Local 584

Worst is over, Ford exec says

Bryce G. Hoffman / The Detroit News
July 22, 2009

Dearborn -- Ford Motor Co. says the U.S. car market has bottomed out, but warned that the recovery could still be months away.

"Things have stopped getting worse," Ford Americas President Mark Fields told reporters at a product event at the automaker's proving grounds Tuesday. "The question is, at what point does it start to turn positive?"

He said leading economic indicators suggest the economy will recover in the second half of the year, but he said it is unclear how long it will take for that trend to buoy car and truck sales.

Ford had hoped to see a modest rebound in auto sales by the end of June. Ford CEO Alan Mulally said the company has enough cash to weather the economic crisis.

U.S. car and truck sales have been falling fast for a year, and last month saw another dip. But analyst Erich Merkle of Autoconomy.com said the decline was negligible, adding that he agreed with Fields.

"That drop was not meaningful," he said. "We're just dragging the bottom."

Mulally on Tuesday touted the company's quality gains and called on GMAC Financial Services to put its shareholders -- the American taxpayers -- ahead of General Motors Co. and the Chrysler Group LLC.

He would not elaborate, but Mulally's comments were apparently meant to caution GMAC against offering too favorable of terms to customers of competitors. GMAC earlier this year became a bank holding company, giving it access to funds at a more favorable rate. Ford has applied to set up an industrial bank, which would give it some of the same benefits as GMAC, but that request has languished

Ford remains the only U.S. automaker not to file bankruptcy. That has improved its image with American consumers, but some analysts worry it could leave the company at a disadvantage against rivals that have shed billions from their balance sheets in Chapter 11.

Mulally said Ford has eliminated more than $10 billion in debt since the beginning of the year through a series of actions, including debt-for-equity swaps, and he said Ford will continue to take similar actions.

"It's the American Way, to pay back your loans," he said.

On Sunday, Sen. Mitch McConnell, R-Ky., told NBC's "Meet the Press" that Mulally called him recently to express concerns about the lending situation.

McConnell said the Ford executive said his company was "doing reasonably well compared to everybody else in this recession. People appreciate the fact that we haven't taken any money from the government. But we've got a problem. The government now runs the finance companies of GM and Chrysler. And since they're running the finance companies, they're undercutting us on the financing of our automobiles."

Washington effectively took over GM's former finance arm in December, giving GMAC $5 billion in exchange for preferred stock in the company. By May, the federal government had injected another $8.4 billion into the company and gained majority control.

Bank application a priority

Mulally said Tuesday getting its industrial bank application approved remains "an important thing to us," suggesting it could go a long way to assuaging his concerns about GMAC. But he said Ford is not at a competitive disadvantage at this point.

Analyst Jim Hall of 2953 Analytics LLP said GMAC has not done much to support Ford's rivals, which it is obligated to provide financing for under the terms of the government bailout.

"I can't say they're really supporting GM and Chrysler. They're supposed to be supporting the dealer body and they aren't doing a very good job of that," he said. "Ford is worried about what they could do."

Gaining an edge in quality

In other news, Tuesday, Ford said a new study of initial quality shows it has passed arch-rival Toyota Motor Corp. and now has fewer problems with its new cars than any other full-line manufacturer.

According to a study conducted for Ford by the RDA Group of Bloomfield Hills, Ford, Mercury and Lincoln cars and trucks averaged 1,185 issues per 1,000 vehicles, while Toyota had 1,215 problems; Honda Motor Co. had 1,291.

RDA's research is used by a number of automakers, both foreign and domestic.

Ford has fought its way back to quality leadership before only to lose it again to competitors like Toyota. Joe Hinrichs, Ford's head of global manufacturing, said the company cannot relent this time.

"We have every expectation that Toyota will remain very competitive," he said. "There's no way we're going to give that up."

Ken Thomas
The Associated Press

WASHINGTON–Small in stature, a group of 2009 two-door cars are providing good safety value to car shoppers, according to U.S. crash tests released Tuesday.

The Ford Focus and Volvo C30 received top scores in front-end, side and rear crash tests, according to tests from the Insurance Institute for Highway Safety.

Two-door versions of the Chevrolet Cobalt and Honda Civic, meanwhile, received top scores in front-end tests and the second-highest rating in side tests. The Civic received the top score in the rear test while the Cobalt has not yet been tested for rear crash protection.

The Scion tC, which is manufactured by Toyota Motor Corp., and not available in Canada until next year, received the second-highest score of acceptable in both the front-end and side tests. It received the second-lowest rating of marginal in the rear crash test.

The Institute decided to test the two-door cars because they are frequently asked how the small vehicles perform in crash tests, said David Zuby, the Institute's senior vice-president for vehicle research. He called the overall results "good news.''

Zuby said all the vehicles tested were equipped with side air bags that protect the motorist's head. He said the side test results were strong, "considering how demanding the side test is. It simulates being struck by a pickup or SUV.''

The vehicles range in prices in Canada from $17,190 for the Honda Civic Coupe to $27,695 for the Volvo C30.

The tC's structure held up well in the crash, but Zuby said the forces recorded on the dummy indicated that a driver could suffer an injury to the lower right leg. The tC is not equipped with electronic stability control, which helps a driver avoid a rollover crash.

Brian Lyons, a Toyota spokesman, said the tC was last redesigned for the 2005 model year and Toyota has been installing stability control and improved head rests in newly redesigned vehicles. Toyota has not announced when it plans to upgrade the tC, he said.

Ford tops in quality survey

Bryce G. Hoffman / The Detroit News
July 21, 2009

Ford Motor Co.'s newest automobiles had fewer problems than any other manufacturer -- including Toyota Motor Corp. -- according to a new survey of initial quality, details of which were obtained by The Detroit News.

It was the first time ever that the Dearborn automaker beat its arch-rival in the survey, which was conducted for Ford by the RDA Group of Bloomfield Hills. The study also put Ford in a dead heat with Toyota in customer satisfaction.

"We've been tied with Toyota before, but it sure feels better to be on the top!" wrote Bennie Fowler, Ford's global head of quality, in a memo to employees Friday, a copy of which was obtained by The News. "We can all be pleased with the progress we have made in quality, even as we face external and internal challenges in a tumultuous climate. Our progress has come as the result of our union partnerships in the U.S., Canada and Mexico, along with the work of dedicated teams in manufacturing, product development, purchasing, marketing, sales, service, legal, IT and others who follow disciplined, standardized processes."

RDA's research is used by a number of automakers, both foreign and domestic, and has historically tracked closely with other independent research by firms such as J.D. Power and Associates. Its second quarter study showed new Ford, Mercury and Lincoln cars and trucks had 1,185 issues per 1,000 vehicles. Toyota had 1,215 problems, while Honda Motor Co. had 1,291.

Both Toyota and Ford had an 80 percent positive customer satisfaction rating, Fowler said.

The results come a year after he vowed publicly to seize Toyota's crown as the quality leader among full-line manufacturers in the United States. But Ford has found that its quality gains have still not convinced all consumers that its products are on par with those from its Japanese competitors.

Fowler said more work is needed, particularly on the luxury brand, which faces even tougher competition.

"There is more work to be done," he said." We want nothing less than to be the highest-quality automotive manufacturer year over year!"

Toyota says it's no longer
profitable in North America

David Shepardson / The Detroit News
July 21, 2009

Washington -- Toyota's top executive in the United States said Monday the company was reviewing its entire operation here, including whether to close a factory in California and when to open a factory in Mississippi.

In an hour-long interview with reporters at Toyota's Washington office, Yoshimi Inaba said Toyota is not profitable in North America despite cost cutting in the organization, but he said he hopes the company could be profitable in its next fiscal year in North America. Inaba, who is president and chief operating officer of Toyota Motor America and chairman and CEO of Toyota Motor Sales USA, is taking up his responsibilities at a crucial time for the Japanese automaker.

Toyota's sales have fallen 38 percent in the first six months of the year -- to 770,000 cars and trucks from nearly 1.25 million vehicles in the first six months of 2008. U.S. industry auto sales fell 35 percent in the first half of the year.

Among the issues the company is considering in its re-evaluation process is whether to keep open the 25-year-old New United Motor Manufacturing Inc. assembly plant in Fremont, Calif. The plant, which employs 4,700 people, is a joint venture formed with General Motors, but the Detroit automaker recently withdrew from the pact during its stay in bankruptcy court.

"That put us in a very difficult position," Inaba said. "We are carefully evaluating all the options."

He didn't commit to a timetable for a decision on Nummi, but said a decision would be made "quite soon." He said Toyota hadn't received an incentive package from California yet.

The hourly workers at Nummi are represented by the United Auto Workers, and the contract expires next month. Inaba said the UAW contract "is one consideration, but not the single deciding factor."

Inaba noted that California is Toyota's single biggest market in the United States, and closing the factory would negatively impact its image there.

The company also is contemplating what to do with its Mississippi plant. Toyota has completed the structure, but not moved equipment into it or given a date it might open because of the sharp decline in auto sales. It was scheduled to open next year. Toyota has said it may build the Prius in Mississippi, but Inaba said those plans are unclear.

Asked whether Toyota could shelve its Mississippi plant permanently, Inaba said, "I hope not," and added, "I'm not that pessimistic" about its future.

"Toyota is certainly at a crossroads with respect to capacity," said Michael Robinet, vice president of global forecast at CSM Worldwide. "Virtually every manufacturer is stepping back and looking at their capacity."

Inaba refused to rule out layoffs or plant closures at its other North American plants.

Inaba said the company had made mistakes in making too many decisions in Japan, urging more "decentralization" of decision-making.

Because of Toyota's success for the last eight years, there was an attitude among some executives that, "OK, now we have been so successful, we understand the market, so can make a decision there rather than here," Inaba said.

Inaba said the company is listening to the market, and customers "had been a little bit lost."

When asked whether Toyota had become complacent, he said, "Complacent or arrogant -- a lot of people use that -- I don't know," he said, adding that the company had tried to guard against those qualities.

Inaba acknowledged that Toyota vehicles had often lacked "passion" and that the company's vehicles must be "more exciting, more nimble."

"Toyota is a good car but not exciting. Those are the comments we usually (or) always get," Inaba said.

Inaba said he supported the decision of the U.S. government to rescue General Motors Co. and Chrysler Group LLC with $65 billion in loans. "Stepping into Chrysler and GM was a necessary step for the government, for the country," Inaba said.

But he said he hoped the U.S. government would have a "free-market level ground in mind in deciding what to do next."

He also said GM and Chrysler were right to shrink their dealer networks. Toyota, he said, has no plans to expand its dealer network in the U.S.

Business Reporter

General Motors Co. has received three final offers for its Opel subsidiary in high-stakes bidding that could lead to victory for Magna International because of geo-political factors favouring the Canadian company.

Aurora-based Magna and its partner Sberbank of Russia have received a positive reception for their bid from four governments – Germany, Russia, the United States and Canada. That could ultimately lead to their selection as the winner for majority control of Adam Opel GmbH, sources familiar with the complex process said yesterday.

GM, which has just emerged from bankruptcy court protection in the U.S., confirmed that it received the bids and will now analyze them.

That will lead to further review involving the German federal and state governments; other countries where the company operates; the European Union; and Opel's trust board before an announcement.

GM did not indicate who made offers and when it will make a decision, but one industry official said it could come within a few weeks.

Germany has already provided Opel a $2.1 billion bridge loan to keep the company, one of Europe's biggest automakers, alive. Berlin effectively holds a veto on any sale because of its critical aid and further financial support, which would be part of any bid.

In late May, Magna and Sberbank, Russia's largest bank, signed a memorandum of understanding with the German government as its preferred candidate to take a leading stake in Opel. GM is selling control of Opel as part of a massive corporate restructuring.

But the German government said later it was still open to other offers. RHJ International, a Belgian holding company, and Beijing Automotive Industry Group of China emerged as suitors and also made formal bids for Opel yesterday.

Despite the new offers, sources say Magna remains the favourite bidder of the German national and local governments because of assurances it has made to save production and jobs.

Furthermore, one source noted, the Canadian and U.S. governments, which now own about 72 per cent of GM, and Russian political heavyweights have responded "positively" to Magna's proposal.

"It has really become a geo-political game now," said the industry insider about the battle for Opel. "And it's pretty amazing that Magna has been able to create an alliance of support from four of the G8 countries – Germany, Russia, the U.S. and Canada."

In its final offer, Magna and Sberbank evenly split their 55-per-cent proposed stake in Opel to help ease German concerns about Russian influence. Their original offer contemplated Sberbank holding 35 per cent and Magna 20 per cent. If the new bid is successful, each will own 27.5 per cent.

The Canadian and U.S. governments recently provided GM with more than $50 billion in loans in one of the biggest public bailouts in corporate history.

Reports suggest that some GM officials support what RHJ International described as a "compelling offer" because it would allow the automaker to buy back control of Opel after three years.

Magna, the world's third biggest auto parts supplier, has resisted that idea.

But it has promised to keep all German plants open and cut about 10,000 of Opel's 50,000 jobs, including about 2,500 in Germany.

RHJ plans to cut a similar number of jobs, but its plan would affect more workers and two plants in Germany. That would be politically explosive in Germany.

Magna's bid is part of an overall company strategy to increase business in Russia, where a middle class is emerging and the company expects booming sales during the next decade.

One industry source said that Magna had some concerns after it reviewed Opel's operations in detail after its initial takeover bid. However, the source would not elaborate on those concerns.

Magna executives could not be reached for comment.Among areas of potential dispute is the issue of access and control of intellectual property. As part of their bid, Magna and Sberbank want access to Opel's technology in building autos in Russia, probably in partnership with Russian automaker GAZ.

However, reports also say GM wants to maintain access to Opel technology as a minority shareholder. GM's international small and midsize cars have underpinnings designed by Opel.

Congress puts microscope
on GM, Chrysler

David Shepardson / Detroit News Washington Bureau

Washington -- The White House vowed not to micromanage General Motors Co. and Chrysler Group LLC, but Congress is stepping up its scrutiny of the automakers' actions now that the government owns most of GM and a chunk of Chrysler.

There is growing agitation in Washington over how the companies are restructuring post-bankruptcy and the role the Obama administration played in decisions to close thousands of auto dealers and shutter factories nationwide, costing tens of thousands of jobs.

GM and Chrysler are eager to get out of the headlines in Washington and back to the business of building and selling cars. But one price of a government bailout is getting caught in political crossfire.

Lawmakers are pushing to revoke the dealer shutdowns, demanding that the White House release records that document its involvement in restructuring decisions, and holding more hearings.

The House Judiciary Committee, chaired by U.S. Rep. John Conyers, D-Detroit, is set to start a two-day hearing Tuesday on GM's and Chrysler's plans to close more than 3,000 dealers combined. Lawyers for the automakers are expected to testify at the sessions, which come despite two days of hearings on the subject earlier this summer.

The Conyers hearings follow a flurry of activities in the House last week.

On Friday, the House Financial Services Committee voted unanimously to prod the White House to turn over information about the Obama auto task force's oversight of GM and Chrysler's restructuring. The committee expressed frustration with a number of actions by the automakers and related companies.

That vote came a day after the House passed a spending bill with a provision to restore the franchise agreements of nearly 800 dealers Chrysler has already closed and about 2,500 GM retailers expected to shut down by late 2010.

The message from some in Congress is that since taxpayers provided GM and Chrysler with about $65 billion in loans, the automakers should listen to lawmakers' concerns.

"This was a chance for Congress to say you don't get to crush state franchise laws, and you don't get to put thousands of dealers out of business because you feel like it," said Rep. Steve LaTourette, R-Ohio. Republicans consider the auto bailout a resonant political issue -- even President Barack Obama has noted that his approval ratings for lending money to the automakers are among his lowest.

GOP lawmakers in Congress have tried to take advantage of that by introducing a number of bills that would force a quick sale of the government's stakes in the companies -- with some suggesting the shares be distributed to all taxpayers.

"American taxpayers now own GM, and President Obama is both commander- and carmaker in chief," the National Republican Committee said on July 10, the day GM emerged from bankruptcy.

Legislation to block the dealer closings is gaining momentum -- separate from the dealer provision attached to the spending bill last week.

The Automobile Dealer Economic Rights Restoration Act of 2009 was introduced June 8, but had 258 co-sponsors as of Friday -- 16 more than it had Thursday. A Senate version has 27 supporters.

Senate Majority Leader Harry Reid, D-Nev., is not eager to take up the bill, so it isn't likely to come up in the Senate before Labor Day. The automakers hope to negotiate a deal with dealers.

As the dealer controversy grows, it is clear the government is not just an observer in the remaking of GM and Chrysler.

The Obama administration is working to sign off on the remaining new members of GM's board after taking a key role in choosing former AT&T Chairman and CEO Edward Whitacre Jr. to be chairman. Critics have suggested that Obama was meddling in some business decisions because he was the one who called Michigan's congressional delegation May 31 to tell them GM would file for bankruptcy but would not move its headquarters out of Detroit. GM filed for court protection the next day.

At least one lawmaker used his clout to protect a GM parts depot in his district from quick closure.

House Financial Services Committee Chairman Barney Frank, D-Mass., who supports efforts to get more information from the White House on its role in restructuring decisions for GM and Chrysler, caught flak from Republicans for prodding GM CEO Fritz Henderson to reverse the closing. He also e-mailed the White House expressing his irritation. A day after a meeting with Frank, Henderson delayed the depot's closing.

Sen. Lamar Alexander, R-Tenn., gave Frank a mock "car czar" award, calling him a "Washington meddler."

"Car executives trying to manage complex companies will be reduced to the status of some assistant secretary hauling briefing books between subcommittees answering questions," he said.

Rep. Christopher Lee, R-N.Y., has questioned the auto task force's support for GM taking over the pensions of hourly Delphi workers but not salaried pensioners, who could lose up to 70 percent of their pensions. GM is Delphi's former parent.

"As 60 percent owners of the new General Motors, American taxpayers deserve a public explanation of how this decision was made," Lee said.

"My view is it's fundamentally unfair."

Chrysler, GM market
shares will decline

Christine Tierney The Detroit News
July 19, 2009 07:43 AM

Even now that it has a dynamic new partner in Fiat SpA, Chrysler will become a smaller player in the U.S. auto market, investment firm Bank of America-Merrill Lynch predicts in its annual "Car Wars" report.

"We believe Chrysler is likely to be half its current size in a few years due to lack of product," analyst John Murphy wrote in the report.

Chrysler's share of the market -- including its Dodge and Jeep brands -- has been on a steady decline, slipping from 13.6 percent in 2005 to 11 percent last year, with 1.45 million vehicles sold, and 9.8 percent for the first six months of this year.

"Chrysler severely lags the industry on a number of key metrics, which is an ominous sign for market share," Murphy said. "In our view, this is a result of a lack of investment by previous owners and the dubious potential for Fiat products in the U.S. market."

A spokesman for Chrysler said the automaker is rolling out 24 vehicles in the next 48 months and has "no plans to be half our size in the future."

The annual Car Wars study by Merrill Lynch, now owned by Bank of America, essentially measures the freshness of an automaker's lineup by looking at statistics such as the average age of its vehicles, and the percentage of new models in the range.

It says the data of the past 10 years shows a clear correlation between a brisk vehicle replacement rate and gains in market share, production capacity utilization and profitability.

In recent years, Asian automakers displayed newer model ranges, on average, than U.S. and European manufacturers, although that gap is narrowing, according to the report.

With an above-average replacement rate over the next four years, Ford Motor Co. is likely to further increase its market share. "This appears to be the results of planning as well as the fortuitous stress at its two major competitors," the report said.

Over the next four years, Merrill Lynch predicts that Chrysler and GM will have the smallest proportion of entirely new or redesigned vehicles in their lineup -- 33 percent for Chrysler and 45 percent for GM, compared with 68 percent for Toyota Motor Corp. and 99 percent for Ford. The industry average is 72 percent.

"GM's market share losses are likely to be greater than expected and more severe in 2009 and 2010 while easing in late years," the report said.

GM is bound to lose some customers as it eliminates four brands -- Hummer, Pontiac, Saturn and Saab. Merrill Lynch estimates GM's market share will decline to a 15 percent-16 percent range from 20.2 percent during the first half of this year.

Despite losses, Ford feels confident

Bryce G. Hoffman / The Detroit News
July 18, 2009

Ford Motor Co. is scheduled to report its financial results for the second quarter Thursday, and company insiders say that -- while it is still operating at a loss -- they will demonstrate that the Dearborn automaker remains on track to meet its stated goal of returning to profitability by the end of 2011.

That would be particularly encouraging, given that the U.S. economy has not recovered as Ford had hoped. Its plans envisioned a modest recovery by the second half of the year, but the recession has resisted Washington's efforts to stimulate the economy.

As a result, the pace of car and truck sales fell again in June. The industry selling rate in the United States is still trending below what Ford had projected, according to people familiar with its plans.

However, they said that is being offset by Ford's increased market share in the United States, which has come largely at the expense of its crosstown rivals -- General Motors Co. and the Chrysler Group LLC -- as well as stronger European sales, which have been buoyed by fleet modernization programs enacted in countries like Germany and Britain.

"The company certainly has some momentum," said analyst Kirk Ludtke of the CRT Capital Group LLC. "They're gaining share. The near-term liquidity looks OK."

While analysts are still expecting Ford to post a loss, most think the results from April, May and June will be a significant improvement over the first three months of the year, when the automaker lost $1.43 billion. That translated into a loss of 75 cents per share. Analysts are expecting Ford to post a second-quarter loss of 56 cents a share, according to a survey by Thomson Reuters.

But a growing number of analysts think Ford will do even better than that.

JPMorgan's Himanshu Patel, who met with Ford executives earlier this month, is one of them. And he believes Ford will use the bump its stock gets from beating Wall Street to trade more debt for equity.

"Management seems intensely focused on addressing the December 2011 $10.5 billion revolver maturity," he said, referring to the pool of debt secured by the company's U.S. assets.

Patel said this bodes well for the company's long-term survival, but could be bad news for investors, because it makes it more likely that Ford will once again issue new stock to help pay off its debt, further diluting share value.

Ford did that in May when it issued 345 million new shares of common stock. It used the proceeds of that sale, which amounted to about $1.5 billion, to cover its obligations to the union-run voluntary employees' beneficiary association that is assuming responsibility for hourly retiree health care and to bolster its balance sheet.

Both Patel and Ludtke think Ford needs to shed more debt, particularly as rival GM emerges from bankruptcy with a much lighter balance sheet.

Patel said Ford executives are confident they can renegotiate the terms of some of their debt with sympathetic bankers, but says the company also will continue to trade debt for equity.

As big jumps in its share price are the best time to do that, Ludtke said a move could come soon if Thursday's numbers beat expectations.

"They'll do everything they can to put up some good numbers for the second quarter and then take some equity action," he said.

CAW’s Nash Seeks NDP Presidency

Peggy Nash, assistant to the CAW president and a former New Democratic MP, is running for the position of President of the New Democratic Party of Canada.

Nash, formerly MP for the riding of Parkdale-High Park in Toronto, is seeking the post at the Party’s upcoming national convention in Halifax on August 14. If elected, Nash would remain in her job as assistant to the CAW president.

“I would consider it a great honour and privilege,” Nash said. “This is a very critical time in national politics as many Canadians are struggling through this recession and are looking for strong leadership. I want to lend my voice and experience to all the great work of Jack Layton and New Democrats across the country.”

As NDP president, Nash would be a party spokesperson and would be responsible for chairing all NDP national meetings. She would contribute to overall party policy and would represent the NDP at various meetings and conferences.

“I was a Member of Parliament and I’ve had a long career in the labour movement, but I’ve also worked extensively in the women’s movement, and I’ve been a long time peace and human rights advocate,” Nash said.

J.D. Power new car satisfaction survey

Detroit automakers gain
in new J.D. Power survey

Friday, July 17, 2009
Christine Tierney / The Detroit News

When it comes to making reliable and attractive vehicles, Detroit's automakers say they are closing the gap with import brands -- and J.D. Power and Associates issued the latest in a string of surveys Thursday backing up that claim.

On a scale of zero to 1,000, American car brands, led by General Motor Co.'s Cadillac and Ford Motor Co.'s Lincoln, lag foreign brands by only five points in J.D. Power's 2009 Automotive Performance Execution and Layout Study measuring new car owners' satisfaction with the performance, features and layout of their vehicles.

That compares with a 15-point difference last year. "On a thousand-point scale, we're talking pretty fine differences," said David Sargent, vice president of automotive research at J.D. Power.

Excluding premium brands, domestics have a slight edge over their foreign rivals, according to the survey of nearly 81,000 people in the first 90 days since they bought or leased their vehicle.

J.D. Power recently issued its annual Initial Quality Study that also showed the domestics narrowing the gap with their foreign-based competitors.

Surveys by other firms, such as AutoPacific Inc. and Strategic Vision, also conclude that domestics have become more competitive in recent years.

But, as frustrated U.S. auto executives have come to realize, "truly closing the perception gap takes time," Sargent said. "They didn't lose their original image overnight and they won't regain it overnight."

He estimated that it takes several years for the perception of a brand to catch up with the reality.

Derrick Kuzak, Ford's group vice president of global product development, said the Dearborn automaker has been working hard to improve the basic reliability and performance of Ford vehicles and is now trying to equip models with features designed to delight the customer.

"We're still consumed with basic quality, but we're also now very focused on providing appeal and excitement," Kuzak said.

Ford captured top scores in two segments in J.D. Power's study, with the F-150 truck and Flex crossover. Honda Motor Co.'s Honda brand, Daimler AG's Mercedes-Benz, and Nissan Motor Co.'s Nissan brand also captured two segments.

Among the other findings:

• Chrysler Group LLC's Dodge was the most-improved brand, followed by GM's Pontiac, Buick and Cadillac.

• The Dodge Ram, Buick Lucerne and Ford F-150 truck were the most-improved models.

• Volkswagen models led in four segments -- more than any other brand -- with the CC, GTI and Passat cars and Tiguan compact SUV.

• Mercedes' S-Class sedan won the highest score of any model, but Porsche was the highest-scoring brand for the fifth year in a row.

• Improved fuel efficiency, coupled with lower fuel prices, helped nudge the average APEAL score to 779 from 770 in 2008.

For all-new and redesigned models, the average score was 11 points higher at 790.

ctierney@detnews.com

WASHINGTON–The U.S. House of Representatives broke with the Obama administration yesterday over a key part of the auto industry restructuring, pressing General Motors and Chrysler to restore car dealerships shuttered by the car companies' bankruptcies.

The House approved the car dealer measure as part of a spending bill. It would force General Motors Co. and Chrysler Group LLC to restore franchise agreements with dealers as a condition of partial government ownership.

Dealers have argued the government and the automakers have trampled over state franchise laws. They warn that up to 200,000 workers could lose their jobs.

GM is reducing its 6,000-dealer network by more than 2,000. Chrysler cut 789 of its dealers as part of its restructuring plan.

The cuts were part of the GM and Chrysler bankruptcy agreements that left the U.S. government with a 61 per cent ownership stake in GM and 8 per cent of Chrysler.

GM and Chrysler have fought the legislation, saying it will slow down their turnaround plans and hurt their work to create a more profitable dealer network amid sluggish sales. Peter Grady, a Chrysler vice-president, said the move ``flies in the face" of a declining U.S. vehicle market. "There are simply too many dealers for not enough sales." Representative John Dingell, a Michigan Democrat, said Congress was "playing with fire.''

"If the auto industry goes down because we have taken sides in a quarrel between the auto industry and the dealers, we will have destroyed not only the dealers that complain but all of the other dealers."

Associated Press

Ford Taurus grows up strong

Impressive 2010 model hits all the right marks to deserve title of Ford's 'flagship'

Scott Burgess: Auto review Detroit News

Nothing lasts forever.

Whether by bad luck, bad design or the stars just stop aligning; every good (and bad) thing passes. But that doesn't mean it can't come back: Cinderella may have cleaned a lot of fireplaces, but even she got hitched.

The Ford Taurus arrived three decades ago with a youthful vigor that would propel it to become the No. 1 sedan in America. It was a winner, a juggernaut, the San Francisco 49ers of the '80s with Joe Montana in the driver's seat.

But Montana split for the Kansas City Chiefs and the neglected Taurus became a regular rental. Neither ever really recovered. The malaise of this century hurt the Taurus so much it sputtered on life support. Ford Motor Co. finally pulled its plug, hoping to replace it with the Ford Five Hundred, which then needed more than 500 changes to it after the first model year. It was a tragedy of Shakespearian proportions.

Welcome to Act III: The 2010 Ford Taurus, a car worthy of the original Taurus name and deserving of the title "flagship."

There are a lot of boxes to check to truly become a brand's top-of-the-line vehicle. The Taurus doesn't miss any. It's the most technologically advanced, quietest, most comfortable, largest sedan in Ford's fleet.

It's the premium premiere vehicle Ford has -- and even SHOs off its capabilities with a performance 365-horsepower version.

But it's also attainable starting at $25,995, the same price as the outgoing model. While Ford may not care for this advice, I could not tell any consumer to buy the 2009 Taurus for the same price as a 2010 -- really, there is no comparison between the two.

The 2010 Taurus is so much better.

First, there are the features that come with this car. It has nearly everything but a refrigerator in the second row (which Ford will tell you the large crossover Ford Flex does).

Here's just a sampling:

• Adaptive cruise control: Radar mounted under the front bumper monitors the traffic in front of the car and maintains the speed of other vehicles. If they slow down, so does the Taurus.

• Blind spot detection: A little yellow light turns on in the outside mirror if a car is the blind spot. After using this feature twice, you will demand every car comes with it.

• Keyless entry: Finally a number pad on the door that doesn't look like an aftermarket remote control. Touch it with the car's key in your pocket and the door unlocks.

• Cross Traffic Alert: Very helpful when backing up because it looks both ways for oncoming traffic, so you don't have to.

There's more: Rain sensing wipers; navigation with Sirius Travel Link; third-generation Sync to control your phone, iPod, and Sony stereo; and a programmable key to limit a teen driver's overconfidence.

Then there's the class-exclusive derriere rubber. Ford calls its Multi-Contour Seats with Active Motion -- designed to keep the circulation rolling in your legs on long trips. Whatever name you use, it works fabulously with an embarrassingly awkward introduction.

The great indoors

But the interior is more than a collection of gadgets. There's a cohesive quality to the layout. There's flow, high-grade materials and a sense of purpose. Sure you can switch between seven different interior lighting colors, but it's the ambient lighting scheme that makes the Taurus feel more luxurious. The high sitting center stack makes the front feel more like a cockpit of a race car than a Sunday driver.

Additionally, Ford uses a few tricks to make you think it's even nicer. Check out the door inserts, how the material looks and feels like leather. It's not, but your friends don't need to know that little piece of information. It's also why the Taurus comes in a much more affordable price.

There's loads of space inside the cabin with more than 41 inches of legroom up front and 38 inches of legroom in the back. Three adults can easily fit in the back. The trunk is also massive, with 20.1 cubic feet of space.

There's more luxury than you'd expect.

And significantly more performance than you'd think. Ford says it focused on making the Taurus more fun to drive. It's not Mustang, but for a big sedan, it can get up and play. Here's how it did it.

Give the Taurus an independent suspension, a powerful V-6 and power rack-and-pinion steering. Include some big wheels (up to 20-inches) and stiffen up the ride slightly so the body doesn't roll like a boat at high seas. The Taurus manages to remain stately on the road while providing more than a few smiles.

The all-wheel drive models I tested felt more agile on the road than their front-wheel-drive-only brothers. But this car drives smaller than it looks.

The power steering feels a little numb in city driving but excellent on open highways.

Impressive power

The 3.5-liter V-6 pushes out an impressive 263 horsepower. The six-speed automatic transmission is very smooth, even during aggressive driving. It tends to want to get to sixth gear a little too quickly for my liking, but that's because it wants to stretch every drop of gas. The EPA estimate for the Taurus is 18 miles per gallon in the city and 28 mpg on the highway.

Ford includes paddle shifters on the Taurus for those who want to try and push the car a little. They seem natural on the performance Taurus SHO, but awkward on the regular sedan. Then again, you don't have to use them.

Another notable quality on the new Taurus is how quiet it rides. Consumers equate quiet rides to quality for a reason: Better built cars, using higher grade materials, tend to ride quieter. Sometimes perception and reality park in the same space.

Based on the Intercepter, a dark and powerful-looking concept car, the Taurus's exterior was drawn with a thick Sharpie. There's a heavy feel to it (perhaps because the Taurus weighs a touch over 4,000 pounds).

But the thick three bar grille looks right for this car. Its face squints as it moves toward you, and the lower front end makes the Taurus look like it's ready to jump. Instead of giving it very small windows and lower the car's profile, the greenhouse on the Taurus provides plenty of glass. The roof is flatter than curved, but that's why the car provides so much headroom (37.8 inches) in the back.

While the Taurus looks big and strong, there are no sharp edges. The corners are rounded, as if Ford tried to baby proof the parking lot. The looks help the design flow around the body. The exterior is not as dramatic as the original Taurus, but a vast improvement over the Five Hundred, which resembled a turtle.

The Taurus won't save the Blue Oval. But flagships rarely single handedly pull off a victory of those proportions. A flagship watches the fighting from a distance, moving its pieces around the board and summing up the competition. This Taurus provides the kind of ride any general would enjoy.

That's the difference between this generation Taurus and the original. This Taurus, with its stately manner, good performance and high-tech interior, finally shows what happens when a car grows up the right way.

It may have had a rough life, but things are finally looking up for the Taurus. Change is inevitable and the Taurus has changed for the better.

Get ready to pay more – potentially much more – for auto insurance.

Ontario motorists face the biggest increases in insurance premiums since the province temporarily froze premiums in late 2003.

The latest round of increases approved by regulators has brought the average increase over 12 months to 7.8 per cent, with some insurers raising rates by twice as much.

Policy holders with CAA, Scottish & York, COSECO and TD General insurance companies will see their rates rise 10 per cent or more when policy renewal statements start arriving over the next several months.

Regulators approved earlier increases at COSECO and Scottish & York, which totalled more than 15 per cent, as have increases at Economical and Pilot.

Intact Financial, the former ING Canada, has increased rates about 17 per cent since October of 2007, a spokesman said yesterday.

Don Forgeron, president of the Insurance Bureau of Canada, says the double-digit increases, including some at companies with lower average increases, may signal worse to come.

"Historically we have seen modest rate increases for a period of time and then the pace quickens, and there is no warning of when that will happen," he said.

Premiums are rising in the wake of investment losses and the increased demands on insurers to pay more for medical and rehabilitation services for victims of minor injuries.

Insurers are anxiously awaiting a decision by Ontario Finance Minister Dwight Duncan regarding a package of changes they hope will help control cost increases and avert a consumer backlash.

Changes enacted in 2004 led to a period of modest price reductions, but pressure for price increases has been building for the past two years.

Insurers of autos, homes and businesses generally earned profits last year, but as a group they lost about $390 million on their Ontario auto insurance business.

Economical Mutual Insurance Co. of Waterloo lost $102 million last year. The Financial Services Commission of Ontario has approved its request for three rate increases totalling 19.7 per cent since last summer.

Some large insurers have managed to limit their requests for premium increases to less than 7 per cent in the past year.

These include sales leaders State Farm Mutual, Co-operators General (sister company of COSECO) and Security National, whose insurance is marketed to university graduates by TD Meloche Monnex.

Rick McCombie, a senior vice-president at Co-operators in Guelph, said the COSECO division needed larger increases because more of its clients are in the Greater Toronto Area, where losses have been higher.

"But there is another (smaller) increase coming at (Co-operators)," he said.

"I think everybody is feeling the same pain and we are trying to have our rates to reflect the current loss activity."

Andrew Wicken of InsuranceHotline.com says brokers are still willing to deal with consumers who use the company's online service to shop for cheaper rates.

But there are signs insurers are taking steps to drive customers away, or avoid attracting additional customers in Ontario.

President's Choice Financial, the Loblaw Cos. Ltd. subsidiary, has stopped selling home and auto insurance.

Neither Aviva Canada, which underwrites existing policies, nor President's Choice responded yesterday to a series of questions posed by the Toronto Star.

Randy Carroll, chief executive of the Insurance Brokers Association of Ontario, said brokers have faced obstacles getting the cheapest rates available from Aviva, which operates under the names Aviva, Pilot and Elite. And customers of various insurers have had home insurance policies cancelled or their premiums increased, which can have an impact on their auto insurance rates.

Unless they move both home and auto policies to another insurer, they lose a multi-policy discount.

Carroll said he suspects some insurers are dumping home insurance policyholders because of poor credit ratings. Regulators have warned insurers not to use credit scores when pricing auto insurance, but by hiking home insurance rates insurers can drive away unwanted auto business. The province does not regulate prices or underwriting practices for home insurance.

These attempts to cut losses have prompted other insurers to respond. Lombard Canada has told brokers it will impose a 25 per cent surcharge on clients moving their home insurance coverage from insurers such as Economical and Pilot.

It will also stop offering loyalty discounts and first-accident forgiveness to new auto insurance customers.

Bulletins to brokers indicate Pembridge Insurance and AXA Canada have also taken steps to avoid customers driven away by other insurers.

Big 3’s heaviest debt load
now falls on Ford

Ford Motor Co. has benefited for months from the woes of its bailed-out Detroit brother General Motors Corp., but GM’s emergence from bankruptcy -- freed from its heaviest debts -- now puts debt-laden Ford at a disadvantage.

GM used the bankruptcy process and its federal bailout to shed more than $40 billion of past debts and other obligations, and now can operate more nimbly and profitably in the most competitive auto sales market in a generation.

But Ford still faces the steep cost of servicing its $32 billion of debt -- nearly twice as much as GM’s and three times as much as Chrysler Group LLC’s -- since GM and Chrysler emerged from bankruptcy. Moreover, Ford was not able to use bankruptcy to shed other burdens, such as a bloated dealer network and idle manufacturing plants, as its rivals did.

The companies now must compete in a market that has shrunk by more than a third from sales levels that prevailed a year ago. But GM estimates that it can now make a profit with annual U.S. auto sales of about 10 million, down from 16 million in 2007, while Ford would need to have higher sales on average to foot its higher debt costs and make a profit.

"Ford got bupkis for its financial virtue" by going deeply into debt to avoid a government bailout, said Antony Currie, an analyst at Breakingviews.com. Ford’s strategy helped it for a while to gain market share over its rivals, attracting buyers who are repelled by the government’s involvement with the other Detroit automakers.

But in the post-bankruptcy world, Ford now is saddled with obligations GM and Chrysler no longer have to bear, he said.

"By cleaning up its two U.S. rivals, Uncle Sam has put Ford at a competitive disadvantage," Mr. Currie said, adding that the government also is "conflicted" because it owns GM and is essentially in competition with Ford.

Aware of the appearance that it is handing GM a major advantage, the Obama administration has sought to lend Ford a hand by awarding it a $5.9 billion loan last month to develop more fuel-efficient cars and by providing financial assistance to auto suppliers who service all the Detroit automakers.

Ironically, the government loan only added to Ford’s burdensome debt levels, while the government’s assistance to GM was intended to avoid increasing the larger automaker’s debts.

Ford officials say they’re aware of the advantages rivals have gained from their trip through bankruptcy, but they remain confident that Ford is well-placed to keep picking up market share as the company attracts customers who do not want the government dictating their choice of cars.

"We don’t know what the implications are going to be, but one thing’s for sure: I like our position," Ford Chairman Bill Ford said at a Detroit conference last month.

If auto sales don’t improve soon, some analysts say, Ford’s debts may eventually drive it into bankruptcy, where it would could seek to jettison overhanging costs like the other auto companies did.

"GM and Chrysler are showing how you can do things in bankruptcy you can’t get close to outside of bankruptcy," said David Cole, chairman of the Center for Automotive Research in Michigan. "It’s a huge issue."

But Gregg Lemos-Stein, an analyst with Standard & Poor’s Corp., said he has little worry that Ford will have trouble paying its debts. S&P has given Ford a CCC-plus credit rating that indicates its bonds are deep into the junk category.

"Leverage is a concern, but it’s not the primary concern. The greater concerns are low sales and underused capacity," he said. While Ford has had more cash on hand than its rivals, "they don’t have an indefinite supply of cash" and the outflows are likely to continue as long as sales remain depressed, he said.

Ford also could face difficulty if it seeks to add to or refinance its debts, or replace them with equity through debt exchanges. Analysts say investors will be wary of purchasing Ford debt and stock now that GM has demonstrated that bankruptcy is a viable option should the company start to founder.

GM repudiated its $27 billion of unsecured bonds in bankruptcy, which were rated as junk, much like Ford’s. And its stockholders were entirely wiped out.

Ford’s debt holders may wonder whether they would face a similar fate, said Glenn Reynolds, an analyst with CreditSights, citing "lingering bad will and capital markets bitterness" in the wake of the GM bankruptcy.

"How long will memories last?" he asked.

Big Three hope for
profits in small cars

Bryce G. Hoffman / The Detroit News
July 14, 2009

Faced with tough new federal fuel economy standards and the prospect of rising gasoline prices, Detroit's automobile manufacturers will soon be pushing small vehicles in a big way.

Ford Motor Co. is scheduled to launch the Ford Fiesta subcompact by the end of the year -- the first in a series of new small cars from Europe that will soon make up a big portion of its U.S. fleet. Next year, General Motors Co. plans to introduce the compact Chevrolet Cruze, with even smaller vehicles such as the Chevy Spark set to follow. And Chrysler Group LLC, now run by Italy's Fiat SpA, is counting on the diminutive Fiat 500 to reverse its fortunes.

Producing and selling small cars profitably in the United States has proved an elusive goal for Detroit's three automakers in the past. They promise this time will be different.

It has to be.

Volatile fuel prices have scared consumers away from big trucks and sport utility vehicles, robbing American automakers of their biggest revenue stream. Even if they had not, tough new federal fuel economy standards cannot be met without a shift to smaller vehicles.

"They haven't been able to make money on small cars in the past," said Michelle Hill, Detroit vice president for the Oliver Wyman Group, a manufacturing consulting firm. But she said the game is beginning to change.

Recent concessions by the United Auto Workers have made the Detroit automakers' U.S. factories more competitive, while advances in product development and manufacturing have further reduced costs. But each of the companies say the real difference will come from an international approach that utilizes common global platforms and parts, allowing them to spread development costs around the world and achieve tremendous economies of scale.

"Without global platforms, it would be hard to imagine any of the domestic players being competitive going forward," said Michael Robinet, vice president in charge of global vehicle forecasts at CSM Worldwide.

Ford's decision to transform its new European small cars into global products gives it a big head start, Robinet said, noting that the company also plans to build most other vehicles on common platforms. By spreading development costs across all markets and using common components and production processes, he projects that Ford will achieve a 185 percent increase in the economies of scale on these global products by 2015, compared to 1997 when the work on global platforms began.

While he would not comment on that specific figure, Derrick Kuzak, the company's global product development chief, said the Ford Focus offers an example of what is possible.

The Focus sold in the United States today is completely different from the car sold in Europe under the same name. Ford sells about 230,000 of the U.S. compacts annually. But next year, both models will be replaced with a new Focus that will be sold worldwide, boosting the total vehicle volume to more than 800,000 units.

That means the cost of designing and engineering the new Focus will be spread out across far more vehicles. It also means that Ford can negotiate better prices from suppliers, because it will be ordering far more components. It even reduces tooling costs.

"The scale benefits are tremendous," Kuzak said. "They are orders of magnitude."

While GM and Chrysler are pursuing similar strategies, Robinet estimates they are 12 to 36 months behind the Dearborn automaker -- not to mention the Asian manufacturers that are leading the race.

The Chevy Cruze is expected to be the first in a series of global small cars from GM. Like Ford, GM has committed to manufacturing at least some of these vehicles in the United States -- and doing it profitably, thanks to recent concessions from the UAW.

"It's no surprise that, as the price of a vehicle goes down, all of the costs become more critical," said Jon Lauckner, vice president of product development at GM. "Having very competitive labor costs winds up being very important in the whole calculation of whether you can make small cars profitably in North America. There's been a lot of focus on the talks we've had with the UAW around getting the kind of competitive labor agreements we think are needed in order to make small cars profitable in the U.S."

GM will produce some of its next-generation small cars at its plant in Orion Township. Ford will produce the new Ford Focus at its factory in Wayne.

UAW Vice President Bob King told The Detroit News the union has worked with the automakers to ensure they can produce small cars profitably at these factories.

Fiat must produce some of its small cars in the United States as a condition of its recent agreement with the federal government that gave it control of Chrysler.

Chrysler spokesman Rick Deneau said relying on the Italian automaker to fill the small-car void in Chrysler's lineup makes sense.

"That is Fiat's strength," he said, adding that developing its own small cars would have cost Chrysler $8 billion or more. "These are platforms that already exist."

But some analysts say the domestic manufacturers need to do even more to really make money off these products.

Sandy Munro of Munro & Associates Inc., a management and engineering consulting firm in Troy, says the small cars designed by American manufactures are still more complex than similar vehicles produced by Asian automakers. He says domestic automakers need to find ways to use fewer parts in their cars in order to compete.

"To make money off a small car, it has to be a low-cost car," Munro said. "If you don't go in and reduce the number of parts, you're never going to hit your cost targets. That's what the Japanese are doing. That's what the Koreans are doing. You can't win anymore by busting the workers, squeezing the suppliers and producing everything off-shore."

Kuzak said Ford is already doing that and will get more aggressive in future designs. But he added that there is more to the equation than just cutting costs.

He believes American consumers are now willing to pay more for a small car that is big on features, comfort and mileage. Delivering these will allow Ford and other automakers to increase their margins on these cars and crossovers.

"That formula already works for us in Europe and Asia," Kuzak said. "(But) it has to be a great vehicle. It has to be a vehicle that is exciting in its design. It has to offer useful and exciting technology and great fuel economy."

Ford, GM object to Visteon's $80 mln bonus plan

By Phil Wahba

NEW YORK, July 13 (Reuters) - Ford Motor Co and General Motors Co have objected to a plan by bankrupt auto parts supplier Visteon Corp to pay employees up to $80.1 million in bonuses, saying that they and major auto parts suppliers had eliminated performance incentives for 2009.

Ford, which last month agreed to provide Visteon at least $125 million in bankruptcy financing, called Visteon's incentive program "entirely too rich, given current market and economic conditions," according to documents filed Friday in federal bankruptcy court in Delaware.

In a separate filing on Friday, GM said it was negotiating a loan to Visteon and that without that funding, Visteon would be unable to pay the bonuses.
Citing the 14.1 percent unemployment rate in Michigan, where Visteon is based, Ford questioned the need for the program saying "job retention should be enough" incentive and that it, GM, Chrysler and various au to parts suppliers had opted not to give bonuses this year.

Visteon's incentive plan includes $30.1 million in bonuses for its top 100 managers, and individual bonuses ranging from 90 percent to 375 percent of an employee's base salary, according to a court filing.

Visteon said in a June 26 filing it "seeks authority to honour obligations" ... to "minimize attrition and ensure maximization of employee focus and morale."

Visteon, which was spun off by Ford in 2000, filed for bankruptcy protection in May.

The case is In re: Visteon, U.S. Bankruptcy Court, District of Delaware No. 09-11786.

Ford sales are up around the world

BY BRENT SNAVELY • FREE PRESS BUSINESS WRITER • July 13, 2009

Ford Motor Co.'s sales and market share gains in Europe and several other markets outside the United States provide fresh evidence that the company's global reorganization plan is on the right track.

We now sell more vehicles outside of the U.S. than we do in the U.S.," Jim Farley, Ford's global group vice president of marketing and communications, observed in a Friday interview with the Free Press.

In addition to Europe, he said the company is enjoying successes in Canada, China and Australia.

In Europe, Ford has gained market share in each of the primary 19 countries, except for Spain, over the first half of the year, Farley said. And on Monday, Farley said, Ford Europe is expected to announce that its monthly sales increased for the first time since December.

Even more important, Farley said, is that Ford is gaining market share around the world without increasing incentives and customers are buying Ford vehicles loaded with more options.

"If customers appreciate the product, they tend to buy nicer versions of those products -- they are not commodity products," Farley said.

In Europe, Ford's year-to-date market share through May was 9.2%, up slightly from last year, a significant increase in Europe's primary 19 automotive markets. That has been aided by the recent introduction of the Fiesta and Ka subcompact cars and the Kuga, a small crossover.

The Fiesta is now the second-best-selling vehicle in Europe, behind the Volkswagen Golf, and the Fiesta is Ford's top seller in both Europe and China.

In China, Ford's sales have increased 21% over the first six months of this year. While Ford's total sales in China still lag behind General Motors Co., Ford's sales are outpacing an industry-wide sales increase of 17.7%. Industry sales in China are increasing due to a massive government stimulus package.

Farley said the success of the Fiesta, which comes to the United States in 2010, provides evidence that Ford's strategy to develop cars that can be sold worldwide is paying off.

"Fiesta certainly gives us confidence because it has been well received in mature markets like Australia and new, developing markets like China," Farley said.

The Fiesta was redesigned and introduced last fall in Europe and earlier this year in China. Aside from the Fiesta, Ford plans to begin selling the European version of the Ford Focus compact in the United States next year.

Eventually, Farley said, Ford hopes to sell more than 2 million cars annually that are based on the Focus platform.

Farley said Ford's market share gains in global markets, as well as the United States, prove that Ford's reorganization plan, launched in 2006 by Ford President and Chief Executive Officer Alan Mulally, is working.

"We are seeing the fruits of our labor in Europe and the U.S. and Canada, and we are starting to see it in Asia," Farley said. "But it is just the beginning of the story. We have a long way to go."

Here's GM's lineup of vehicles assigned to Oshawa: the new Cadillac XTS, the Buick Regal, a redesigned Chevrolet Impala and the retro Camaro.

That wouldn't be my choice for the guts of GM's Canadian operations. Three of these vehicles – the Caddie, Impala and Camaro – are out of step with the times. Too big, apart from the Camaro and Regal. Too thirsty. At best, the Camaro and XTS are low-volume niche products.

But Oshawa will be front and centre in GM's revival hopes. These are pinned to reversing finally Chevrolet's gradual market-share decline; a continued resurgence of Cadillac; and the hoped-for "halo" effect of the reborn Camaro, for which Oshawa will be the sole world supplier. There's speculation that one of the four Oshawa models will also be built in a hybrid version. Read on.

The Cadillac XTS is a luxury stretch sedan. The Impala is another land yacht. It's favoured by fleet buyers (police and taxis) and, otherwise, by an elderly demographic. Buick, like Cadillac and the Impala-Caprice line, skews to an old demographic. Possibly the oldest, in fact. It's often said that today's Buick buyer is purchasing his last vehicle.

As for the Camaro muscle car, it's among the swan songs of 77-year-old Bob Lutz, the veteran Detroit "car guy," and GM's design chief until recently, who will retire soon. Lutz beguiled the car press by candidly dissing earlier GM flops like the Pontiac Aztek, and by flying to work in a chopper he pilots.

But as he's the first to admit, Lutz's mind is trapped in an era when cars were intoxicating to drive and to look at. The current era is all about cars as basic transportation – fuel efficient, low maintenance and practical (easy to park in increasingly congested cities, for instance). Lutz, to his credit, has tried to marry practicality with provocative design. That's a very tough trick to master, and one of the biggest failed challenges in GM's decline, prior to Lutz's arrival at GM about a decade ago.

On the bright side, though, Chev and Cadillac are the two GM brands with real life in them. (There's hope for Buick, but mostly in Asia, where it did not develop a reputation as a stodgy "dad's car" along with Oldsmobile – R.I.P.) Cadillac has gained market share of late, thanks to the street cred lent by prominent hip-hoppers who adopted its SUVs earlier this decade.

Caddie is still very far back of BMW, Lexus and Mercedes in the luxury segment. But it's not impossible to imagine a comeback to at least respectable sales volumes. As GM's top-line brand, Cadillac for decades was the first to benefit from GM's technological innovations – the most powerful new engines, automatic transmission, power steering, air conditioning – which then would migrate to the lower-priced brands.

With the revolutionary plug-in electric Volt, Rick Wagoner, the CEO whom Barack Obama sacked earlier this year, opted to use the mass-market Chev division, rather than Cadillac, as a showcase for GM's most advanced technology. Wagoner's idea was to demonstrate forcefully GM's commitment to advanced fuel-efficiency. A big mistake. At $50,000 (U.S.) to $60,000, the Volt is priced way out of Chev's range. This was a missed opportunity to re-establish Cadillac as America's auto technology leader.

That said, Chevrolet basically is GM, the way David Buick's vehicles accounted for more than 80 per cent of GM sales in the company's first two decades. I can see a day when, pushed to the wall, GM sheds its relatively few remaining brands – Buick, Cadillac, GMC – and becomes the Chevrolet Motor Car Co. That firm alone would command 16 per cent of the North American market. GM's other brands, including the discarded Pontiac, Saab, Hummer and Saturn, bring the GM total up to about 20 per cent. Out of neglect, as GM's brass trained their sights on too many brands – nine at the peak – Chev's market share slipped non-stop for at least a decade. But it has slipped gradually, if consistently, which suggests significant loyalty to the Chevrolet brand.

GM simply has to reverse Chev's slow decline or there is no GM.

Thanks to Lutz, today's Chevs are better looking than at any time since the 1960s. Much as I think a revival of muscle cars in 2009 is absurd, Lutz's Camaro is a honey – an "aspirational" vehicle that, with good marketing, every hot-blooded American teen will want to own. The new Camaro is a head-turner, and that should have a "halo" effect on the entire Chev brand, or so GM hopes. The idea that GM can again make vehicles that merit a second look is a hopeful sign.

Overall, though, I can't help being disappointed. Oshawa won't get one of GM's most impressive cars, the Chevy Malibu, deserved winner of just about every "car of the year" award going, and a strong seller despite the diminished allure of the Chev brand.

Neither will Oshawa get the high-volume Chev Cobalt econocar.

Repeated subsidies from Ottawa and Queen's Park over the years have enabled GM to invest heavily in its Oshawa car plant. (The twin GM Truck is idled until a U.S. recovery.) So, for years now, Oshawa has topped North America assembly plants of all automakers in both productivity and quality. Oshawa deserves a more promising lineup than what GM has apparently assigned it for the 2010 model year.

I visited Oshawa Car last year (solo and unannounced) and every stereotype about hellish auto assembly plants was shattered. The factory is quiet, cool and well-lit. It's so clean you could eat off the floors. Employee spirits are high. The CAW line employees, dressed in surgical smocks and thick cotton gloves in order not to scratch the finish of passing cars, inspect each vehicle for fit, finish and blemishes with the dedication of people planning to take delivery of the car themselves.

Yes, Oshawa can build these vehicles to perfection – and it will – but it won't matter if Detroit HQ does not recapture its marketing prowess of old.

In the past decade, as GM quality has vastly improved (Buick has far outranked BMW on quality for about a decade now), GM has not told its compelling story of dramatic quality improvement. Marketing – like the assignment of vehicles to Oshawa – is completely beyond Oshawa's control.

So Oshawa's fate now lies with GM's marketing staff, who will need to have rockets shoved up their behinds.

dolive@thestar.ca

Chrysler Canada Inc. has cancelled plans to end the third shift at its minivan plant in Windsor, a decision that will save more than 1,200 jobs, CAW president Ken Lewenza said yesterday.

After months of bad news for the Canadian auto industry, Lewenza said the announcement was a good-news story for the hard-hit industrial border city in southwestern Ontario.

"Today we're celebrating," Lewenza said.

Windsor has been battered by the auto sector's restructuring, losing thousands of jobs from earlier streamlining at Chrysler, Ford of Canada and General Motors of Canada. Next year, GM plans to shut down a Windsor-based transmission plant, cutting another 1,400 jobs.

Lewenza said the decision has been under review for some time and he called the move a good sign for Chrysler, which hopes to grow through an alliance with Italian carmaker Fiat SpA after emerging from bankruptcy protection.

"They're optimistic the minivan will be able to maintain its market share and be able to maintain three shifts for the next model year, which is absolutely great news for our members and their families."

Yesterday's announcement came as Statistics Canada reported that 7,400 net jobs were lost in Canada in June as gains in part-time jobs and self employment offset losses in full-time jobs.

In Ontario, full-time losses in June hit 56,000, offset by 57,000 in part-time gains, while the unemployment rate edged up to 9.6 per cent, the highest rate in 15 years, Statistics Canada said.

At Chrysler, about 2,000 workers on the day and afternoon shifts at the minivan plant returned to work last week after being off the job for two months during the car maker's bankruptcy proceedings in the U.S.

The minivan plant, one of Chrysler's most efficient and profitable operations, is shut down for the summer vacation period for the next two weeks. The plant's third shift is expected back at work on July 27.

Chrysler had announced in March that it would end the third shift at the plant which produces the Dodge Grand Caravan and Chrysler Town & Country minivans.

The Windsor factory is Chrysler's only supplier of minivans, since the automaker shut down production of the vehicles at two U.S. plants.

Lewenza noted the minivan has remained a winner for Chrysler.

"Outside of all of the bad news, the minivan has been a success story by itself because of its popularity with consumers," he said.

CHAIRPERSON’S WEB REPORT
JULY 10, 2009

As everyone is well aware, the executive and front line leadership from each CAW/Ford location met with Ford VP Joe Henrichs and other top Ford management in Windsor earlier this week. This was a very unique meeting. Given the importance and the true gravity of the situation we face, Ford Council felt it would be beneficial for the extended leadership to hear the company's position right from the horse's mouth.

The management presentation included: sales figures, production numbers, Health and Safety ratings and overall production costs for Canada. Henrichs again confirmed that St Thomas would no longer produce their current vehicles in 2011, but stopped short of announcing a closure. A lot of the meeting focused on Oakville. It is essential that the next generations of vehicles they currently produce are again awarded to that plant.

It goes without saying that Ford is very anxious to get back to the table. Your union has taken the position that it is essential for us to study the company's numbers and ensure the membership knows the situation. The company is essentially demanding we match the pattern agreement that was established at GM and Chrysler. The only real difference in those Master Agreements is that PCOLA is frozen at GM until 2015. The problem is that both GM and Chrysler made some long term product commitments in order to get that agreement. The demand for these commitments was supported by the government. With Canadian tax payers loaning both of these companies billions of dollars, there was an enormous amount of leverage when it came to securing product and protecting jobs.

The situation at Ford is very different. Yes they are still losing Billions of dollars, but they haven’t sought bankruptcy protection or government money as the other two have. It goes without saying that your CAW/Ford bargaining committee will also be demanding a significant footprint in Canada. Instead of talking new product to offset the potential closure of the St Thomas plant, all we are hearing about are the productivity gains that must be made in Oakville.

Truthfully, I believe that negotiating a collective agreement that satisfy’s both sides will be very difficult to reach. Ford must show a serious commitment to Canadian operations if they want any of the concessions GM and Chrysler received. Canadian sales for the company have been through the roof lately. Canadians are demonstrating their commitment to Ford so it’s time for Ford to demonstrate their commitment to Canadians. No one can shy away from the fact that these negotiations would be critical in determining what Ford’s Canadian presence will look like for many years to come.

Your bargaining committee takes their responsibility to the membership very seriously. A lot of lives are affected by the decisions that are being made right now. Every local needs to be more united in solidarity than they have ever been before. There is no guarantee that even if we agree to open bargaining, a collective agreement can be reached. This is a very important factor when it is being decided if we should bargain at all. If negotiations were to break down and either the company or the union walk away from the table, the relationship between the union and the company would be at an all time low. We could quickly find ourselves in a position where we have no other option but to fight.

The stakes are high for both our membership and Ford. It’s important for the membership to recognize just how far apart we are and what the consequences may be. From the beginning, the CAW has said it would be part of the solution as the entire industry weathered this down turn, but we are also demanded what we are rightfully entitled to, jobs and pensions.

The CAW/Ford Master committee is in contact with each other daily right now. We recognize the importance of bargaining with the company at some point, but we are also well aware of what it would mean if we are not successful.

As we move forward we will continue to update the membership as much as possible.

Again, your In plant thanks you for your support and solidarity. As hard as this battle may be, it would be much tougher without it.
I can be reached through the union office or kimclout@hotmail.com.

In Solidarity,
Kim Clout
Plant Chair
CAW Local 584

This morning in Detroit, a shiny new General Motors Corp. will rise from the twisted heap of metal – and crippling debts – of the old.

It will have fewer workers and brands, but it will be equipped with billions of dollars in government bailouts, all meant to make it roadworthy as it faces a slew of faster, stronger rivals in the worst auto sales market in more than 25 years.

After clearing last-minute court hurdles yesterday, GM is expected to announce this morning that it is poised to exit from Chapter 11 bankruptcy protection in the United States.

There is widespread speculation that the car maker will unveil a new look, changing its square logo from blue to green in an attempt to convince consumers it is leaner and more concerned about the environment. It is also slashing jobs in a drastic bid to cut its costs.

But experts say GM must produce vehicles that people want to buy and change its image from a lumbering bureaucracy that makes gas-guzzlers to one on the cutting edge of efficiency and quality.

The question is: under the hood, will the once-mighty giant that used to sell more than half the cars in the North American market have enough horsepower to survive?

"What they have to change is the essence of the company. For a car company, that means the cars," said Joseph D'Cruz, professor of strategic management at the University of Toronto's Rotman School of Management.

GM chief executive officer Fritz Henderson is expected to announce executive cuts, management changes, and the company's plan to make money by emphasizing quality and fuel economy.

According to some reports, GM will cut another 4,000 white-collar jobs, including 450 top executives. The company still employs 9,000 people in Canada, 88,000 people in the U.S. and 235,000 worldwide.

Turning a profit will not be easy. GM lost more than $80 billion (U.S.) in the past four years and survives only because of the massive government loans, given in exchange for guarantees to maintain jobs.

The U.S. government pitched in $50 billion in loans to GM, and will own 60 per cent of the new GM. Ottawa and the Ontario government, which put in more than $10 billion (Canadian), will take a 12.5 per cent stake.

The United Auto Workers union and GM's unsecured bondholders own the rest.

The Canadian operations will be unaffected by today's announcement. GM Canada Ltd. went through its own painful restructuring, though it did not file for court protection here.

The company closed its Oshawa truck plant in May, two months ahead of schedule, and its transmission plant in Windsor will shut down next year. Still, GM Canada has committed to launch five new vehicles, including a hybrid, at assembly plants in Oshawa and Ingersoll, east of London. It also plans to invest about $1 billion over the next seven years in "green" research through its Oshawa-based engineering centre.

GM filed for bankruptcy protection on June 1, and it emerges a record 39 days later with liabilities of $48.4 billion (U.S.). In addition to government debt, the liabilities include accounts payable, pension and other employee obligations and warranties.

The parts not moving to the new company will become part of "old GM," a collection of assets and liabilities that will be sold over the next few years to satisfy creditors, including people with pending lawsuits.

There was also widespread speculation yesterday that GM will announce plans to bring to Michigan production of a new subcompact car, widely believed to be the four-seat Chevrolet Spark minicar now being made and sold in China.

For years, GM neglected the small car market, saying it was unable to make money on them because of high labour costs. As part of its restructuring, the car maker struck unprecedented deals with the United Auto Workers and the Canadian Auto Workers to cut wages and benefits.

The new GM, however, is betting that car buyers will shift to small as gas prices swing wildly. Its aim is to upgrade that class of vehicle.

"That Spark isn't going to provide significant strategic benefits to GM. It might give them a bit of public relations clout," and it may help them achieve new fuel efficiency standards, D'Cruz said. "We don't have any history of GM being able to bring out a small car that really becomes popular and is profitable."

The company also has to overcome the image of a bankrupt entity that has festered over the past year, said Anthony Faria, professor at the Odette School of Business at the University of Windsor. "Consumers have been getting a picture of them as a bankrupt company for a considerable period of time now."

After clearing bankruptcy court, the new GM will focus on only four core brands: Chevrolet, Cadillac, Buick and GMC. It will discontinue Pontiac by the end of the year, and is still in the process of selling Saturn, Saab, Hummer, and its Adam Opel GmbH unit in Europe.

"GM spent a lot of time promoting these products and consumer attachment to them," said Faria, who is also the director of the University of Windsor's Office of Automotive Research. "They're no longer GM products, but some of that consumer attachment is going to stay" and push buyers to rival car makers.

With files from the Star's wire services

Big-ticket safety features,
at a lower price

New Ford Taurus comes equipped with gadgets
passed down from more expensive vehicles

Legal notices have spread panic among many of the 5,200 pensioners and workers laid off from a storied aircraft factory in Mississauga.

Former Boeing and McDonnell Douglas employees thought after reading the bold text, technical language and final-sounding words used in form letters that their pension cheques were going to stop arriving after July 1.

But, while pension plans for former shop floor, office staff and non-unionized salaried employees are indeed about to disappear, benefits and savings will not.

The pension plans' assets will be transferred to various life insurers, which would then bear the risk for paying the lifetime incomes promised to workers before Boeing closed the factory in 2005.

This sort of transfer is increasingly common, and could test the capacity of Canada's domestic life insurance industry if other companies as large as or larger than Boeing also wind up their plans.

"No participant's benefits will be reduced or eliminated as a result of – what is called in the notice – the wind-up of the plans," Boeing spokesman Todd Blecher clarified yesterday.

He had more good news for folks who once assembled wings for airliners in the place where men and women built Lancaster Bombers for Britain and prototypes for the ill-fated Avro Arrow Interceptor.

Many other Canadian workers affected by factory closings and bankruptcies could see their benefits reduced because there are not enough assets to turn over to the life insurers.

But Boeing, which employs more than 1,600 Canadians in Winnipeg, Richmond, B.C., Montreal and Ottawa, intends to make up for any shortfall in the pension plans.

Boeing Co. is the world's largest aerospace company, and while its profitability has plummeted since the 2007 peak, it has orders for more than $350 billion (U.S.) worth of commercial and military aircraft.

"If the plans are under-funded at the time of the transfer (to the insurance companies) we will make them whole," Blecher said.

This is the sort of comforting information that could have been provided along with the wind-up notices required by the Ontario Pension Benefits Act.

Instead, pension plan members were told to expect further information in the form of prepared questions and answers. Blecher acknowledges the notices could have been better handled.

"They scared the hell out of people and it wasn't necessary," agrees Joe Agius, voluntary chair of the retirees' chapter of former local 1967 of the Canadian Auto Workers union. "I must have had between 25 and 30 calls, and other (executives) also received calls."

Meanwhile, Agius's committee has many questions for Boeing and the CAW, which have yet to reveal details of any agreement reached at the time the plant was closed.

Agius said the pension plan for former shop floor workers was about 85 per cent funded at the end of 2007, and members were concerned about the state of the plan after the huge stock market losses in 2008.

Blecher could not provide details on the state of the plan or how investments have been handled. Pension experts at CAW headquarters are taking a summer vacation.

Dean Connor, president of Sun Life Financial Canada, said he could not reveal what discussions Sun may have had with Boeing about selling life annuities for pension plan members.

But he said Canadian life insurers sell about $1 billion worth of annuities a year to companies winding up pension plans. Since the start of the year, Sun has assumed some $60 million worth of pensions liabilities from companies that simply want to reduce the risk of meeting obligations.

Connor said insurers could manage another few billion dollars worth of annuity sales in a single year, but not such a large obligation as for General Motors of Canada Ltd., which is in bankruptcy protection with about $14 billion worth of pension obligations.

Once insurers sell former pension plan members a life annuity, their shareholders bear the risk of meeting the obligations. An industry-run guarantee fund backstops policyholders when an insurer disappears with insufficient assets – a rare event in Canada.

"I think what we are going to see is more focus on shopping this (annuity business) around, to break it up to get the best value and security for the members," Connor said.

"We are encouraging reinsurers to get into the market to open up more capacity."

jdaw@thestar.ca

The Canadian Auto Workers union has reached an initial agreement with General Motors and Chrysler to create a new health-care trust that will manage the health benefits of more than 50,000 retirees.

Some of the details still need to be worked out, but the CAW says the groundwork has been laid and the companies should start contributing to the trust by next year.

"We have agreed on the detailed timeline for that with both GM and Chrysler," CAW economist Jim Stanford confirmed.

The HCT (health-care trust) is being negotiated as part of the union's new labour agreements with Chrysler and GM subsidiaries in Canada. It is based loosely on a similar trust created by the United Auto Workers in the United States.

The Canadian trust is designed to save the companies money by taking future health-care liability off their books after an initial contribution. It will pay benefits and administer dental and drug plans and other private medical payments for services not covered by Canada's publicly funded medicare system.

"They will put money into the fund at specified times over the next few years to endow the fund with enough money to pay out benefits over the long run," Stanford said.

Chrysler spokeswoman Mary Gauthier confirmed a framework agreement has been reached but said it is too early to release details, including how much the company will contribute and over what period of time. GM spokesman Stew Low was unavailable for comment.

In the U.S., General Motors Corp. plans to give the UAW 17.5 per cent of its common stock, $6.5 billion (U.S.) in preferred shares and a $2.5 billion note to fund its Voluntary Employee Benefit Association.

GM Canada and Chrysler Canada do not have their own stock so the Canadian trust will be funded by one-time monetary contributions and smaller payments over time. GM and Chrysler received billions in emergency loans from Ontario and Ottawa. It is likely this funding will support creation of the trust. It is to be run independently and managed by outside directors.

Stanford said it will protect retirees from one or both companies finding themselves unable to pay benefits. "The benefit for us is we've got money in the bank. The risk is, if that money doesn't earn enough profit, then we may have to adjust the benefits down the road. On the other hand, if the investment returns are very good, then we could actually improve benefits down the road, so it's kind of a trade-off for us."

Canadian Press Promises to Recognize Ford Bramalea
in Future Articles

THE CANADIAN PRESS July 7, 2009
Ford wants same deal union gave GM, Chrysler: CAW
Article by Kristine Owram
The Canadian Press

I am writing you again regarding the same mistake regarding articles by Kristine Owram.

She keeps stating the Ford Parts Plant as being in Windsor.

Could you please correct her on this as the plant has been in Brampton Ontario for over 45 years.

Below is an email that was sent to her on June 13, 2009 bringing this to your attention.

Chris Wilski
CAW Local 584
Retirees Chair

*****************************************

June 13, 2009
Re: Important Ford Location Always Omitted

Dear Kristine Owram:

As a Ford Retiree and an ex Ford Bramalea worker I get very annoyed when references are made to the Ford plant locations in Ontario and the Ford National Parts Depot in Brampton is continuously omitted.

In a number of your articles including June 5, 2009 "Ford wants new deal with CAW" you stated that there was a parts plant in Windsor which is not true. We had our birth from Windsor some 65 years ago but have been a part of the present operation which started at the Danforth (Toronto) in the fifties and continues to flourish today in Brampton.

Just to give you some quick background history, the Ford Parts Depot has been represented by CAW Local 584 (prior to 1986 the UAW) since its inception in May of 1944. CAW Local 584 has a rich history from the infamous 99-Day Ford strike in Windsor in 1945 to the present day auto crisis, we were there for all the fights and battles for our members and retirees. We have been part of the Master Ford Agreement with Windsor since 1951 and that was before Ford Oakville and Ford St Thomas came aboard.

Over the next few weeks Ford will be in the news as the CAW considers opening bargaining with Ford so please when making references to all the ford locations don't forget about us.

Thanks for your attention in this concern.

Chris Wilski
CAW Local 584
Retirees Chair

***************************************

RESPONSE

From: Owram, Kristine [mailto:kristine.owram@thecanadianpress.com]
Sent: July-09-09 10:43 AM
To: cwilski@rogers.com
Subject: RE: Kristine Owram's Column again has wrong Information on Ford!

Hi Chris,

Thank you for your email. Unfortunately, I didn't receive your original letter, so this is the first I've heard of this.

According to information sent to me by Ford, the company's Canadian manufacturing facilities include the Oakville and St. Thomas assembly plants and the engine plant in Windsor. This is what I've been referring to when I've written about a "parts plant in Windsor." In future, I'll make sure to be more specific and call it an engine plant.

The reason we haven't mentioned the Brampton parts depot is because it's not a manufacturing facility. Granted, it does employ CAW members who will be affected by any new contract reached with the company and I will make sure to mention it in future stories.

Thank you again for your email. Hopefully this clears things up.

KRISTINE OWRAM
BUSINESS REPORTER

OFFICE: 416-507-2147
CELL: 416-278-5457
thecanadianpress.com
THE CANADIAN PRESS

Canada’s trusted news leader:  The Canadian Press delivers credible, comprehensive news reporting from Canada and around the world in multiple formats, serving newspapers, broadcasters, websites, wireless carriers, magazines, government and corporate clients. 

Ford has asked the Canadian Auto Workers to match recent concession-filled labour deals with the other members of the Detroit Three so it can remain competitive, according to the union.

Mike Vince, chairman of the CAW's Ford master bargaining committee and president of Local 200 in Windsor, Ont., said Ford Canada pleaded its case to the union Monday night.

Although the CAW's current contract with Ford doesn't expire until 2011, Ford says new labour agreements with GM and Chrysler as well as with Ford's U.S. workers have put it at a competitive disadvantage.

"We do recognize that we must stay competitive with our (U.S.) counterparts and with the Canadian GM and Chrysler counterparts," Vince said Tuesday.

CAW economist Jim Stanford, who was also at the meeting with Ford executives, said the company is looking for a labour agreement very similar to that reached with the other automakers.

"In terms of what we call the master contract which covers the bigger economic issues, I think they are looking for the same agreement that we have with GM and Chrysler," Stanford said. ``They'll be looking to use that cookie-cutter approach."

CAW president Ken Lewenza said Ford must agree to maintain its current Canadian production footprint if the union is to give the company concessions.

"There's no question they're at a disadvantage. The question for us is what advantage is it for us to open (negotiations), and the only advantage would be to secure our manufacturing footprint," Lewenza said.

However, Ford has no plans to manufacture vehicles at its 1,600-employee St. Thomas, Ont., plant beyond 2011 and it's likely the plant will shut down once the vehicles it currently manufactures – the Ford Crown Victoria, the Mercury Grand Marquis and the Lincoln Town Car – are taken off the line.

"Without a replacement product the closure is inevitable. At least it gives us some time to lobby for another product, but it's going to be an uphill battle," Lewenza said.

Ford was the only one of the so-called Detroit Three carmakers not to get any financial aid from the U.S. or Canadian governments to stay alive and restructure under U.S. court bankruptcy protection. As a condition of billions of dollars in government aid, GM and Chrysler were forced to negotiate new deals with their unions in Canada and the U.S.

After months of bargaining during which the CAW reached agreements with GM, then Chrysler, and was then forced by the federal and Ontario governments to give GM even more concessions, the union agreed to slash labour costs at both companies by cutting benefits, changing pension funding obligations and creating a trust for retirees' health benefits.

In addition, Ford Canada's Detroit-based parent (NYSE: F) won US$500 million in savings under a new contract with the United Auto Workers in March. Reports say Ford has asked the UAW to match concessions made to Chrysler and GM as well, although the union refused to confirm or deny this on Tuesday.

Although Ford increased its Canadian sales by 24.6 per cent in June compared to a year earlier, gaining the industry's top spot for the first time in decades, the company has said the new labour contracts have left Ford unable to compete.

"To be able to maintain an auto manufacturing presence in Canada, we have to take action now to improve our competitiveness; we cannot wait until 2011 (when the current contract expires) since it may be too late to close the labour cost gap," Ford Canada spokeswoman Lauren More said in an email.

Vince said CAW leadership will review Ford's submission and will decide whether to reopen negotiations within "a week or so."

"We do recognize that many families are relying on us to make the right decision," he said.

"We've got to make sure that our members aren't at a disadvantage moving forward and that we have a Canadian footprint at the end of the day."

Ford Canada employs about 7,000 people at assembly plants in Oakville, Ont., and St. Thomas and a parts plant in Brampton.

Pension plans have rallied to the relief of retirees, shareholders and taxpayers, yet most plans are still in the emergency room.

A typical plan is about a third of the way back to the health status of mid-2007, thanks to three short months of rising stock prices and interest rates.

Pension consultants say the swift and sharp improvement has reduced the state of panic around all but those companies at risk of a bankruptcy that would lead to the slashing of pension payments.

Yet further improvements in health remain uncertain and, even when things get better, ever fewer young employees may enjoy the sort of company-guaranteed pension benefits their elders enjoyed.

"The level of concern, rightly or wrongly, is much better than in March, when people were horrified," says Mercer consulting actuary Malcolm Hamilton.

His company's pension health index tracks the percentage of pension benefits a hypothetical company would be able to pay if it were to cease operations and pay benefits earned to date from the interest on government bonds.

Mercer's index bounced up to 71 per cent by the end of June, up from 59 per cent at the start of the year, thanks to a combination of a 5.6 per cent investment gain and a rise in interest rates that reduced the estimated cost of paying future benefits. Yet the typical plan was still funded at well below the level charted in early 2002.

Meanwhile, a similar index of funding levels produced by Watson Wyatt Worldwide has jumped to 75 per cent from a low of 61 per cent. Watson assumes employers would have started making extra contributions when their plans fell short of funds. The index also incorporates a recent relaxation of actuarial standards.

Watson actuary Ian Markham and Mercer's Hamilton predict that the upset of a second stock market crash in a decade could drive more employers to cut off new entrants to their pension plans, and to invest more heavily in government bonds to reduce risk.

"We may get to the point where pension sponsors say the risk is too high," Hamilton says. "When you put money in the stock market, you expect to earn a higher return (than on bonds), but stocks do badly at inopportune times."

While stock prices may recover over the next three to five years, Mercer consultant Paul Forestell says many employers will still want to take 10 years instead of the usual five to restore their plans to withstand an insolvency.

He said some employers are faced with paying 30 per cent of payroll to maintain and restore their pension plans over five years, and 20 per cent over 10 years.

Ontario, other provinces and the federal government have offered companies the extra time, provided no more than a third of employees and/or pensioners object.

Forestell said pension-funding levels would improve markedly if interest rates on long-term government bonds were to rise by a percentage point.

The cost of paying earned benefits with bonds would fall by 10 to 15 per cent if rates rose a single point. Plans with more retirees than active workers would save the least.

Few economists foresee such a big change within a year or so, however. So members of poorly funded plans have to hope their companies will stay in business.

Carlos Leitao of Laurentian Bank Securities predicts a decline in interest rates, which would make things worse for pension plans and weak employers.

Leitao says the decline in rates will occur as investors realize how slowly economies are going to grow and how little chance there is of price inflation over the next two or three years.

jdaw@thestar.ca

PLANT CHAIRPERSON’S WEB REPORT

Kim Clout
June, 2009

Last week Brother Champagne and I attended Ford Council. As expected, there was a lot of open, and at times frank, discussion about the possibility of opening negotiations with Ford here in Canada. The leadership from all of the locations reported on how upset their membership was with the company's decision not to pay out the $1,700 bonus at the expected date. Ford made the situation even worse by not informing the membership until less than a week before we were to receive this money on our cheques. Yes, the money is important, but what concerns us equally is Fords over all tone and the message this aggressive action sends to the membership. Traditionally the relationship between the CAW and Ford has been seen as the best in comparison to GM and Chrysler. It’s safe to say that things are definitely very strained right now.

Ford has informed the CAW that they will make a decision very soon on where the next generation of Oakville’s vehicles will be built. They’re complaining to us about productivity, quality and H&S issues at the Oakville plant. We’ll be analyzing those numbers as we move forward. Unfortunately, this is the first time the union has been told about most of these numbers, so it’s impossible to respond without analyzing them first. Very little will be left here in Canada if Ford pulls the plug on Oakville. This position is confusing for not only your leadership, but the entire membership because they’re out there bragging about how great they’re doing, then telling the union we have to make concessions and are threatening product.

Last week, the US government gave Ford 5.9 billion dollars in low interest loans through an environmental fund to help re-tool their American plants. That’s a lot of money, with more expected in 2010. So far, we haven’t heard of any such governmental initiative here in Canada. This crisis in the industry only shows that government can’t sit idly by and let the market dictate what happens to our most important industry. The CAW has been demanding for years that the government develop a true automotive strategy. Auto provides good paying jobs and is an integral part of our economy. Many hospitals and schools are built with the taxes auto workers pay.

With everything put together, it’s safe to say that we may be headed for an extremely difficult round of bargaining. Your union's position, and the company's position, is miles apart right now. CAW/Ford Council decided that we need to ensure that not only the local leadership, but the entire membership, are aware of the challenges we face. Our expectation is that there will be a larger leadership meeting some time in the near future. Until then, no decision has been made on whether or not we will enter bargaining with the company. Once again, it’s shaping up to be a very busy summer for your union and the membership. As usual, we will keep you informed as best as we possibly can.

Lately we have taken some questions as to why there are students entering the building one week before the remainder of our Bramalea children. The reason is very simple. Some of the students marked on their application that they were not available for a start date until next week. These are brand new students so it wasn’t very realistic for us to demand that the company run two full orientation classes. As you are also aware, a posting has gone up for members that may have additional children that haven’t been hired for the summer. This was in response to a request from the union.

The In Plant would like to wish everyone a safe and enjoyable summer. I am off on vacation this week but can still reached through the union office or at Kim clout@hotmail.com

Kim Clout
Plant Chairperson
CAW Local 584

********************************

INPLANT WEBSITE REPORT
JUNE, 2009

With everything going on both in the auto industry and in our warehouse lately, we feel that it is important to try and keep the membership as updated as possible. As your Chairperson, I raised the idea of posting Inplant reports on the Local website with Brother Champagne a few months ago. The concern is that doing so will have a negative impact on the attendance at union meetings and members won't interact with their CAW reps as much as we would like. We decided to wait until after the elections to implement it. I believe it is still an idea worth trying and hopefully it will stop some of the rumours or fear mongering that occasionally goes on in the warehouse. As usual, any comments or questions the membership has can be directed to me or one of your committeepersons. Also, I can be reached by email at kimclout@hotmail.com. Please do not hesitate to forward any questions or comments you may have.

Last Friday I attended a meeting with Brothers Lewenza, Vince and other top National leadership. One elected representative from each location that sits on the Master Committee was also present. Joe Henrichs, Marty Mulloy, Stacey Firth and other top Ford management represented the company. Ford applied a lot of pressure through the media prior to the meeting in the hopes of getting a commitment from the CAW to enter bargaining on an established date. The meeting was originally scheduled as a regular update on planned North American production.

The company is pushing very hard for us to get back to the table. We were open to entering bargaining with Ford a few months ago and clearly communicated that to them. They refused and decided to attack our contract with Chrysler through the media, stating it wasn't nearly enough. The CAW felt that this was a very aggressive position to be taking, considering they were not requesting government loans.

Traditionally, the CAW/Ford relationship is probably the strongest out of the three, so your leadership was very concerned with Ford's position. Unlike GM and Chrysler, the CAW/Ford membership has received the $3500 payment earlier this year and we have begun issuing the second week of SPA's that the other two are not eligible for. The GM and Chrysler agreement contained job guarantees. That is exactly what we will be demanding for our Ford membership also. As of now, there is no scheduled bargaining. We will keep the membership updated on any changes.

Lately, we have been asked a few questions and have heard a lot of inaccurate rumours on the floor regarding the 12 noon picking job that was posted. The accumulation class had one extra member added to it through the placement procedure permanently on June 5th. We have an agreement with the company to maintain 20 2:30 Accumulators. The company could have taken the position that this was a necessary accommodation through our injured worker placement process so the 20 number doesn't apply. In the end they honoured our agreement. This was a victory for the union.

Incredibly, some members are attempting to put a negative twist on an accomplishment that allows a member the opportunity to get home early and spend more time with family. If this permanent transfer to the accumulation class could have been completed a couple months ago, it would have been done to avoid any impact on other members. We did have a driver exercise their seniority rights under the collective agreement and take a 12 noon job that was posted. This left the junior 12 noon picker with the only option of bidding into the 2:30 driving job or risk being forced to accumulation, as per seniority and bidding procedure. As unfortunate as that situation is, it is not uncommon and sometimes simply happens when members exercise their seniority rights. I'm asking the membership to please contact the union before believing any of the slander that is floating around on the floor on this issue.

Hopefully these reports will increase communication and lead to a much stronger local. These are still extremely challenging times. The strength we get from our solidarity and the support for our great union, the CAW, is what will carry us through this together.

In Solidarity,
Kim Clout
Plant Chairperson
CAW Local 584

NEW YORK – A federal judge approved a plan by General Motors late on Sunday to sell its best assets to a new, government-backed company, a crucial step for the automaker to restructure and complete its trip through bankruptcy court.

The decision by the judge, Robert E. Gerber of U.S. Bankruptcy Court in Manhattan, came after three days of hearings to address the 850 objections to the restructuring plan and after he had received a revised sale order from GM's lawyers.

In his 95-page opinion, Gerber wrote that he agreed with GM's main contention: that the asset sale was needed to preserve its business in the face of steep losses and government financing that is scheduled to run out by the end of the week.

"Bankruptcy courts have the power to authorize sales of assets at a time when there still is value to preserve – to prevent the death of the patient on the operating table," Gerber wrote.

With the approval of the restructuring plan, GM and the government are seeking to close the sale by Monday or Tuesday, according to people briefed on the matter. The government, which is financing the reorganization, had given GM until Friday to win approval for the sale or risk losing its bankruptcy financing.

Harry J. Wilson, a member of the Obama administration's auto task force, testified on Wednesday that the administration did not intend to extend the loan by even one day beyond the deadline.

Gerber's approval marks yet another victory for the Obama administration, which has sought an enormous restructuring of the American auto industry in an extraordinarily short time span. Last month, a new Chrysler emerged from bankruptcy in just 42 days despite a challenge by three Indiana state funds that went as high as the Supreme Court.

If completed by Friday, GM would be near the end of an unusually quick trip through the bankruptcy courts, turning itself into smaller company with fewer brands and a new focus on fuel-efficient cars.

Under the terms of the revised deal, GM would sell its most desirable assets, including the Chevrolet and Cadillac brands, to a new company owned largely by the U.S. and Canadian governments and a health care trust for the United Automobile Workers union. The Obama administration anticipates taking the company public next year. It will still bear the General Motors name.

GM's chief executive of three months, Fritz Henderson, is expected to hold that position in the new company. The Obama administration has already designated several directors for the new GM, including Edward Whitacre, AT&T's former chief executive, as chairman. The company will be represented on an interim basis by Cadwalader, Wickersham & Taft, the law firm that advised the auto task force.

Old GM will stay in bankruptcy, overseen by the company's current chief restructuring officer, Albert A. Koch of the turnaround firm AlixPartners. The Obama administration has agreed to provide $1.2 billion while the company winds down its estate and settles claims.

Along the way, the company has shed 21,000 union workers and closed from 12 to 20 factories. In addition, 40 percent of GM's 6,000 dealers will close.

It is possible that creditors who objected to the terms could file an appeal. Lawyers for several opponents argued during the hearings that the GM sale stripped them of their rights as creditors. A lawyer representing three dissident bondholders urged Gerber to call what he said was the Obama administration's bluff on the July 10 deadline.

The lawyer, Michael Richman of Patton Boggs, and others said that while they were not opposed to a sale, they objected to the plan's structure and said they deserved more compensation for their claims. Richman's clients hold $2.3 million of GM's $27 billion in bonds, though they assert they represent a wider group of individual bondholders that owns more than $400 million worth of bonds.

Other groups, including those representing product liability claims and asbestos litigants, also fought against GM's plan. Under the terms of the sale, most of those claims would remain with the remnants of GM in bankruptcy, meaning they were likely to recover little, if anything.

GM's chief bankruptcy counsel, Harvey R. Miller, said Thursday that none of the 850 objectors to the sale of assets presented a credible alternative. The only other option would be liquidation, a process that he said would benefit no one.

CAW to press Ford on staying in Canada

Almost 300,000 unionized grocery store workers and former employees could face big benefit cuts in the country's largest multi-employer pension plan.

The Canadian Commercial Workers Industry Pension Plan, which has been dogged by allegations of past financial mismanagement, says in a recent notice to members that it may need a "benefit restructuring" because the worldwide financial crisis has resulted in heavy losses in 2008 and this year.

"This adversity has affected the funding status of the pension plan considerably," trustees said in the note. "... difficult decisions will have to be made. Without the infusion of significant new capital, benefit restructuring will be necessary."

The plan gained notoriety in 2005 after the Financial Services Commission of Ontario, the provincial pension regulator, found trustees allegedly mismanaged the fund and broke numerous provisions in pension law designed to protect workers.

The plan provides pension benefits to some 290,000 current and former members of the United Food and Commercial Workers union at 328 employers primarily in the grocery store sector.

Paul Meinema, a plan trustee and assistant to the food union's national president, wouldn't comment on whether restructuring would significantly cut benefits because the union and employers must deal with a number of issues. These include how much employers, from Loblaw Cos. to Canada Safeway and Maple Lodge Farms, would contribute to bolster the plan and changes in legislation that would spread the fund's obligations over several more years.

"There are a lot of unknowns we're dealing with," said Meinema. He said the goal is to inform members of the situation by fall, "when we have a better understanding."

Greg Hurst, a principal of Toronto-based pension consulting firm Morneau Sobeco, said the trustees' note should concern workers, "particularly given that there have been multi-employer pension plans in Canada who have similarly run into funding challenges and have been required to reduce benefits."

The plan has already reported that, as early as the end of 2006, it only had enough assets to meet 52 per cent of obligations if trustees or government moved to wind up the fund. The plan's last report disclosed its funding deficiency as a so-called "going concern" had climbed to $395 million at the end of 2006 on the basis of $1.5 billion in assets and $1.9 billion in liabilities.

The report also said that in 2007, the plan generated an aggregate rate of return of 7 per cent and significantly outperformed the average return of 2.9 per cent of Canadian pension funds during the year.

But trustees said in the note that the plan, like other funds, is now trying to cope with the largest financial meltdown in years. They disclosed the plan's return on investments last year was a "negative" 19.6 per cent, which is line with the performance of other large pension plans. Trustees will reveal more details later this summer.

But even before the collapse of financial markets and sharp drops in pension investments, trustees set up a "stabilization fund" to address the shortfall between the value of assets and accrued benefits.

Those results came after the commission forced trustees to make changes to operations, and followed the disclosure of trustees' controversial money-losing investments and a stinging report by Ontario's pension regulator about breaches of operating rules.

A subsequent Star investigation revealed trustees had invested more than $225 million in dubious ventures, including loans for two struggling Bahamian resorts and a magic theme restaurant in Florida.

The commission laid regulatory charges in 2006 against trustees. A judge will soon issue her decision after a trial in the last year.

Bailouts put brakes on car sales

Consumers shun GM and Chrysler, but Ford
exploits handout-free status to score historic win

Jul 03, 2009

Business Reporter

General Motors and Chrysler have discovered the downside of massive government aid as Canadian sales plunge while bailout-free Ford has roared to the top of the market for the first time in 60 years.

Analysts said yesterday months of lingering consumer uncertainty about the survival of GM of Canada Ltd. and Chrysler Canada have contributed significantly to the companies' continuing decline, including a slide in sales in June of 31 and 58 per cent, respectively, despite the aid.

"There's no ifs, ands or buts. When you are a company that is bankrupt, consumers are hesitant to buy your products," said prominent industry watcher Dennis DesRosiers.

But Ford Motor Co. of Canada Ltd., which did not pursue any public aid, climbed to the top of the monthly market in June for the first time since 1949.

The company's sales surged 24.6 per cent, or almost 5,500 vehicles, to 27,408 in June from the same period last year.

The federal and provincial governments announced June 1 that they would provide $10.6 billion in loans to save GM. A month earlier, the two governments confirmed about $3.8 billion for Chrysler.

But the government rescue packages here and bigger ones in the U.S. have not sparked any rejuvenation in confidence or showroom sales. The two companies continue to struggle more than any of their major rivals in the worst market in several decades.

At the same time, a shortage of inventories – that resulted from their brushes with bankruptcy – has hurt sales more than anything, according to company spokespersons.

Analysts agreed low inventories are the biggest reason for continuing eye-popping sales declines at GM and Chrysler but they note months of questions about their future have left shoppers uneasy.

"I think it is reasonable to assume the financial challenges faced by GM and Chrysler have affected to some extent what vehicles consumers would consider," said Chris Travell, vice-president of the auto division at Maritz Research.

John Tews, a spokesperson for J.D. Power and Associates in Detroit, added that some consumers may be taking a "wait and see" attitude toward buying GM and Chrysler models until they see clear signs the companies can weather the current economic storm in both countries.

Like its rivals, Ford had posted declines for most of the first half of this year but the company has still outperformed the market with smaller decreases. Its sales have slipped almost 5 per cent while the market has dropped 18.3 per cent, or about 162,000 vehicles in the first half.

David Mondragon, Ford of Canada's chief executive officer, said the company's restructuring – which started three years ago – and an emphasis on innovation, fuel efficiency and safety is now paying off.

He also acknowledged Ford benefited to an unknown extent by staying away from any negative publicity that dogged rival GM and Chrysler as they dealt with bankruptcy issues, government loans and the impact on consumer confidence.

Chrysler's sales tumbled a stunning 58.4 per cent to 9,211 in June, a drop of almost 13,000 vehicles from the same month last year. Its sales also dropped 50 per cent in May.

The June collapse pushed Chrysler down to sixth place in sales after leading the market for the first time in 84 years in February.

Chrysler blamed most of the steep decline on a shortage of vehicles, because the company temporarily shut down assembly plants across the continent while it operated under temporary bankruptcy court protection in the U.S.

"With our plants down, limited inventory on the ground and virtually no fleet deliveries, we were relegated to the bench for much of May and June," said chief executive officer Reid Bigland.

"Now that those issues are behind us, we look forward to getting back in the game and regaining our positions as the No.1 or No. 2 highest-selling vehicle manufacturer in Canada."

GM, the perennial monthly industry leader until this year, reported its sales fell 31 per cent to 22,334 cars and trucks in June.

Most GM plants are down as the company works through bankruptcy proceedings in the U.S. so it can emerge as a smaller, stronger company.

The company said it is currently "very lean" on truck inventories.

In the U.S., Chrysler's sales slid 41.9 per cent in June and GM's fell 33.4 per cent. The overall U.S. market slid 27.7 per cent during that period.

DesRosiers said it may take five to eight years before GM or Chrysler can erase all doubts in the minds of consumers about their viability and issues such as backing of warranties. But Travell argued most of the doubt could disappear by the end of the year.

The June results also revealed continuing volatility in the marketplace. Several automakers now are competing for the three top positions, which was strictly the domain of GM, Ford and Chrysler, the so-called Big Three North American automakers, until only a few years ago.

For example, booming Hyundai Auto Canada, which bucked the market trend this year, broke into the top five for the first time in June as sales surged 25.5 per cent to 10,104. Its sales have shot up 21.4 per cent to 52,454 in the first six months despite the industry's sharp downturn.

Toyota Canada and Honda Canada, which have also experienced double-digit declines this year, held third and fourth spots in June.

"There's no longer a Big Three," said DesRosiers. "It's a Big Five or Six."

Mondragon said Ford expects consumer confidence will remain low and adversely affect industry sales during the third quarter before picking up in the final three months of the year.

"There continues to be economic challenges facing every industry and the overall economy," he added.

Mondragon would not comment on whether the company would continue to lead the market during the next few months.

Toronto Star

GM in talks that may leave
Magna alone at the altar

July 1, 2009
NELSON D. SCHWARTZ
DAVID JOLLY
THE New York Times

ROME–As General Motors and auto-parts giant Magna International struggle to conclude a deal for Opel, GM is talking with other potential buyers in a bid to win better terms, according to the officials involved in the negotiations.

While Aurora-based Magna remains the favoured buyer of the German government, GM has pressed for the right to regain control of Opel in several years, according to the officials, but Magna has so far refused to budge.

Under the terms of a preliminary deal brokered by Berlin before GM's bankruptcy filing on June 1, GM and Sberbank, a Russian lender controlled by the Kremlin, would each hold 35 per cent of Opel, with Magna owning 20 per cent and Opel's workers controlling the remaining 10 per cent.

Yesterday, Siegfried Wolf, a Magna chief executive, expressed confidence that a deal would be reached and said that he "wants to come to an agreement by July 15," Associated Press reported.

Initially, Fiat had been favoured as the probable buyer, but Magna edged out the Italian automaker because of German union and government fears that a Fiat deal might mean significant job cuts in Germany. Many analysts argued that the Fiat deal made more commercial sense because consolidation was needed in an industry suffering from overcapacity amid the worst sales slump in decades.

Fiat CEO Sergio Marchionne has said that the Italian company will not raise its bid but that it remains interested if the talks falter.

While Fiat remains in the background, GM has quietly begun talking with RHJ International, a Brussels-listed industrial holding company that owns auto-parts businesses in Japan and Germany, as well as Beijing Automotive Industry Holding.

Beijing Automotive, owned by the Beijing city government, has been the largely silent local partner for a series of joint ventures with multinational automakers, while showing little interest in developing its own cars. But after recent management changes, it has begun to show an interest in raising its profile.

"Their new leaders are very ambitious," said Yale Zhang, the director of China vehicle forecasts at CSM Worldwide, an automotive consulting firm. "They really want to achieve a bigger role.''

Still, officials doubt that the Chinese company is prepared to take on such a complicated international transaction. Government officials say they consider RHJ the most likely fallback plan if the Magna-Sberbank deal should falter.

By talking with other interested parties, General Motors improves its leverage over Magna and Sberbank, even as the Detroit giant moves through bankruptcy. What is more, the talks provide GM with the ability to quickly move on to a new deal if the Magna talks should founder.

The German government, which is providing Opel with 1.5 billion euros in bridge financing as well as 3 billion euros in loan guarantees, remains the kingmaker.

A spokeswoman for Sberbank declined to comment, while Arnaud Denis, a spokesman in Brussels for RHJ International, said he could neither confirm nor deny his company's interest in Opel.

Ford Motor Co. of Canada Ltd. will offer $100 to shoppers if they test-drive any one of the automaker's vehicles but then buy a rival's product instead.

Ford said yesterday it is introducing the national promotion tomorrow on a bet that the automaker can increase sales by pulling a lot more potential buyers into showrooms.

It is part of the company's summer incentive program, which will include "employee pricing" and thousands of dollars in savings that Ford and other automakers have offered to consumers in recent years during July and August.

In getting a small jump on the latest summer incentives, Ford president David Mondragon said the company is simply compensating consumers for their time in a company dealership.

"It's a way of introducing our brand and our vehicles," Mondragon added in an interview.

"We're betting on the fact that our vehicles are so good that once you drive a Ford, you won't want to drive anything else."

He said Ford's research shows that once shoppers visit its dealerships, the company's sales success rate is 30 per cent and that it should increase this summer with the latest incentive.

Under the promotion, shoppers will receive $100 if they test-drive any new Ford or Lincoln and then purchase a model in the same segment from another manufacturer.

The promotion is a bigger version of a Ford idea that the company and some dealers have offered on a particular model in recent years.

In 2004, Ford gave visitors at the Canadian International Auto Show a coupon to test-drive the Freestar minivan. Coupon holders who drove the model got $100 if they bought a rival minivan.

In 2006, a Ford dealership in Mississauga offered $100 gift cards to anyone who test drove a Fusion model and then bought a competing Honda, Toyota, or Nissan mid-size car.

Ford is also offering consumers the same lower prices that employees can get for new vehicles. The savings range from about $4,300 on a Fusion car to $15,000 on a F350 Crew Cab pickup truck.

General Motors and Chrysler spokespersons would not disclose any new incentives for July and August.

However several automakers including GM, Ford, Hyundai and Mazda are currently offering cash incentives or no-interest financing.

Meanwhile, Mondragon said he will meet with Environment Minister Jim Prentice again soon to press for "clunker" legislation in Canada that would spur slumping auto sales by encouraging consumers to scrap aging vehicles in exchange for incentives of at least $3,500 to buy new, more fuel-efficient models.

Deadline passes in CAW,
Navistar talks

June 30, 2009

THE CANADIAN PRESS

CHATHAM–A midnight deadline passed with a settlement in contract talks between the CAW and the Navistar truck plant here.

The union says despite the failure to reach a new agreement and a wide gap on key issues, it remains open to further discussions.

The CAW says efforts to reach a new deal failed because of "company demands for massive concessions and job cuts."

Union president Ken Lewenza says massive concessions and job cuts would devastate the community.

He says the proposed job cuts would result in more than 1,000 workers now on layoff with little or no chance of recall.

The union will update members on Wednesday on the negotiations and says it is prepared to meet with the company at any time.

NEW YORK – General Motors Corp. has agreed to take on responsibility for future product liability claims, removing what could have been a sizable roadblock on the automaker's path to a quick sale of its assets and emergence from Chapter 11 bankruptcy as a new company.

As part of its government-backed restructuring plan, GM wants to sell the bulk of its assets to a new company and leave behind unprofitable assets and other liabilities such as product-related lawsuits. A hearing on the proposed sale is scheduled for tomorrow.

But in a concession to consumer groups and state officials who had threatened to block the sale because of product liability concerns, GM will now assume responsibility for future claims on vehicles made by the old company, according to a bankruptcy court filing.

Under the automaker's previous plan, consumers who wanted to file a lawsuit related to a defective GM vehicle would have had to seek compensation from "Old GM'' which likely would not have any assets to pay their claims.

*************************************

NEW YORK – General Motors Corp. has agreed to take on responsibility for future product liability claims, removing what could have been a sizable roadblock on the automaker's path to a quick sale of its assets and emergence from Chapter 11 bankruptcy as a new company.

As part of its government-backed restructuring plan, GM wants to sell the bulk of its assets to a new company and leave behind unprofitable assets and other liabilities such as product-related lawsuits. A hearing on the proposed sale is scheduled for Tuesday.

But in a concession to consumer groups and state officials who had threatened to block the sale because of product liability concerns, the new company will now assume responsibility for future claims involving vehicles made by the old company, according to documents filed in federal bankruptcy court in New York on Friday.

Under the automaker's previous plan, "New GM" would not have assumed any liability for future claims related to GM vehicles made before the sale and creation of the new company. That meant that consumers who wanted to file a lawsuit related to a defective GM vehicle would have had to seek compensation from "Old GM," a collection of mostly unprofitable assets left over after the sale, where there likely would be nothing left to pay their claims.

But under the new plan, "New GM" will not assume liability for already pending claims against the automaker and those people will still be forced to seek compensation from "Old GM.''

"The fact that 'New GM' will protect consumers injured by defective 'Old GM' cars is a positive development for public safety," The Ad Hoc Committee of Consumer Victims of Chrysler and GM said in a statement released Saturday.

But the group said more needs to be done, noting that GM's concession doesn't help people that have already been hurt by its vehicles. It also said consumers hurt by fellow automaker Chrysler LLC still have little recourse.

As part of its plan to sell most of itself to a group led by Italy's Fiat Group SpA and emerge from Chapter 11, Auburn Hills, Mich.-based Chrysler also asked the judge overseeing its case for permission to leave behind its past and future product liability claims.

Consumer groups, as well as several individuals with pending claims against Chrysler, objected and some even took their arguments to the Supreme Court before the sale was ultimately approved and the automaker emerged from court oversight shortly thereafter.

GM, which filed for Chapter 11 on June 1, has said it wants to spend no more than 60 to 90 days under bankruptcy protection and that a key part of meeting that goal will be a quick sale of the company's assets.

Under the deal brokered with President Barack Obama's administration, the U.S. government will get a 60 percent ownership stake in the new GM. The Canadian government will get 12.5 percent, with the United Auto Workers union taking a 17.5 percent share and unsecured bondholders receiving 10 percent. Existing GM shareholders are expected to be wiped out.

Even with the resolution of the product liability issues, GM still faces numerous objections to the sale, including ones filed by a group of its unsecured bondholders, a handful of states and cities and individual retirees and shareholders.

While noting the "painful" sacrifices being made by many parties in GM's bankruptcy process, including individuals injured by GM products, an administration official said Sunday there is nothing "exceptional" about the automaker's bankruptcy terms.

"The outcome for all involved would have been far worse had the government not intervened in the restructuring and General Motors had liquidated," the official said in an emailed statement, declining to be identified.

Organized workers feeling the heat

June 28, 2009
Sandro Contenta
Feature Star Writer

At the foot of the Don Valley Parkway are haggard symbols of the risk workers take when striking in hard times.

Employees of the old Lever Brothers soap factory have been walking the picket line for a year. In February, American owner Korex Don Valley filed for bankruptcy protection. Last month, all 100 strikers received layoff notices.

"We, as the normal common guy, didn't see it coming," David Pal, 48, says of the recession. "We were out in June (2008) and in July we started realizing, holy cow, the economy seems to be in trouble."

And yet, sitting under a makeshift tent at the plant's gate, Pal and a handful of other strikers say they have no regrets.

They accepted a long list of concessions in their last contract seven years ago, including a wage freeze – their average salary is $25 an hour – and the loss of their defined-benefit pensions. Last year Korex demanded much more.

"I'm not going to work in a sweatshop," says Pal, a member of the Communications, Energy and Paperworkers union. "After 30 years of service, some things are worth fighting for."

Not so far away, on Commissioners St., municipal garbage workers feel the same way. They hit the pavement this week with other city employees to fight concession demands, including their decades-old right to bank unused sick days and cash in some of them at retirement.

"They're using the recession as an opportunity to stick it to us," says garbage worker Bill Steele, 44.

Also sticking it to them is the public. Says Steele: "They're jumping on the bandwagon: `Hey, let's beat these guys down.'"

Moments earlier, a woman in a hurry to dump her garbage at the Commissioners St. site – one of several where residents can do so – spit at picketer Tommy Bazkur, 55.

Union jobs have long been seen as the standard-bearers for decent working conditions. But these days, unionized workers are feeling the heat from employers and the public.

With corporate profits down 24 per cent in the first quarter – about the same amount they fell in the last quarter of 2008 – the pressure on employees for concessions is mounting.

Across the private sector, defined-benefit pensions – enjoyed by only 17 per cent of these workers – are under serious threat and proposals to cut wages are making an appearance.

Sharp cuts in benefits to save GM and Chrysler are the most obvious example. In the struggling newspaper industry, The Globe and Mail wants employees to take an unpaid one-week vacation each year and switch to a less secure defined-contribution pension.

The most extreme example comes from abroad: U.K.-based British Airways, which recently reported a pre-tax loss of $760 million, has asked its employees to work one month for free.

Companies struggling to survive make tough choices, sometimes in agreement with unions. But the concessions they demand set the tone for profitable companies too, argues Norene Pupo, director of York University's Centre for Research on Work and Society.

Says Sid Ryan, Ontario president of CUPE, which represents striking city employees: "There's a real trend to pull everybody down to the lowest common denominator. And that's why you'll see long strikes."

Niels Veldhuis, director of the Fraser Institute's Centre for Labour Market Studies, disputes the claim. Expanding companies can't afford to be stingy if they want to attract the most talented people, he says.

Twenty-one unionized workplaces under provincial jurisdiction are currently on strike in Ontario – one less than in June last year, and six less than in June 2007.

In contract agreements between Ontario unions and employees in the private sector from 2007 to April 2009 average annual increases fell from 2.9 per cent to 2 per cent. In public-sector contracts negotiated during this period, wage increases fell from 3.1 per cent to 2.5 per cent.

Unions are facing their own survival challenges. Unionized manufacturing jobs across Canada disappeared at twice the rate of non-unionized ones from 1998 to 2008, according to Statistics Canada. During the past year in Ontario, 53 per cent of the 133,000 manufacturing jobs lost were unionized.

Voy Stelmaszynski, a lawyer with the Ontario Labour Relations Board, has noticed an increase in applications to decertify unions. Most are due to workplaces switching from one union to another, he says.

As the number of manufacturing jobs drop, unions are scrambling to maintain revenues from union dues, Stelmaszynski says. The result is an increase in rival unions "raiding" already unionized workplaces.

"They really are in a struggle for membership," he says.

The bottom for both unions and working conditions depends on the length of the recession, says York University's Craig Heron, a historian of the Canadian labour movement.

"You find much more strength and leverage for unions during boom times and a much weaker ability to negotiate during down times."

With unemployment rising – it hit 9.4 per cent in Ontario in May, the highest in 15 years – employers have a bigger pool of labour to choose from. During the Great Depression, workers who resisted wage cuts were replaced by the many waiting at factory gates for jobs, Heron notes.

The heyday for unions began in the early 1940s, when massive cross-country strikes and the rise of the pro-union CCF party pushed the federal Liberals to pass laws that allowed unions to be recognized.

What followed was an unprecedented period of prosperity and near full employment. Wages and benefits rose steadily, as did union membership. This ended in the 1970s, with wage and price controls and, later, company downsizing.

Along the way, unions set labour standards for most workers. Their gains pushed federal and provincial governments to set labour laws that guaranteed, for example, paid vacations and severance. For years in Hamilton, when the unionized Stelco steel mill struck a deal, its non-unionized competitor, Dofasco, automatically matched it.

"The quality of life that everybody enjoys today is thanks to the labour movement," says Pal, the striking factory worker. "And then people turn their backs on it like it never happened."

The Fraser Institute's Veldhuis argues that improved working conditions have nothing to do with unions. The key is job creation, which he expects will robustly return once we're out of the recession.

The scramble for workers will then intensify as Canadian baby boomers retire, he says.

"There is going to be pressure for workers on all sorts of labour categories, and that obviously means that employers are going to have to do more to attract talent, both in the public and private sectors.

"That is good for workers because it means higher wages, it means better conditions, it means they can demand more. That's what we were seeing before the recession hit."

For now, however, the lack of overt public support for picketing workers is indeed striking when compared to countries like France. Hundreds of thousands there regularly take to the streets to fight proposed labour concessions, creating the impression of a highly unionized country. In fact, only 8 per cent of the French labour force is unionized, compared to 30 per cent in Canada. (If workers in the agricultural sector are counted, the number drops to 25 per cent.)

Canadians are victims of "a politics of envy," promoted all the more during the recession, says sociologist Pat Armstrong.

"People say, `Why should those workers get it if I don't have it,' as opposed to flipping it around and saying, `Why shouldn't we all get it,'" she says.

Canadians should be careful what they wish for, particularly if wages start falling, says Sylvain Schetagne, senior economist at the Canadian Labour Congress.

"People will consume less and you might end up losing your job."

Some argue more focus should be placed on fixing the social safety net – such as boosting employment insurance coverage and the Canada Pension Plan – and reforming economic practices.

Roger Martin, dean of the Rotman School of Business, calls for changes in executive pay structures. He blames much of the economic collapse on the way Wall Street uses stocks to pay the lion's share of CEO salaries. That created a kind of financial Russian roulette, with hedge fund managers and others repeatedly betting on the riskiest investments until they all came tumbling down.

Pupo criticizes what she calls "corporate welfare" – executives getting huge bonuses while workers get cuts. At Nortel, which is under bankruptcy protection, severance pay was cancelled and pension benefits slashed while executives received millions of dollars in bonuses.

Yet even among unionized workers envy makes an appearance. Strikers at Korex can't help but feel their striking cousins in the garbage sector have got it easy.

"Once the garbage starts smelling, after three weeks, it's going to be settled," says David Pal.

"It's just like a little summer vacation for them without pay," adds fellow striker Ron Gaudet, 58.

At the Commissioner St. picket line, garbage workers complain the city wants to take from them what it didn't try to take from police or fire fighters. Jay Gibbs, 37, says people wouldn't envy his sick day plan if they knew what it was like to "slug" 15 to 20 tonnes of garbage a day, four days a week, from 7 a.m. to 5 p.m.

"At the end of the day, I'm absolutely exhausted," says Gibbs, a driver and garbage loader for three years. "These older guys, they're hurting."

Bazkur, who makes $25 an hour, works at a site also used by private garbage collectors. "They get $18 an hour and in a couple of years their knees are gone," he says. "They run them into the ground. Is that what people want to see?"

WATERLOO–An equipment operator punches the start button on his high-end lathe and watches it put the finishing touches on a simple metal piece. He's almost alone on the plant floor. Most of the machines around him are silent. He worries.

On the other side of the plant, a glum customer services manager studies a spreadsheet with dwindling contract orders. The data tells her the machines will remain down and layoffs will be longer for a lot of workers.

Nearby, an anxious controller can't plan ahead. There's too much uncertainty. It's hard to keep revenues and costs in line and meet the payroll. He now draws up budgets by the week, not by the month or quarter.

Across the aisle, a frazzled materials manager is on the phone trying to delay payment to a supplier for a few more days. Another supplier is on hold. He hopes to find the money somewhere.

Upstairs, the company's president is preparing to rush off to Europe on a crucial mission. He needs to find contract work and sow the seeds for the company's future. Fast.

And in another office, the company's founder and majority owner feels the weight of all of them on his hunched shoulders.

He's also got everything on the line now, including a personal multimillion-dollar fortune.

Welcome to a day in the life of Maxtech Manufacturing Inc., one of many auto-parts companies in turmoil in Canada's reeling industrial heartland.

-----------------

Maxtech owner and chief executive officer Kacee Vasudeva has felt the weight and risk increasing for more than two years. At 63, he works longer and sleeps less at night. Playing more golf is a passing fantasy. There is no time for doting on grandchildren.

"Every day is a struggle now," says Vasudeva, slowly removing a set of reading glasses and rubbing his eyes at the end of another gruelling 12-hour day.

"The last few years have been the toughest of my life."

Maxtech's fight for survival is a corporate drama playing out behind the walls of hundreds of manufacturing plants across recession-ravaged southwestern Ontario.

"We're in a war zone here every day trying to keep things going," said materials manager Joe Schneider. "It's extremely hard on everyone. It's difficult for people on the outside to really understand what we're going through."

A higher dollar, plunging demand for exports, intense offshore competition and tighter credit have led to the biggest and quickest economic downturn since the Great Depression.

It has triggered a crash in North American auto sales and hammered the country's manufacturing sector. Empty plants with bankruptcy notices on their doors and "for sale" signs on the gates dot industrial parks across southwestern Ontario.

Surviving manufacturers desperately search for lifelines to stay open another month or week. They wait for a recovery that might not include them.

Owners fret as the losses pile up. Hapless managers cut costs and then do it again to make the numbers work. Employees lose their jobs temporarily or permanently. Families and children suffer. Everyone hurts.

Vasudeva gets phone calls from loyal, long-time employees on layoff wondering when business will pick up and they can return. It pains him to tell them that there's no work yet – again.

Vasudeva always found the cash with understanding lenders, friends or, more often than not, he sunk his own money into the company.

But the recession is dragging on and it is squeezing him more and more. Cash is tight and options are dwindling.

He has become a true entrepreneur in the spirit of the late telecommunications icon Ted Rogers, who said you really aren't one until you mortgage your house. Vasudeva did that in 2007 to resolve a cash crunch.

Maxtech, which operates three plants, including two in the city's north end, makes numerous components ranging from exhaust system parts to gear shift levers for big name suppliers like Mahle, Siemens and ArvinMeritor. In turn, they add other parts or machining for delivery to Chrysler, General Motors and Ford assembly plants.

The company also designs hand- and power-tool accessories that are made in China, sent here and distributed to retailers such as Home Hardware. Furthermore, it is seeking new work in the environmental sector.

"If we can make a bumper part, we can make a rain barrel," says Vasudeva, who prides himself on his company's attention to innovation.

In coping with the downturn, Vasudeva and his partner and minority owner, Atul Bali, don't have to look at financial statements to know the company is struggling. They just turn their ears to the plant floor below the management offices.

A lot of noise means more production and business. It's sweet music to them. But except for the occasional clanging, clunking, thumping or humming sounds from a lathe or screw machine, it is quiet.

"All these machines are asleep," says general manager Isaac Jacob derisively as he walks through one section of a Maxtech plant.

It's a familiar sight in Canadian industry. Utilization rates fell almost six percentage points to less than 70 per cent during the first quarter, the lowest level since Statistics Canada started tracking the data in 1987.

Nothing illustrates the underutilization at Maxtech more than an $850,000 "dial" machine that the company designed and bought to win a contract from Siemens VDO Automotive.

The complex unit drills holes, inserts pins and assembles four different components to create an intake control lever that will end up in the manifold of a Chrysler engine.

The machine has rung up nothing but losses for Maxtech. It has the capacity to produce 14,000 levers a week. But it is the plant's biggest sleeper, pumping out less than 1,000 a week in recent months. On this day, it doesn't move.

The silence of machines and steep decline in the auto market has pummelled Maxtech on the revenue side. In the first quarter, revenues tumbled to $3.5 million from $9.2 million in the same period last year. Operating losses grew to $700,000 in the quarter after the company barely broke even in the same three months of 2008.

The deteriorating financial performance has forced Vasudeva and Bali to slash costs and staff. About 190 employees have lost their jobs, or more than half of the 350 from two years ago. Many remaining hourly-rated employees are working three days a week.

It is the same elsewhere in the beleaguered parts industry. The sector, which is concentrated in southern Ontario, will shrink by more than a third and eliminate a phenomenal 36,500 jobs this year, according to a forecast from the Conference Board of Canada, a leading research agency.

Maxtech managers, including Vasudeva and Bali, are also feeling the impact. They are absorbing a stinging 40 per cent pay cut.

That means they work five days but two of them are effectively free. Some of those workdays stretch into the evenings. The strain is visible on everyone.

Veteran machine operator Murray Luft, a fortunate employee with some work, has never seen Maxtech struggle so much in his 12 years with the company.

"We're holding our breath," says Luft, standing beside his computer numerical control lathe, one of the few machines making noise these days.

Left has gained some extra job time because he's working on a prototype part for Volkswagen, one of Maxtech's new customers.

It is indicative of Maxtech's aggressive approach to diversification away from domestic automakers. The company is pursuing parts work in the European auto market and outside the industry in areas such as flanges and valves for the oil sector, steel spindles to regulate water flow in pipes and even blades to power wind turbines.

Although the strategy shows promise, it will take time, which is something in short supply at Maxtech. A lot more equipment around Luft's lathe needs to run consistently again.

Customer service manager Sunita Gandhi hasn't seen a trend for more business, which would turn those machines on and end some layoffs.

She pulls out a daily production sheet detailing output of small parts for a key customer, and points to spaces with zeroes. There are a lot of them.

"Here's an order for 490, down from 2,220," Gandhi adds. "When you see something like that, you know workers are staying at home and it's sad. Very sad."

Dealing with those sliding orders and volatility causes chronic headaches for Schneider, who has to make sure steel, plastics and tools arrive on time for manufacturing.

Those suppliers are skittish these days about delivering to Maxtech when there are doubts about whether it can make timely payments.

Sputtering automakers exacerbate the problem by reducing or abruptly cancelling orders. It puts Schneider in a tough spot.

"It's crazy here every day," says Schneider, who sports a black and white checkered sweater and seems to wear stress well.

"You can only imagine. I might have a customer who decides to drop his normal parts order by something like 90 per cent. At the same time, I could have a ship of goods (materials to produce the original order) on the ocean coming here.

"When it arrives, we have to pay 70 per cent of the bill for its release. We can't leave it sitting because of the exorbitant storage charges. And I know there will be not nearly enough money later to cover it because of the much smaller order from my customer. Things like that keep me up at night."

Schneider must also deal with suppliers who press for immediate or quick payments while the company waits up to 100 days for money from its customers.

"Right away, we're looking at an imbalance in cash," he says.

Schneider, who describes himself as a "riverboat gambler," has to constantly engage in cajoling, a little psychology and a lot of hard-knuckle bargaining.

If Maxtech can't pay fast enough and a supplier of steel rod holds up delivery, it could trigger a disastrous chain reaction.

First, Maxtech can't make the part. Its customer then can't deliver a cluster of components including the Maxtech part to an assembly plant. Auto production stops immediately. The damage is millions of dollars a day.

It's a reason why Schneider pops by the office of controller Michael Hingley several times daily in the hunt for money to pay suppliers and maintain the flow of critical materials so production can continue.

Hingley's job is almost impossible because he can't get enough accurate information from customers in the current volatile auto market to calculate revenues and draw up proper four- to six-week budgets.

"In the auto industry now, you can reach an agreement one day, but it doesn't mean much the next day," he says. "They (customers) can pull it, and there's no compensation."

Compounding his problems are slower payments by customers and tightening credit when the company needs temporary help.

"Seventy per cent of auto-parts makers our size no longer have commercial lines of credit with a bank," he adds, staring at another set of numbers on his computer screen that are tough to square.

It's now week-to-week budgeting for Hingley. Sometimes, it's day-to-day. He also checks the company's bank accounts daily to make sure there are enough funds to cover costs.

More revenues would ease Hingley's budget pressures, and Bali needs to deliver. Bali, who has also mortgaged his house to help Maxtech, lands in Frankfurt, Germany, the next day in the quest for more business.

Maxtech set up a European office near the city earlier this year as part of its diversification strategy.

Bali and Silke Apfel, the company's European manager, race 3,800 kilometres through four countries in a Peugeot over seven days.

Later, Bali and Apfel clinch a big deal with Volkswagen for Maxtech's unique fittings for exhaust systems. The fittings, or so-called sensor bosses, are made of recycled steel, and Maxtech's design and technology reduces machining, eliminates scrappage and produces savings for automakers.

The duo secure a total of six contracts on the trip, including one for plumbing parts that will generate annual revenues of more than $10 million starting next year.

"We're going the right way in reducing our dependence on the North American auto industry," says a happy but tired Bali.

Vasudeva, who waited anxiously for daily progress reports from Europe, returns to his office where a board on the wall is crammed with reminders and ideas.

He catches up on some calls and turns to a file dealing with patents. A few minutes later, he gets up to leave and turns off the lights. It's 8 p.m.

There will be more work tomorrow – and more challenges.

Judge gives automaker
access to bailout funds

June 26, 2009

A bankruptcy judge ruled yesterday that General Motors Corp. can have access to its full $33.3 billion (U.S.) in bankruptcy financing.

Judge Robert Gerber gave final approval to the financing after he had given preliminary approval earlier this month for GM to use $15 billion of the total. The billions in U.S. and Canadian government financing is intended to keep the automaker going until it can sell its assets to a new company and emerge from Chapter 11.

The U.S. government will take a 60 per cent stake in the new company, and the Canadian government would get 12.5 per cent. The United Auto Workers union and GM's unsecured bondholders would own the rest.

At a hearing yesterday, Gerber also denied a request from a committee of people with asbestos-related claims against GM to appoint a "tort czar" who would oversee all future claims against the old GM, not just those related to asbestos.

Ford suppliers face tough times

June 25, 2009

DEARBORN, Mich.–Ford Motor Co.'s top executive for auto parts purchasing said Wednesday the number of the automaker's suppliers that are under distress, bankruptcy protection or under observation has more than doubled in the last year.

Tony Brown, Ford's vice president for global purchasing, declined to give an exact number of distressed suppliers, but said in a briefing that more suppliers are in the category of being monitored as slumping auto sales force automakers to slow production and order fewer parts.

Brown said he had several teams of people looking at ways to aid distressed suppliers operationally, as Ford has limited funds to financially support the ailing companies.

"You could expect Ford to take the appropriate action given the situation and it could include providing financing," he said. ``And it could include simply having an engineer go in and clean up their process.''

The Dearborn-based automaker has pledged to provide at least $125 million in debtor-in-possession financing to its former subsidiary, Visteon Corp., which is under Chapter 11 bankruptcy protection.

Ford said it is accelerating its plans to consolidate the number of suppliers it uses. The company said 850, or 48 percent, of its suppliers will be eligible for future work at the end of the year, down from the 1,683 eligible at the end of 2008.

"We don't need that capacity," he said. "We need a stronger, healthier, profitable supply base. This is our strategy to make that happen.''

Ford will have 1,650 total suppliers at the end of 2009, compared with 2,198 at end of last year. Its goal is to eliminate short-term suppliers, with a target of 750 total suppliers in the coming years. Ford purchases about $90 billion in parts annually.

Brown said the reduction of its suppliers would be "orderly'' and not disruptive to the other automakers that may do business with the companies.

Ford also said it has added 16 companies to its key group of component and service suppliers, including BorgWarner Inc. and Denso Corp. There are now 82 suppliers in the company's Aligned Business Framework, which increases the automaker's collaboration with the companies.

Ford shares rose 27 cents, or 4.9 per cent, to $5.80 in morning trading. Shares of Auburn Hills, Mich.-based BorgWarner rose $1.20, or 3.9 percent, to $31.79.

AL BORDEN PASSES AWAY

May 19, 1931  -  June 23, 2009

AL BORDEN (Photo taken at Ford in 1984)

Our Deepest Condolences go out to his family!

He will be resting at:

Dodsworth & Brown
2241 New St.
Burlington

Visitations will be:
Thursday June 25
2:00pm - 4:00pm
7:00pm - 9:00pm

Funeral service will be on Fri June 26 at 2pm

http://www.db-burlington.ca/

BORDEN, Alford – Peacefully at home on Tuesday, June 23, 2009.  Alford has rejoined his late wife Ruth.  Leaves behind 3 loving children Cindy, Al and his wife Lori, Timothy and his wife Paula.  Alford will be missed by 11 grandchildren and 4 great-grandchildren.  Alford is also survived by 6 siblings.  The family will receive friends at the DODSWORTH & BROWN Funeral Home, BURLINGTON CHAPEL, 2241 New Street (at Drury Lane), Burlington (905-637-5233) on Thursday, June 25th  from 2-4 & 7-9 p.m.  Funeral Service will be held in the Chapel on Friday at 2 p.m.   Reception to follow. 

WASHINGTON– The Energy Department said Tuesday it would lend $5.9 billion to Ford Motor Co. and provide about $2.1 billion in loans to Nissan Motor Co. and Tesla Motors Inc., making the three automakers the first beneficiaries of a $25 billion fund to develop fuel-efficient vehicles.

Energy Secretary Steven Chu announced the loan recipients at Ford's Research and Innovation Center in Dearborn. The loans to Ford will help the company upgrade factories in five Midwest states to produce 13 fuel-efficient vehicles.

Nissan was receiving $1.6 billion to retool its plant in Smyrna, Tenn., to build advanced vehicles and build a battery manufacturing facility. Tesla would get $465 million in loans to build electric vehicles and electric drive powertrains in California.

The loans were designed to help auto manufacturers meet new fuel-efficiency standards of at least 35 mpg by 2020, a 40 percent increase over current standards.

"These loans will help the auto industry meet and even exceed the president's tough fuel standards," Chu said. "This is part of President Obama's commitment to a new energy strategy for America. ... This means the most fuel-efficient cars in the world must be made right here in America.''

Dozens of auto companies, suppliers and battery makers have sought a total of $38 billion from the loan program, which was created last year to provide low-interest loans to car companies and suppliers retool their facilities to develop green vehicles and components such as advanced batteries.

Ford had been seeking about $5 billion in loans by 2011 and a total of $11 billion from the program to invest $14 billion in advanced technologies over the next seven years. The company said it will transform plants in Illinois, Kentucky, Michigan, Missouri, and Ohio.

Ford CEO Alan Mulally said in an interview with The Associated Press that the department approved the company's entire proposal through 2011 and it would help Ford meet the new fuel efficiency standards.

"This is a tremendous development," Mulally said.

He said the loans would help Ford further its strategy to build a wide range of fuel-efficient cars.

"We want to be in every market segment in the U.S.," Mulally said. "Every year forever we want to continue to improve fuel efficiency.''

Ford expects to begin repaying the loans in 2012, with an interest rate based on the current U.S. Treasury rate hovering between 3 and 4 percent, said Ford spokesman Mike Moran.

"If it were at market rates it would be in the double digits,'' he said. "That's a huge thing for us.''

Ford can draw from the loan for work done to retool its plants going back to late last year, Moran said. The plants must build cars that improve fuel efficiency by 25 percent.

General Motors Corp. and Chrysler Group LLC have received billions of dollars in federal loans to restructure their companies through government-led filings for bankruptcy protection, but Ford avoided seeking emergency aid by mortgaging all of its assets in 2006 to borrow about $25 billion.

Mulally said the loans Ford would receive from the Energy Department were part of a government-industry partnership and "had nothing to do with the emergency loans to keep General Motors and Chrysler in business.''

Ford has said it intends to bring several battery-electric vehicles to market. The automaker has discussed plans to produce a battery-electric vehicle van in 2010 for commercial use, a small battery-electric sedan developed with Magna International by 2011 and a plug-in hybrid vehicle by 2012.

General Motors has requested $10.3 billion in loans from the energy program, while Chrysler has asked for $6 billion in loans. Energy officials have said the loans could only go to "financially viable" companies, preventing GM and Chrysler to qualify for the first round of the loans.

Elizabeth Lowery, GM's vice president of environment, energy and safety policy, said GM still must pass the Energy Department's financial viability test before it can receive loan funding and the company hoped to get the money shortly after it emerges from Chapter 11 bankruptcy protection.

Chu said the Energy Department has started discussing details of the loans with Chrysler and has begun reviewing the "technical side" of the loan requirements with GM.

Nissan said the $1.6 billion loan would be used to modify its Smyrna, Tenn., plant to produce zero-emissions vehicles and lithium-ion battery packs to power them. The Japanese company has previously outlined plans to develop an all-electric car with 100 miles of pure battery range for release in late 2010.

"This loan is an investment in America. It will help us put high-quality, affordable zero-emissions vehicles on our roads,'' said Dominique Thormann, Nissan North America's senior vice president for administration and finance.

Tesla, based in San Carlos, Calif., will use $365 million for production engineering and the assembly of the Model S sedan, an all-electric vehicle that is expected to travel up to 300 miles per charge and go on sale in 2011. It will use $100 million for a powertrain manufacturing plant expected to employ 650 workers.

Tesla CEO Elon Musk said the automaker would use the loan ``precisely the way that Congress intended – as the capital needed to build sustainable transport.''

NEW YORK–Ford, General Motors and Chrysler have made strides in new vehicle quality over the last year, but they still lag behind their foreign competitors, according to a closely watched study released Monday by J.D. Power and Associates.

The initial quality of 2009 model year vehicles sold by the Detroit Three improved by an average of 10 per cent from last year, the marketing and consulting company said. Industrywide, scores improved an average of 8 per cent.

"The Detroit automakers are keeping their focus on designing and building high-quality vehicles, which is a precondition for long-term success," said David Sargent, vice-president of automotive research at J.D. Power, in a statement.

Lexus, Toyota Motor Corp.'s luxury line, was the top brand in J.D. Power's initial quality study, an annual survey of vehicle owners that measures mechanical and design problems in the first 90 days of ownership.

Porsche was the No. 2 brand, followed by GM's Cadillac, then Hyundai and Honda.

Toyota, which supplanted General Motors Corp. as the world's largest automaker last year, also swept 10 vehicle segment awards. Its assembly facility in Higashi-Fuji, Japan, that builds the Lexus SC 430 and the Toyota Corolla took the J.D. Power's top plant award.

The worst-performing brand was Mini, with owners reporting 165 problems per 100 vehicles. Though Chrysler's scores improved year over year, it had no brands above the industry average. It tied for one segment award, with its PT Cruiser Wagon sharing the top award in the compact activity vehicle segment with Honda's CR-V. Chrysler, however, is discontinuing the car.

Cadillac and Chevrolet were GM's only two brands whose 2009 models performed above average. The four brands GM is purging under Chapter 11 bankruptcy protection – Pontiac, Saturn, Hummer and Saab – were the company's worst rated. The Chevrolet TrailBlazer and GMC Yukon SUVs were rated best in their segments.

Jamie Hresko, GM's vice-president for global quality, said the automaker has worked hard to improve vehicle quality over the last five years. Chevrolet and Cadillac account for 70 per cent of GM's volume, he said, and top marks for those segments are an indication the effort is paying off.

"Is it where we need to be? No," Hresko said. "To have our core brands – Cadillac and Chevrolet – be on par with Toyota, we have reached a level of quality that will allow us to change perceptions.''

Ford Motor Co., the only major U.S. automaker that has not filed for bankruptcy protection or accepted government aid, also saw scores improve for three of its four brands: Ford, Mercury and Volvo. But its Lincoln brand's score fell, and only Ford and Mercury performed above the industry average.

The average industry score improved to 108 problems per 100 vehicles, down from 118 in 2008.

J.D. Power credited the improvement to several well-received new models that were launched in 2009. It said vehicles like Hyundai's Genesis, Kia's Borrego, Toyota's Venza and Volkswagen's CC performed better than their segment averages. Several redesigned 2009 models also scored well, J.D. Power said.

The scores come during a tumultuous time for the auto industry, with sales at their worst level in decades and taxpayers stuck funding the restructuring of GM and Chrysler Group LLC to the tune of billions of dollars. Although the two automakers have been pummeled by the economic crisis, many analysts have complained that a shortage of high-quality small car offerings has hobbled their performance in the down market.

GM has several new, small vehicles on the way that industry analysts say should help it better compete with established offerings from Toyota, Honda and other foreign competitors. It plans to start building the subcompact Chevrolet Cruze next year and says it will get about 40 miles per gallon (5.88 L/100 km). It also plans to sell the Chevrolet Spark minicar in the U.S. in 2011.

The road may be tougher for Chrysler. Cars like the sporty 500 made by its new owner, Italy's Fiat Group SpA, won't make it to the U.S. until late next year. The Auburn Hills, Mich., company plans to roll out new versions of its popular Jeep Grand Cherokee SUV and Chrysler 300 large sedan by the end of next year, along with a rechargeable electric vehicle, but these plans likely have been delayed by the bankruptcy process.

J.D. Power's rankings were based on questionnaires from 80,900 people who bought or leased new 2009 vehicles between February and May. The questionnaires ask 228 questions on issues from handling, braking and engine trouble, to seat comfort and stereo systems.

The rankings are closely watched by automakers and consumers, and are frequently used in advertising. However, some critics question whether they show any real statistical difference between automakers. Mini's ranking, for example, equates to 1.65 problems per vehicle. Top-performer Lexus had 84 problems per 100 vehicles, or 0.84 per vehicle. So on average, less than one problem per vehicle separates the best brand from the worst.

Barry Howard  Passes Away

Retired: May 1, 1997

1941 - 2009

HOWARD, Barry - Passed away peacefully, Thursday, June 18, 2009, at the age of 68. Predeceased by his wife Irene. Loving father of Danny and Stephen and his wife Lisa. Loving nono of Kristen, Brittany, Casey and Victoria. Dear brother of Bryan and his wife Suzanne, predeceased by brother Warren. Retired employee of 32 years of Ford Motor Company. Visitation to take place at the Andrews Community Funeral Centre (8190 Dixie Rd., Brampton, north of Steeles Ave., 905-456-8190), on Monday from 2-4 and 7-9 p.m. A Funeral Service will be held Tuesday, June 23, 2009 at 11:00 a.m. in the Funeral Home Chapel. Interment to follow at Glendale Memorial Gardens.

Ford CEO says regulation
often hurts innovation

Ford CEO Mulally says innovation is often
hampered by government regulation

June 18, 2009
By Kimberly S. Johnson, AP Auto Writer

DETROIT (AP) -- Ford Motor Co. CEO Alan Mulally said government regulation in many ways has hurt innovation among businesses and manufacturers in the United States.

We've become so stymied with regulation," said Mulally Wednesday during a panel discussion on innovation in manufacturing at The National Summit in Detroit. "We have to say enough is enough and get back to freeing people up."

Pulling on his experience as the head of Boeing and now Ford, Mulally said U.S. businesses need to be at the forefront of innovation again. Corporate scandals, government bailouts and bankruptcy filings have put a blemish on the business sector.

"We've got to make it cool to be in business again," he said. "We really have to re-polish the value of what business brings to mankind."

Nonetheless, Mulally said the recent fuel efficiency and emission standards set by the Obama administration brings a "tremendous benefit" to companies such as Ford when designing new vehicles because it unifies standards set by several states under a federal umbrella.

Mulally said that Ford, the only major U.S. automaker which has not sought government assistance, is working toward profitability and increased market share, particularly with the rollout of new cars such as the 2010 Fusion and Taurus.

"Ford is in a different place," Mulally told reporters following the panel discussion. "People want to be with a company they know is viable and is going to be here for the long-term."

Ford has been in contact with the president's auto task force regarding parts suppliers, many of them struggling as low sales volume has halted production at many Chrysler Group and General Motors Corp. plants.

"The supply base is the most important thing in our industry right now," Mulally said.

With a goal to reach profitability or break even in 2011, Ford has modified its contract with the United Auto Workers union, cut debt by nearly $10 billion and retooled some plants to expand their vehicle production abilities.

Mulally said those efforts would continue, adding that the company will seek to improve its balance sheet even further when it reaches profitability.

Mulally has Ford would likely seek further concessions from its UAW on top of the modified contract ratified in March. GM and Chrysler workers have also modified their contracts, but some of the modifications go deeper than Ford's.

"We continually talk to the UAW and the CAW (Canadian Auto Workers union)," he said, adding that a no strike clause until 2015 is "just one piece of the conversation we're having with them."

GM and Chrysler workers agreed to place a no-strike clause in their modified agreements.

Shares of Ford rose 10 cents to $5.77 in midday trading Wednesday.

Chris Sorensen
Business Reporter

Air Canada has bought itself some breathing room after hammering out tentative agreements on pension funding with its employees, but observers say it still may not be enough to keep the country's largest airline out of bankruptcy protection.

The airline reached tentative deals with its five biggest unions this week that include a moratorium on pension payments for 21 months, with four of the five unions also agreeing to wage freezes over the same period.

As well, the agreements call for Air Canada to raise $600 million in financing.

That includes $200 million to $300 million in the form of a federal government loan from Export Development Canada and up to $200 million from parent, ACE Aviation Holdings Inc., according a source familiar with the situation.

The loans are needed to keep the airline from being dragged into its second filling under the Companies' Creditors Arrangement Act in less than six years.

Karl Moore, a business professor at McGill University, said the goal appears to be finding a way to "skinny" through a few more months in the hope that the global economy recovers and the demand for air travel returns.

"Is there still a risk of CCAA? Absolutely," he said. "But the risk has gone down significantly over the past week."

Air Canada announced early yesterday that it reached agreements with the Air Canada Pilots Association and the Canadian Union of Public Employees, which represents 6,700 flight attendants. It also reached agreements with three other unions last week. The deals, if ratified, include a provision that would give employees a 15 per cent stake in the airline and a seat on its board.

All of the unions, with the exception of CUPE, have agreed to freeze wages and pension benefits for 21 months.

But David Newman, an analyst at National Bank Financial, warned investors yesterday the airline still must address other notable financial obligations this year – including $617 million in debt repayments – plus the challenge of funding its day-to-day operations when ticket sales continue to plummet due to the weak economy.

"The fundamentals continue to deteriorate, given the recession, the onset of the H1N1 influenza virus, a competitive marketplace and rising fuel costs," said Newman, who still rates Air Canada's shares "underperform," with a 12-month price target of $1.

Shares of Air Canada closed yesterday at $1.62, up 13 cents, on the Toronto Stock Exchange.

Newman said the current quarter looks particularly challenging with "continued economic weakness and pricings pressures." He said his calculations show that Air Canada is on track to burn through one half of its roughly $1 billion in available cash in the third and fourth quarters.

In other words, the bulk of the $600 million in financing that Air Canada is now looking to raise may be necessary just to keep it from running afoul of its covenants, including a recently renegotiated agreement with a credit card processor.

Calin Rovinescu, chief executive of Air Canada, in a statement said the next step is to obtain the necessary federal government approvals for the new pension funding arrangements, which call for fixed payments of $150 million, $175 million, and $225 million in 2011, 2012 and 2013 respectively, while raising money.

"Discussions are ongoing with several potential lenders who are assessing our financing needs."

What the agreements do not address is Air Canada's overall costs, estimated to be at least 30 per cent higher than its main domestic rival WestJet Airlines Ltd.

A source familiar with the negotiations said Air Canada has committed to finding "hundreds of millions" in annual cost savings expected to come mainly from streamlining its processes and procedures.

Ford: Execs, CAW
brass meet on contract

June 14, 2009

Ford Motor Co.'s top labor executives met with the leadership of the Canadian Auto Workers on Friday in an effort to "improve the competiveness" of its contract.

The poor economy, combined with recent contract modifications approved by union employees at Chrysler and General Motors in Canada, makes it necessary to change the existing contract, Ford spokeswoman Lauren More said.

"Just simply to maintain our manufacturing presence in Canada we have to take action now," More said. "We can't afford to wait until 2011 ... when the current contract ends."

Joe Hinrichs, Ford's manufacturing and labor chief, as well as top Ford Canada officials attended, More said.

Ford Canada has about 7,000 hourly employees at two assembly plants and three other plants in Ontario.

Chrysler: Plymouth Road complex shuts

Several hundred Chrysler employees and retirees gathered last week to mark the closing of the Plymouth Road Office Complex. Originally a Kelvinator Corp. refrigerator factory, the U.S. Defense Department converted it to make military helicopters in World War II. Since 1987 when Chrysler bought American Motors Corp., it has been the center of Jeep, pickup truck and rear-wheel drive vehicle engineering.

Now that the sale to Fiat is behind it, Chrysler and its suppliers are expected to announce this week when production will resume at its North American assembly, stamping and powertrain facilities.

GM: Corvettes now number 1,500,000

General Motors has produced its 1.5 millionth Chevrolet Corvette.

The sports car rolled off the line at the Bowling Green, Ky., assembly plant May 28. It was a white convertible 3LT with a red interior and a black top. The company said it was similar to the first, 500,000th and 1 millionth Corvettes built in 1953, 1977 and 1992.

Important Ford Location
Always Omitted

Toronto Star
Tony Van Alphen

June 12, 2009

Re: Important Ford Location Always Omitted

Dear Mr. Van Alphen:

As a Ford Retiree and an ex Ford Bramalea worker I get very annoyed when references are made to the Ford plant locations in Ontario and the Ford National Parts Depot in Brampton is continuously omitted.

In the last Star article of June 6th "Ford Anxious for a new deal within CAW" it stated that there was a parts plant in Windsor which is not true. We had our birth from Windsor some 65 years ago but have been a part of the present operation which started at the Danforth (Toronto) in the fifties and continues to flourish in Brampton today.

Just to give you some background history The Ford Parts Depot has been represented by CAW Local 584 (prior to 1986 the UAW) since its inception in May of 1944. CAW Local 584 has a rich history from the infamous 99-Day Ford strike in Windsor in 1945 to the present day auto crisis, we were there for all the fights and battles for our members and retirees. We have been in the Master Ford Agreement with Windsor since 1951 and that was before Ford Oakville and Ford St Thomas came aboard. I feel we need to be recognized.

Over the next few weeks Ford will be in the news as the CAW considers opening bargaining with Ford so please when making references to all the Ford locations don't forget us.

Thanks,

Chris Wilski
CAW Local 584
Ford Bramalea
Retirees Chair

************************

Tony's Response:

Ford Motor Co. of Canada will seek labour cost concessions from its main union that would put the automaker on the same competitive level as rival General Motors of Canada and Chrysler Canada, where workers recently accepted significant cuts in compensation.

Senior officials for Ford and the Canadian Auto Workers plan to meet at an airport hotel today for a regular quarterly business update where the company will press for new savings immediately so it can remain competitive.

"We have to take action to be more competitive and maintain our manufacturing presence in Canada," Ford spokeswoman Lauren More said.

The meeting will include Joe Hinrichs, vice-president of global manufacturing and labour affairs for parent Ford Motor Co., and Ken Lewenza, the CAW national president. About 20,000 GM and Chrysler workers overwhelmingly have ratified new contracts that will freeze wages and pensions, cut vacation time and reduce benefits until 2012. They earn an average of about $35 an hour.

The two reeling automakers needed the concessions as a condition to receive almost $15 billion in loans from the federal and Ontario governments amid the industry's worst sales slump in decades. Ford had asked for a standby line of credit of up to $2 billion in December but it later removed the request.

Concessions took effect earlier this month for GM workers and will hit Chrysler staff when production resumes probably later this month.

Chrysler's North American plants stopped production at the end of April when the company gained court protection from creditors in the United States. Chrysler emerged from court this week with a survival plan and a new partner, Fiat SpA of Italy.

Lewenza said the union will not necessarily agree to the same concession terms at Ford as it accepted at the other two automakers.

"We're not going to just open contracts because the boss says so," he added. "We will do our due diligence so Ford won't be at a competitive disadvantage that would affect future investment."

Ford employs about 7,000 including 6,200 union workers at plants in Oakville, St. Thomas and Windsor.

Letter sent to CAW
President
Ken Lewenza

I am not a member of the CAW.  My husband has been employed by GM for almost 26 years. Before that, he worked in General Motors dealerships from the time he was a teenager. His family have all been employed by GM in roles that have ranged from Upper Managment (Vice Presidents) to front line workers and his father was a GM dealer as was his grandfather.He works at the GM Parts Warehouse and Distribution Center in Woodstock. GM has been a part of his entire life. And it has been intrinsic to our family well being .

As you noted in your recent message in the bargaining report, the pressure and the disrespect of people who have made the autoworkers the scapegoats of the recession has been very hard on all of us. Not just the workers but their families as well.  The let down from our government representatives who only  have to work six years for their "gold plated" pensions and who thought people who have worked a life time should give up their pensions has been unbelievable. Our local MP who has three automotive corporations in our riding ( GM, CAMI and Toyota) has not uttered one word of suport or taken the gauntlet of helping the workers here dispite the fact that as we all know, we are high paying taxpayers in the community.The media has positioned the blame for the economy on the workers and they have facilitated much negativity and disrespect in how they have presented information, not facts or true journalism.  As someone who is not, has not ever been a union member, I have tried to support my husband and all of your work by writing letters to heads of government, Ministers, newspapers etc. We all needed to be a part of the solutions as you so aptly stated in your report.

I work as a Trainer / Facilitator and Employment Counsellor in St. Thomas where the community is ravaged by loss of jobs by companies like Sterling, Magna (Formet and Presstran), Lear and many other plants all related to the automotive industry. I witness every day people who suffer from the impact of these job losses - the loss of their homes, marital break down, increasing depression and family conflict. And most of all, the loss of hope. I know first hand what would lie in store for the GM workers and for the communities that relay on these strong industries. And as a result, I have tried to join your efforts in the ways that are available to me as a citizen, in order to try to be proactive and solution oriented. And I have been very pleased by the tone and the approach that you have all taken. Rather than take a stand from a negative and confrontative place, you stood strong on issues but communicated a willingness to be a part of a problem solving approach to the grave concerns in front of you.

I just wanted to say Thank You.  You and your team have all been pushed to the wall and have not only had to sacrifice time with your families and your personal lives for these many past months but also have worked tremendous hours to fight for our lives and our futures. Your care and dedication to protect the retirees and the pensions has been admirable and as someone who has worked in non profit for a lifetime without benefits or a pension, that pension represents both my husband and my lives as retirees in the not so distant future. We have all understood that given the times and economic challenges, that concessions had to be made. The average person out there truly could not imagine that the governement and the financial stewards could allow GM to go down. The ripple effect is beyond imagining. My son in law works in a secondary industry that supports GM and Chrysler and so his job is now more secure as well thanks to your efforts.

For the first time in months, I hope we can now sleep and feel that we can more forward in our lives in a more normal way. My husband has had a lifetime committment to quality and doing his job well and safely. We joke that he married me because my initials then became GM! LOL!  But more seriously, he too is grateful and our entire family has recognized that your efforts to restore respect and value to the autoworker is critical. We appreciate you for caring about all of us.

Thank you for fighting the good fight. And for seeing through the issues and politics as to what was really important and critical. Your efforts not only have helped workers and thier families but also, our communities and essentially our country.  I am proud of what you have done. Mr. Lewenza, I am not sure your predecessor could have accomplished what you have done. You have created a legacy to be proud of in the most difficult of times. Bless you and bless all of the people in the union who have done so much for so many.

With respect and appreciation

Gail Malcolm
1 Potter's Way
Woodstock, ON
N4S 8Z5

The Grand Caravans, 300s and Chargers could be rolling off the assembly lines at Chrysler Canada plants within three weeks as the company's parent pulls away from bankruptcy protection with a new partner following a two-month shutdown.

Although Chrysler would not confirm dates, the Canadian Auto Workers union said yesterday that company officials have suggested privately they want to reopen the minivan plant in Windsor, a car operation in Brampton and an engine casting factory in Etobicoke by June 29.

"There's no official notification yet, but we are optimistic the plants will be up and running by the end of the month," said Jerry Dias, a senior CAW official. "The company hopes to start by then."

About 8,700 workers at Chrysler Canada Inc.'s operations have been off the job since the end of April, when the parent company gained court protection from creditors in the United States. Thousands of other workers at scores of parts makers that supply the assembly plants have also been idled.

Chrysler had wanted to build autos during a 30- to 60-day bankruptcy period but uncertainty over the process and payments prompted some edgy suppliers to stop deliveries. It disrupted operations here and in the U.S., where about 27,000 more workers are on layoff.

Chrysler spokespersons said yesterday they did not know when plants in Canada or the U.S. would reopen.

Dias, assistant to CAW president Ken Lewenza, said Chrysler wants to start building vehicles as soon as possible to improve consumer confidence.

Chrysler sales crashed in Canada and the U.S. last month partly because of uncertainty over the company's future, according to industry watchers.

Dias said Chrysler has already recalled some staff to ease the transition to work practices set by Italian automaker Fiat SpA, Chrysler's new owner.

"We've already incorporated a lot of the lean manufacturing techniques so it shouldn't be too difficult," he added.

Parent company Chrysler LLC emerged from court protection yesterday after Fiat took ownership of most of its assets, including the Canadian operations.

Chrysler announced Fiat chief executive officer Sergio Marchionne, who grew up in Toronto, would also head the company.

Marchionne spoke to senior staff at Chrysler's headquarters in Auburn Hills, Mich., about the company's push to implement Fiat's fuel-efficient technologies in smaller cars in North America and develop a new corporate culture.

"He told us bureaucracy doesn't build cars," said Lewenza who heard Marchionne's speech. "He really emphasized the need for fewer managers and the need for everyone to help change the culture."

The company announced several management changes – including the appointment of president Jim Press as deputy chief executive – and individual presidents for the Chrysler, Dodge and Jeep brands. Reid Bigland, Chrysler Canada's CEO, will stay in his current post.

Chrysler LLC CEO Bob Nardelli informed staff of his departure while Stephen Landry, executive vice-president of North American sales and a former CEO of Chrysler Canada, confirmed his retirement.

DETROIT–Chrysler was reborn Wednesday under a new Italian parent, but it can't shake the shadows of its past: It's not selling enough cars, its fleet is tilted to trucks and SUVs, and help is more than a year away.

A 42-day stay in bankruptcy court cleansed the company of much of its debt and labor costs, but many analysts say Chrysler's immediate future is bleak. It lost $8 billion (U.S.) in 2008, and sales are down by almost half for the first five months of this year.

Cars designed by its new owner, Italy's Fiat Group SpA, won't make it to the U.S. until late 2010. And even then there are no guarantees American drivers will want the tiny cars Fiat specializes in.

In the meantime, Chrysler is left with few new vehicles headed to its drastically reduced network of dealers. Its aging model lineup is still heavy with bigger vehicles. And its offerings in the growing small and midsize markets haven't caught on.

"The showroom is not going to look terribly different over the next 18 months," said Aaron Bragman, an analyst for the consulting firm IHS Global Insight. "They're going to try and maintain market share in a down market with products, many of which haven't been redesigned in several years.''

Bragman said Chrysler faces tremendous competition, especially from new cars in the works at General Motors Corp. and Ford Motor Co.

Even if the new Chrysler Group LLC can survive, the super-small Fiat cars that were popular in Europe, like the 500 and Grand Punto, could be out of step with Americans who like bigger cars and are used to lower gas prices.

During Fiat's last run at the U.S. market, in the 1970s and '80s, reliability problems led people to suggest the name stood for ``fix it again, Tony.''

"Fiat is really not a known commodity in the U.S. market,'' said David Koehler, a clinical marketing professor at the University of Illinois at Chicago. "It doesn't resonate with the target market.''

The new Chrysler began operations Wednesday morning after the U.S. Supreme Court refused to hear an appeal of lower court decisions that allowed the transfer of most of the old Chrysler's assets to Fiat.

Fiat CEO Sergio Marchionne was named chief executive of the new company, and Chrysler CEO Bob Nardelli said farewell to employees and ended his tumultuous 20-month reign.

Marchionne quickly shook up the management, replacing Chrysler's chiefs of marketing, finance and product development and cutting layers to make the company more focused on individual brands, such as Jeep, Chrysler and Dodge.

Jim Press, who was Toyota Motor Corp.'s top U.S. executive until he joined Chrysler in 2007, was named deputy CEO and will probably run the company when Marchionne is in Italy.

In an e-mail to Chrysler's 54,000 workers, Marchionne acknowledged the company's problems and said he was determined to repair them. Five years ago, he wrote, he stepped into a similar situation at Fiat, perceived at the time as a failing bureaucracy that made poor cars.

"Through hard work and tough choices, we have remade Fiat into a profitable company that produces some of the most popular, reliable and environmentally friendly cars in the world," he wrote. "We can and will accomplish the same results here.''

Marchionne's more immediate problem is weak offerings in the market for small and midsize cars. Its smallest vehicles, the Dodge Caliber and Jeep Compass and Patriot, sell far less than the Toyota Corolla, the nation's top-selling small car.

Work is already under way to convert Chrysler factories to produce small Italian-designed cars. Neither Chrysler nor Fiat would say which models would come first or how many would be imported to the U.S.

"The need is now, but unfortunately, it'll be at least a two- to three-year process," said Michael Robinet, vice president of CSM Worldwide, a Detroit-area auto industry consulting firm.

Chrysler plans to roll out new versions of its popular Jeep Grand Cherokee SUV and Chrysler 300 large sedan by the end of next year, along with a rechargeable electric vehicle. But Bragman said those were probably delayed in the bankruptcy process, making the next 18 months look iffy.

The good news for Chrysler is that it has cut its expenses enough that it can break even with lower sales, said Gary Dilts, senior vice president of global automotive operations for J.D. Power and Associates.

He said much of the drop in sales this year for Chrysler came from cuts in its sales to rental car companies. Chrysler actually made small gains in market share in sales to individuals in the first five months of 2009.

The struggling company has offered the heftiest rebates and other incentives to buyers recently. But it remains to be seen whether Chrysler can produce amazing cars, not just amazing deals.

The U.S. government has committed roughly $8 billion more to help Chrysler as it leaves Chapter 11 bankruptcy protection, and the Obama administration acknowledges Chrysler will probably lose money until Fiat rides to the rescue. But the government believes the company will be viable in the long term because of Fiat's management expertise.

Aside from the electric vehicle, Chrysler's upcoming new models are not particularly fuel-efficient, and they could suffer if gas prices keep climbing. Those same gas prices could help Chrysler benefit from Fiat's small-car technology.

Marchionne has said Fiat could start selling a successful, North America-made remake of the 500 minicar as soon as next year. Fiat also plans to relaunch the sporty Alfa Romeo brand in North America.

The new Alfa 149 midsize five-door hatchback, to be unveiled next year, would be built in North America as a successor to the larger Alfa 159, Marchionne has said.

But Toyota and Honda remain the champs of midsize cars, and Fiat still has to prove itself to American drivers.

"A lot of us have residual memories of Fiat that are less than stellar," Dilts said. "But I think the product looks good. They've got some great small engine capabilities. With a little bit of pressure on gasoline, I think they're going to give Fiat a look.''

NEW YORK–A bankruptcy judge yesterday approved Chrysler's plan to terminate 789 of its dealer franchises, and the Supreme Court cleared the way for its partnership with Italy's Fiat SpA, rejecting a plea by a trio of Indiana pension plans and other secured creditors to block the sale.

U.S. Judge Arthur Gonzalez's order says the franchises, represent about 25 per cent of the dealer base, can no longer act as authorized Chrysler, Dodge and Jeep dealers, effective immediately. A written ruling explaining the decision was to be filed later.

The sale of Chrysler's assets to Fiat Group SpA was expected to close more than a week ago, but Supreme Court Justice Ruth Bader Ginsburg decided Monday to delay the sale to study an appeal by three Indiana pension and construction funds that threatened to derail Chrysler's rapid restructuring.

In a brief filed with the Supreme Court yesterday afternoon, Chrysler and Fiat warned the deal will terminate if it does not close by June 15. Though a new agreement could be negotiated, there is no guarantee one would be reached or that Chrysler would be able to be jump-start its operations after the deadline, they said.

Late yesterday, the Supreme Court cleared the way for Chrysler's sale to Fiat. It issued a brief, unsigned opinion explaining its action. To obtain a delay, or stay, someone must show that at least four of the nine justices find the issue raised serious enough to warrant hearing a full appeal and that a majority of the court would conclude the lower court decision was wrong.

"The applicants have not carried that burden," the court wrote.

Earlier in the day, more than 25 attorneys representing hundreds of dealers from across the country argued in court that little would be gained by terminating the franchises, while Chrysler maintained the move is a necessary part of its plan to cut costs and quickly emerge from Chapter 11 protection from creditors.

Many dealers were trying to sell the last cars on their lots and preparing to shut their doors for good at the end of the day, while others planned to sell used cars or other brands after severing ties with Chrysler.

Chrysler attorneys said the automaker would extend until Monday its program to help affected dealers send unsold vehicles to others.

"Given Chrysler's precipitous state, every day past June 15 increases the risk that Chrysler's business will not be able to restart successfully," the company said.

The Obama administration warned in a separate filing that each day of delay consumes more of the financing provided by the government.

If the closing is delayed by more than 10 days, the government will need to "either to increase its overall funding to the detriment of taxpayers, or abandon its role in the transaction,'' the administration said.

Production at Chrysler's manufacturing plants remains halted pending the closing of the sale. Chrysler says it is losing $100 million every day its plants are closed. Under the deal, leading to Chrysler's April 30 Chapter 11 filing, Fiat will get up to 35 per cent of the automaker, in exchange for sharing the technology Chrysler needs to create smaller, fuel-efficient vehicles. The United Auto Workers gets a 55 per cent stake to fund its retiree health-care obligations, while the U.S. and Canadian governments will receive a combined 10 per cent stake. The secured debtholders would get $2 billion (U.S.) in cash, or about 29 cents on the dollar, for their combined $6.9 billion in debt.

General Motors of Canada dealers losing their franchises under the automaker's survival plan will receive an average $900,000 each under terms of a confidential offer, but they say it won't cover steep closing costs in many cases.

A copy of GM's "wind down agreement" obtained by the Toronto Star reveals cash compensation for Canadian dealers based on 2008 sales of new vehicles plus an allowance of up to $35,000 for the removal of store signs. Small dealers will get $1,600 for each sale; middle-level owners will receive $1,800 per car and big stores $2,000 a vehicle.

The automaker would not reveal last year's individual dealer sales and the range of compensation for small and big retailers, but industry statistics show GM stores sold an average of 497 vehicles last year.

That would work out to a payment of almost $900,000 plus the signage allowance to closing dealers with average sales.

At the same time, one Toronto region dealership manager, who spoke on condition of anonymity, noted yesterday many mid-level retailers generated sales much lower than that figure and would qualify for less than the average payout.

The agreement contains a ``confidentiality" clause prohibiting dealers from discussing the contents publicly without GM's consent.

Another dealer said GM's payments could range anywhere from less than $200,000 to more than $1.5 million, but it could still leave them with losses after paying shutdown costs. Staff severance costs would alone push some owners into bankruptcy, he said.

Other dealers said colleagues that spent heavily to upgrade stores in recent years because GM insisted on "imaging" now won't be able to recover their investments and are bracing for financial ruin.

GM would not disclose the overall bill for the downsizing but if average sales are an indication, the cost could easily surpass $200 million.

GM, whose sales have plunged in the past year, informed about 240 dealers last month it would not renew their franchise agreements when they expire in October next year because the automaker needs to become more viable quickly. The company also plans to trim its network by another 50 stores through attrition before the end of 2010.

The federal and Ontario governments had pressed GM to announce cuts in its dealer network before a May 31 deadline to qualify for $10.5 billion in loans.

In letters accompanying the offers, GM said it had identified necessary "attributes" for future dealers and reviewed "sales effectiveness," customer-satisfaction scores, capitalization, profitability, location, facilities, market factors and an analysis of the operation.

"The dealer network consolidation is far more complex than most people appreciate," GM Canada spokesperson Stew Low said yesterday.

"It takes time to do the analysis to ensure we did the best job possible given the unique markets across the country."

In exchange for the payments, GM placed several conditions that include releasing the company from liabilty and agreeing not sue the automaker.

Under the agreement, dealers would close by the end of this year rather than next fall and receive four payments, including a final one of 55 per cent.

Government sources say more than 80 per cent of dealers who received the offer signed it after consulting with counsel. Some will remain open as independent used auto dealers.

Dealers complained about the compensation in view of closing costs; the pressure to accept the offer within six days; the number of closings and decisions on some stores.

A senior executive at a Toronto-area dealer that received a termination notice said GM's criteria for keeping some dealers open and closing others doesn't seem to make any business sense.

"How GM can choose to terminate some of their most successful retailers – when every sale counts – over some of their lesser performing dealers is beyond me."

Government loans will save GM and thousands of assembly and parts jobs but the store closings will kill more than 12,000 jobs at dealerships across the country, he said.

HALIFAX – Voters in Nova Scotia made history yesterday, electing the first NDP premier in Atlantic Canada as they delivered a decisive majority win to a party offering a modest platform that promises to balance the books.

NDP Leader Darrell Dexter, a lawyer and former journalist, persuaded voters to ignore dire warnings from the ruling Conservatives, who demonized the Opposition party as a shifty band of irresponsible, free-spending radicals.

The win ends 10 years of Progressive Conservative rule and, most likely, the short political career of Premier Rodney MacDonald, a former professional fiddler and gym teacher whose awkward style in public seemed to leave voters cold after three gaffe-prone years in power.

The NDP won 31 seats in the Legislature, while the Progressive Conservative caucus was reduced to 10 seats.

The Liberals will form the official Opposition with 11 seats.

At a Halifax-area hotel, Dexter thanked throngs of supporters for the party's slow but definitive ascent to governance.

"Who would believe that NDP ridings would cover Nova Scotia?" Dexter said.

"Friends, Nova Scotians decided that at this historic moment of challenge, it was time for historic change.

"I'm humbled by the trust so many Nova Scotians have placed in the NDP," he said.

In his Cape Breton riding, MacDonald said he would meet with party officials before the end of the week.

When asked if he would be stepping down, he replied, "It's going to be time to turn the next chapter for the people of the province."

The victory was the result of a long, steady climb. The NDP had been relegated to third-party status in every election it contested until 1998, when a young, charismatic leader, Robert Chisholm, led the NDP to the brink of power by winning 19 seats – a tie with the ruling Liberals.

The party under Chisholm would lose traction in the election the following year when it was revealed in the final days of the campaign he had been convicted of drinking and driving as a young man. As a result, country doctor John Hamm would lead the third-party Tories to a surprising majority win.

But the NDP has remained in contention ever since, as Dexter offered his solutions to several hot-button problems such as rising gas prices, health-care wait times and emergency room closings.

Under Dexter, the party won 15 seats in 2003 and 20 seats in 2006 as Liberal fortunes waned.

A firmly moderate, centrist platform helped.

Since Day 1 of the latest election race, the NDP waged an overtly careful and positive campaign aimed at persuading Nova Scotians that the New Democrats could be trusted to deliver on their promises without blowing the bank.

Despite a global recession and mounting job losses in Nova Scotia, Dexter has pledged to balance the province's budget in 2010-11.

The NDP had been ahead in the opinion polls for more than two years and was pulling away from its rivals as the 35-day campaign drew to a close.

Liberal Stephen McNeil, contesting his first election as party leader, devoted much of his time to courting the small business sector, which supports about half of the province's entire workforce.

At dissolution, the Tories held 21 seats in the 52-seat Legislature, the NDP had 20 and the Liberals nine. There was one vacancy and one Independent.

Investors ask U.S. court to halt Chrysler-Fiat deal

June 8, 2009

Reuters

WASHINGTON–Indiana pension funds asked the U.S. Supreme Court Sunday to immediately delay the sale of bankrupt automaker Chrysler LLC to a group led by Italian carmaker Fiat SpA while they challenge the deal.

The request, which moves the legal battle to the highest court in the United States, was filed after a U.S. appeals court in New York approved Chrysler's sale to a group led by Fiat, a union-aligned trust and the U.S. and Canadian governments.

The Chrysler ruling could set a precedent for the case of General Motors Corp, which is using a similar quick sale strategy in its bankruptcy in New York.

The appeals court late Friday stayed the closing of the sale until Monday afternoon, giving the pension funds time over the weekend to ask the Supreme Court to block the sale while they appeal.

The pension funds, which hold about $42 million (U.S.) of Chrysler's $6.9 billion in secured loans, have argued the sale unlawfully rewarded unsecured creditors such as the union ahead of secured lenders and that Chrysler was pursuing an illegal reorganization plan through a sham sale.

"The need for the court to review the profound issues presented by Chrysler's novel bankruptcy sale far outweighs the cost of delaying" a sale, lawyers for the pension funds and the Indiana attorney general said in seeking an immediate stay.

The three state pension and construction funds also argued the U.S. government, which kept Chrysler afloat with emergency loans before the automaker's bankruptcy and financed its Chapter 11 filing, overstepped its authority by using bailout funds Congress intended for banks.

"The public is watching and needs to see that, particularly, when the system is under stress, the rule of law will be honoured and an independent judiciary will properly scrutinize the actions of the massively powerful executive branch," the lawyers said.

"The issues presented by this case are of immediate and enduring national significance," they said.

Without a stay from the Supreme Court, the sale will close on Monday, the lawyers said.

A federal bankruptcy judge in New York and the three-judge panel of the appeals court rejected the funds' arguments in approving the sale.

Attorneys for Chrysler, the U.S. government and Fiat all have argued the sale should be allowed to go forward. Fiat can walk away from the deal if it does not close by June 15.

The request to stay the deal was filed with Supreme Court Justice Ruth Bader Ginsburg, who has responsibility for such emergency matters from the New York-based appeals court.

Ginsburg could act on her own or could refer the matter to the full court. A stay from the full court would require the votes of five of the nine Supreme Court members.

Advice on when to start collecting from the Canada Pension Plan to get the most money before you die is getting beyond mere mortals.

Even Malcolm Hamilton, the brilliant (and helpful) Mercer actuary, had to confer with chief CPP actuary Jean-Claude Ménard. Canada's finance ministers are proposing to improve "fairness" by phasing in changes between 2011 and 2016, as my colleague Ellen Roseman outlined Wednesday.

These changes would benefit workers to different degrees, depending on their age, history of earnings and ability or desire to work past age 60. They would:

Shrink pensions started before age 65, eventually by an extra 1.2 per cent a year, while boosting pensions started after 65, eventually by an extra 2.4 per cent per full year worked.

Allow people to collect pensions before age 65, while continuing to work without the two-month break in employment or reduction in earnings that is now required to collect and work.

Anyone who starts a CPP pension in 2012 or later would have to contribute to the CPP up to age 65 if they continued or returned to work, and would have the option to continue contributing beyond 65 when that would have a bigger impact on monthly benefits.

Allow people to drop from the calculation of their average earnings since age 18, nearly an extra year of low or zero earnings, up to a maximum of eight (not counting years for pregnancy and child rearing). This will help low-income earners come closer to the maximum CPP pension, which is $10,905 for 2009.

Hamilton says it now costs CPP more to pay a lifetime pension to someone who starts collecting before age 65 than after. That will change, but not immediately.

So someone like me who turns 60 this year could have a range of choices before and after 2012.

What Hamilton gathered after talking to Ménard is that by 2016, the cost to CPP of pensions started before age 65 will fall somewhat more than will be needed to make the system neutral.

The nature of the changes may shift the advantage to retiring later for those who need more years to qualify for a maximum benefit, but not for those who need extra income right away, or those who can afford to quit working early and, by quitting, avoid counting additional years of zero earnings in the calculation of their benefit.

But Hamilton wonders who could advise someone who intends to continue working whether or not to delay taking a pension once it's possible to both collect a pension and contribute to earn a larger benefit.

"In most instances it will be better to continue working and draw the benefit later, but not in all instances," he suspects.

Before 2012, when you would not have to keep contributing to the CPP while collecting a pension, it may be better in more cases (but not all) to apply early.

To calculate what's best, an adviser would "need to have an intimate knowledge what people are going to earn going forward, when they are going to retire and their entire earnings history under the CPP; about all the dropout provisions and phase-in reductions," says Hamilton.

What will be required, he says, is an upgraded online calculator of the sort Service Canada already provides.

Personally, I'd rather anticipate a long life, keep working and wait for a bigger, inflation-protected CPP pension than take a chance of collecting early and investing.

NEW YORK–General Motors Corp. has a tentative deal to sell its Saturn brand to former race car driver and dealership group owner Roger Penske, both companies said yesterday.

Penske has signed a memorandum of understanding that would give his dealership chain, Penske Automotive Group, Saturn's 350 U.S. dealerships, the firms said. Penske said he expects to offer all the dealers new franchise agreements to sell Saturns exclusively and to retain all 13,000 Saturn employees for the immediate term.

In embarking on a due diligence process, Penske told the Star's Tony van Alphen one of the first priorities is to review the opportunity to continue the Saturn dealer network in Canada. There are 51 Saturn dealers here.

"I would expect that the model that we're putting together, the distribution model, will be profitable day one," Penske told Associated Press. "We'll have less costs. We'll not be in the manufacturing side.''

Penske would take over the separate Saturn parts factory in Spring Hill, Tenn., to continue making Saturn components.

Neither firm would say what Penske is paying for the brand. Penske expects the deal to close in the third quarter.

Initially, GM would make on contract the Saturn Aura sedan and the Vue and Outlook SUVs. He is in talks with global car makers to build future Saturns.

Unveiled in November 1983, Saturn was described as a revolutionary new way to build and sell small cars in America. But the brand did not launch officially until 1990. Its iconic tagline was "a different kind of car company.''

GM hoped Saturn would attract younger buyers with smaller, hipper cars to better compete with Japan's imports. A new plant in Spring Hill devoted to Saturn production had more flexible work rules. Now, production is scattered. The Aura's made at Kansas City, the Outlook in Lansing, Mich., and the Vue in Ramos Arizpe, Mexico.

Despite a cultlike following that drew thousands to annual reunions in Spring Hill, the brand never made money for GM.

"Saturn was kind of an unpolished gem at GM," said Brad Coulter, director at turnaround firm O'Keefe and Associates.

Associated Press

MPs - all of 'em - mum on GM

Chantal Hébert

June 5, 2009

MONTREAL—The $10.6 billion General Motors bailout announced by Prime Minister Stephen Harper on Monday is the largest federal rescue mission of a private-sector operation in the recent history of Canada.

Accounting for one fifth of the expected deficit for this fiscal year, the assistance package to the Ontario car industry is also the biggest single red ink blot on the federal government's books.

By the Prime Minister's own admission, it is a loan in name only, with little expectation that the money will eventually be reimbursed. Meanwhile, the federal capacity to stimulate other sectors of the economy has been reduced.

At the same time, the package is so big that it has instantly raised the bar against which inter-regional fairness will be measured in the future in Canada.

And yet, the expensive operation was set in motion with little more than a swoop of the governmental pen and an Ottawa-Queen's Park leap of faith.

An orchestra looking for federal assistance to finance a tour would have to document its application with more paperwork than what has so far been brought to the fore to back up the pertinence of bailing GM out.

Unsurprisingly, the initiative inspires deep reservations in a majority of Canadians. Even those who support the bailout have many questions about its underlying assumptions and potential outcomes.

It seems they should not count on the parties whose mandate it is to hold the federal government's feet to the fire to get those answers.

Since the bailout was announced, a cone of silence has fallen over it in the House of Commons.

On Monday, Frank Valeriote, the Liberal junior industry critic, asked whether the government would guarantee a return on the billions Canadians were putting into GM.

The answer he received was really a non-answer, delivered not by a minister but by a parliamentary secretary. It apparently was enough to satisfy the Liberals.

On Tuesday, with the Prime Minister and the leader of the Opposition in the House for the first time this week, Michael Ignatieff focused on the isotope shortage triggered by the shutting-down of the Chalk River nuclear reactor.

By Wednesday, he and his party were hot on the trail of ministerial blood and the two subsequent question periods were spent asking for the resignation of Natural Resources Lisa Raitt for leaving some documents behind at an Ottawa TV station.

Given the NDP's long-standing ties with the union movement, it would have been a surprise if Jack Layton had picked up the slack and he did not.

With an eye to the next election, neither of the two national opposition parties is eager to get on the wrong side of an Ontario-driven bailout. As for the Bloc Québécois, it mostly sees the GM bailout as fresh evidence that the federal balance is tilted against Quebec.

And thus, it seems that no party will step forward to kick the tires of the bailout on behalf of the taxpayers. If it is possible to have a non-position on an issue of this magnitude, that term best describes the Liberals' body language.

Ignatieff is hardly the first official opposition leader to be selective in the due diligence he exercises on the government. But at a time when the Liberals are out to demonstrate that the Conservatives lack the rigour expected of a competent government, their own unwillingness to exhibit the vigilance expected of a competent official opposition makes them look like they are throwing stones from a glass house.

Employment in Canada's auto assembly and parts sectors, which are concentrated in southern Ontario, have fallen to their lowest levels since the early 1970s after a huge plunge in the past year.

Net auto manufacturing employment dropped a stunning 25,122 jobs, or 20 per cent, to 99,684 jobs in the first quarter, according to figures from Statistics Canada.

The employment level at the end of March marks the lowest point for jobs in the sector since 1973 when the Middle East oil embargo hammered auto production in North America.

The job losses are expected to continue piling up because of the recent closing of the General Motors of Canada truck plant in Oshawa and the effect on scores of suppliers in the region.

Chrysler Canada will also eliminate a shift at its assembly plant in Windsor later this summer, which will also cut production for numerous suppliers.

Industry watcher Dennis DesRosiers added the current restructuring of GM Corp. and Chrysler LLC will lead to smaller companies that will adversely affect Canadian parts makers who supply their operations on both sides of the border.

"More bad news is to come over the coming months," said DesRosiers, who described the latest job levels as "scary."

Reeling GM and Chrysler have received about $14.4 billion in loans from the federal and Ontario governments to stay alive and rebuild their companies, but the terms do not include job guarantees.

In announcing the aid earlier this week, Prime Minister Stephen Harper and Ontario Premier Dalton McGuinty said that without it, the remainder of GM and Chrysler operations would disappear to the United States, where the American government has provided the two companies more than $60 billion (U.S.) since January.

"The governments felt they had no choice but to try to save some of these jobs," DesRosiers said in a note to clients. "It is hard to disagree with this logic from a political perspective. There are serious issues with the deals but the political logic was crystal clear."

The industry is currently weathering the worst downturn in sales in more than a quarter-century. The economic shock has also affected the plans of rival automakers such as Toyota Canada Inc., which cancelled a shift at its new plant in Woodstock last year before the operation even opened.

Employment in the Canadian assembly and parts sector peaked at 157,130 in 2001 but has declined steadily since then, primarily because of lower demand for vehicles from the Detroit-based automakers GM, Chrysler and Ford Motor Co. Ltd.

Honda Canada Inc. and Toyota Canada Inc. have increased their job levels and the fortunes of some parts makers here, but they have not overcome the losses by the Detroit companies.

The StatsCan figures show employment at assembly plants has slid 13.4 per cent in the past year to fewer than 37,500 workers, the lowest level since the temporary oil embargo. Parts sector jobs have dwindled by a startling 23.7 per cent in only a year to about 62,200, the smallest number since 1982.

Top auto figures may
take a pension hit

Wednesday, June 3, 2009

David Shepardson / Detroit News Washington Bureau

Washington -- The bankruptcy filings of General Motors Corp. and Chrysler LLC will likely cost former and current top executives including Rick Wagoner, Robert Lutz and Lee Iacocca big money.

Wagoner, fired by President Barack Obama more than two months ago as GM chairman and CEO, remains on the payroll.

But it's not his $1 salary for 2009 that's in dispute.

It's Wagoner's $22 million pension agreement, which now will be decided after the company emerges from bankruptcy. GM's board of directors and the auto task force have been reviewing the matter, but the board didn't take action before GM filed for bankruptcy Monday. The financial issue is the only snag that is keeping Wagoner on the payroll.

The deposed GM boss, like a number of former senior execs, is likely to lose some of his pension.

Chrysler cuts under way

Chrysler is leaving some of its former executive pensions behind, in bankruptcy. But GM didn't follow suit. GM spokeswoman Julie Gibson said Tuesday the pensions for former execs -- known as supplemental employee retirement plans -- will be brought to the new company emerging from bankruptcy.

GM said in a statement that "the amount of non-qualified pension for some executive retirees may be affected."

Gibson said benefits won't be reduced until GM emerges from bankruptcy.
Last Thursday, Chrysler CEO Robert Nardelli confirmed that former Chrysler Corp. CEO Lee Iacocca was losing a company car and his supplemental executive pension. Just how much wasn't made public, because Chrysler is privately held.

Lutz, a legendary auto figure who is retiring as GM vice chairman this year, is a former president and CEO of Chrysler; he also worked at Ford Motor Co. and BMW AG. Reached by e-mail, Lutz confirmed that his Chrysler pension had been reduced, but he declined to elaborate.

The firm sent letters to several former executives telling them to turn in their company vehicles.

In a May 14 letter, Chrysler told former executives and directors with company-provided vehicles that they'd have to turn them in, or buy them at fair market value by May 31.

"In light of the many contributions you have made to Chrysler over the years, we regret the need to take this difficult action," Chrysler wrote.

Other former top execs at Chrysler also have lost supplemental pensions.

Wagoner, 56, a 32-year veteran of GM, had a pension with total accrued benefits of $22.1 million as of Dec. 31. The pension is to be paid in five annual pension payments of $4,523,400, with the first monthly instalment due upon his retirement. Wagoner could have collected about $900,000, if he had retired immediately.

Wagoner also is owed a $68,900 annual pension that is likely to be honoured by GM and the bankruptcy court.

The $22 million owed Wagoner is in addition to about $535,000 in deferred compensation -- a portion of his income that he agreed to be paid at a date after which it was earned. Wagoner's deferred compensation account was worth $766,000 at the end of 2007 but has fallen along with GM's stock value. The deferred compensation could be lost in bankruptcy.

Some executives sold off most or all of their GM stock in anticipation of the bankruptcy filings.

It's unclear what, if anything, GM will make public about the payments since the company will be privately held after it clears bankruptcy.

GM has dealt with other pension issues and faces a $20 billion shortfall, according to the Pension Benefit Guaranty Corp. GM, using different accounting rules, estimates its shortfall at about $12 billion and says it expects to need to make $6 billion pension payments in 2013 and 2014 to make up the difference.

Wagoner's compensation has totalled about $65 million since 2003, including $40.2 million over the past three years.

GM noted that because the precipitous drop in the company's stock price, the stock and options the automaker awarded to Wagoner declined dramatically: For the $11.9 million in stock and options awarded to Wagoner in recent years, GM said the actual value as of Dec. 31 is $682,000.

Wagoner became CEO in 2000 and added the title of chairman of the board in 2003.

Bankruptcy already stings

Bankruptcy already has stung Chrysler execs.

About 1,200 Chrysler retirees who received large pensions under the company's Supplemental Employee Retirement Program got their checks cut off after the April 30 bankruptcy filing.

They're lumped in with more than 100,000 other unsecured creditors to whom Chrysler owes money. The bankruptcy court will determine how much, if anything, they will receive.

Chrysler also said in court papers it wouldn't honor "retiree benefits or severance arrangements provided under certain individual agreements, American Motor Co. employment agreements, retired officer benefit arrangements and retired board of director benefit arrangements." Chrysler purchased American Motor Co. in 1987.

For some former senior execs, Chrysler said, there are "contractual retiree health care benefits that will nevertheless not be assumed by" the new company.

Big changes to Canada Pension Plan benefits, announced last week, were overshadowed by news of a larger-than-expected federal deficit.

The new rules, to be introduced gradually starting in 2011, will give lower pensions to retirees who start collecting CPP from age 60 to 65.

Those who delay claiming CPP benefits until after age 65 will get larger pensions.

There will also be more flexibility for people 60 and older, who now must stop work or significantly reduce their earnings to receive their CPP retirement benefit.

In future, "those who choose to work while receiving the benefit will participate in the CPP and increase their pension," said a statement by the federal and provincial finance ministers.

"Their employers will also be required to participate," it added.

CPP is a contributory pension, financed by both employees and employers, and is adjusted for inflation once a year.

If you retire at age 65, your maximum pension for 2009 would be $908.75 a month, or $10,905 a year.

The average pension, however, is $501.82 a month, or $6,021.84 a year.

Your CPP pension amount is based on the number of years you work and contribute to the plan, as well as your salary or wages.

Why do governments want to give a weaker incentive to collect pensions before 65 and a stronger incentive to wait until after 65?

In a big demographic shift, more Canadians are retiring early and starting CPP before 65. Yet, the age-related adjustments have not changed since 1987.

Under the current system, you can apply for CPP starting at age 60. Your pension is permanently reduced by 0.5 per cent a month, or 6 per cent a year, depending on your age.

Suppose you start CPP at 60. While you lose 30 per cent of your pension, you get pension money for five more years than you would if you waited until 65.

You can go back to work after starting to collect the pension and not have CPP contributions deducted from your salary.

The current system also lets you delay applying for CPP. You get an extra 0.5 per cent a month, or 6 per cent a year, if you start collecting benefits beyond age 65.

Adjusting CPP pensions this way "no longer ensures actuarial fairness," said an information paper released last week.

Here's what would happen under the proposed changes:

The early pension reduction will be increased gradually to 0.6 per cent a month for each month the pension is taken before age 65. This will be phased in over a five-year period, starting in 2012.

The late pension augmentation will be increased gradually to 0.7 per cent a month for each month that the pension is taken after age 65, up to age 70. This will be done over a three-year period, starting in 2011.

The changes will not affect current retirees collecting CPP or those taking their benefit before the changes start coming into force.

Amrita Caceres, a fictional nutritionist used as an example, will turn 65 in 2014. She expects her CPP benefit will be $6,220.

If she works another year and delays taking her CPP pension until she's 66, her basic pension amount of $6,410 in 2015 will be increased by 8.4 per cent – rather than 6 per cent without the proposed change.

So her pension will start at $6,498 and grow with the cost of living.

Governments hope that boosting CPP benefits for those who wait will be fairer to retirees – and will help Canada's public pension system accommodate the baby boomers' retirement plans.

Ford revs up production,
market share

Bryce G. Hoffman / The Detroit News

June 2, 2009

Ford Motor Co. is boosting production for the second time this quarter -- an action in sharp contrast to the factory shutdowns taking place at its bankrupt cross-town rivals.

But General Motors Corp.'s bankruptcy filing, which will eliminate much of that company's debt, also creates new challenges for the Dearborn automaker, particularly with the financing of its vehicles.

Ford, which will announce today that it is increasing its North American plant output by another 10,000 vehicles, is gaining market share as customers shy away from GM and Chrysler LLC, and it stands to gain more as GM moves to eliminate or sell its Pontiac, Hummer, Saturn and Saab brands. Chapter 11, however, allows those companies to eliminate much of their crippling debt, close dealerships in overcrowded urban markets and secure more favourable terms from the United Auto Workers.

Ford has addressed some of its issues outside of bankruptcy court. In March, the automaker renegotiated the terms of its UAW contract and convinced bondholders to forgive billions of dollars of debt for pennies on the dollar. But bankruptcy will allow GM and Chrysler to do more.

Asked if Ford was being left at a disadvantage, an administration official said no.
"Ford has ample financial resources," he said. "Ford has been very successful in growing its market share during this period."

But a senior Ford executive, who spoke to The Detroit News on the condition of anonymity, said the company is being hurt by the government's restructuring of GMAC LLC as a bank holding company. That allowed GMAC, which is now the lending arm of GM and Chrysler, to receive taxpayer money -- money it is already using to give customers no-interest loans.

"They've just got an unlimited spigot," the source said. "The scary part is all will be forgiven and they will have cleared their books better than us."

The Treasury Department has been slow to act on Ford's application to allow Ford Credit to become an industrial bank. That still would not give Ford access to federal money, but it would allow Ford Credit to secure financing at more favourable rates.
Ford is confident it can get terms similar to GM's from the UAW, and it will sell more stock to pay off its remaining debt. Though its sales are down sharply with the rest of the industry, the family-run company is eager to avoid any move that would subject it to government control.

Analysts agree Ford is in a relatively strong position.

Grand Theft Auto: How Stevie
the Rat bankrupted GM

FORD STATEMENT ON GM BANKRUPTCY FILING

DEARBORN, Mich., June 1, 2009 – Today's announcement that GM is filing for Chapter 11 bankruptcy is another important development during this unprecedented period for the auto industry and the global economy.

The Ford team continues to monitor the industry environment and plan for all contingencies to ensure our transformation plan remains on track. At this time, we do not expect any major disruptions to our operations as a result of today's news.

We share President Obama's hope that GM's bankruptcy will be controlled and orderly, and we continue to believe it is important that our governmental leaders and the U.S. Automotive Task Force remain focused on the stability of the supply chain and on ensuring that a healthy U.S. auto industry emerges from this difficult economic period. We look forward to working with the Obama administration to ensure that the government's majority ownership of GM will not change the industry's competitive dynamics and that a level playing field will be maintained.

Ford remains absolutely committed to continuing to make progress on our transformation plan without accessing emergency taxpayer assistance from the U.S. government. We have been executing our plan for several years and now gaining market share and new customers with an unprecedented number of new high-quality, fuel-efficient vehicles, such the new Ford Fusion, F-150, Lincoln MKS and Lincoln MKZ. Coming soon are the highly acclaimed Ford Taurus, Lincoln MKT and Transit Connect.

Letter Sent to GM Employees
June 1, 2009

First and foremost, I would like to thank each and every one of you for your unwavering support during these unprecedented times.  The dramatically changing global landscape and economic conditions have created the urgent need, and the opportunity, for GM Canada to reinvent our company.  

The Governments of Canada and Ontario have approved our comprehensive plan, enabling GM Canada to complete our restructuring without the need for court supervision.  We will launch a more competitive, stronger, new GM Canada building on our foundation of award-winning vehicles.

General Motors Corporation has announced it will complete its reinvention through a court-supervised process in the U.S.  Let me assure you that we do not expect GM Canada’s operations to be impacted by the U.S. court filing.  GM U.S. and GM Canada expect that customer service, manufacturing, and supply chain will continue with minimal disruption.

What does this mean for you?

Retirees and surviving spouses will continue to receive pension and post-retirement health care benefits without interruption.  At this point, we do not anticipate making any further changes to benefits affecting retirees and surviving spouses.

What does this mean for our customers and partners?

While GM Canada is restructuring, the company intends to carry on business as usual.  GM and GM Canada’s customer service, manufacturing and supply chain are expected to continue with minimal disruption:

GM Customers - The Company’s warranties and other service commitments, such as OnStar®, XM Radio™ and customer financing options remain in full effect.

GM Manufacturing - GM Canada will continue to produce high quality GM vehicles and powertrains as previously announced.  

GM Suppliers – GM Canada’s suppliers will continue to be paid for the delivery of products and services.  We expect supply from our key suppliers to continue without interruption.  Canadian supplier activities will continue to be coordinated through GM’s Global Purchasing and Supply Chain group.

GM Dealers – GM Canada will have the strongest and broadest dealer network across Canada and dealers will continue to service our highly valued customers and have access to financing options, parts and warranty coverage as GM Canada carries out its restructuring plans.  

Where do I go if I have questions?

I know that you will have many questions.  Although we may not be able to offer answers right away, we encourage you to keep checking this website (www.gmclrestructuring.com) for access to retiree Q&A’s and other information.  Using the information found on the website, you can be a helpful voice in assisting others in understanding the actual context and nature of today's actions which will complete the restructuring and strengthening of GM Canada.

What does this mean for the future of our company?

The new GM Canada will emerge from this restructuring a cost-competitive and innovative company that will continue to put customers first.  It will remain one of Canada’s leading auto marketers and manufacturers.  It will focus on Chevrolet, Buick, GMC and Cadillac, and continue to invest in green, energy-saving technologies and will be supported by a stronger balance sheet due to a significantly lower debt burden and operating cost structure.

The many sacrifices by all our stakeholders including employees, retirees, the CAW, our dealers and others, have made it possible to lay the foundation for a new GM Canada.  I greatly appreciate your ongoing dedication and perseverance during these most challenging times.  At GM Canada, we are well on our way to reinventing our company and emerging even stronger.


Thank you for your continued support.

Arturo Elias
President,
General Motors of Canada Limited

 "The skeleton frames of burned-out Chevrolets"

– Bruce Springsteen, "Thunder Road"

Few products have done more to help shape American culture than those of General Motors Corp., which filed for Chapter 11 bankruptcy protection yesterday in the largest industrial bankruptcy in U.S. history.

"The General," as it was known at the height of the Auto Century it long dominated, inspired the tunesmiths of Tin Pan Alley and later, the Beach Boys and the Boss.

But by late last year, GM, the world's biggest automaker for 77 years until it was overtaken by Toyota Motor Corp. in 2008, could no longer pay its bills. It was just another deadbeat, stringing along many of its more-than-3,000 suppliers for as long as it could.

When Dinah Shore sang "See the U.S.A. in your Chevrolet" in the 1950s, GM held the whip in an oligopoly shared with Ford Motor Co. and Chrysler Corp.

The early GM decided its cars would have covered bodies, and later automatic transmissions, and still later outrageous tail fins.

Soon almost all American cars had these things. The GM mystique then expanded to its leading role in the "arsenal of democracy" as a prodigious arms supplier in two world wars.

But an arrogant Detroit went into denial at the dawn of the import era, and remained fixated on big, heavy gas-guzzlers well into the 21st century. Americans long ago abandoned Detroit brands for more fuel-efficient foreign makes.

Today, GM is mocked as "Government Motors." Washington, Ottawa and Queen's Park have taken a 72 per cent ownership stake in the reorganized GM, set to emerge from bankruptcy in about six months, in return for about $72 billion (U.S.) in state loan assistance, $9.5 billion of it from Canada.

In a recent public-opinion survey released last week, two-thirds of Americans opposed the use of taxpayer funds to bail out GM, regarded as a textbook case of chronic failure of free-market managers. The dwindling popularity of GM products relegated its market share to "flyover country," the less-populated interior American states.

The allegiance of motorists on the coasts is to Toyota, Honda, BMW and other foreign makers. GM's overall market share has plummeted to 19.1 per cent. In the most heavily populated states such as New York and California, GM's market share is even lower than that. In detailing Washington's turnaround scheme for the company, built by the legendary Alfred Sloan, who was an implacable foe of FDR's interventionist policies, U.S. President Barack Obama described yesterday what he called "a credible plan that is full of promise."

That it may be, since it expects a "new GM" to be capable of making a profit even during the current 27-year low in auto sales.

Yet ,this phoenix-like rebirth will require another round of drastic downsizing at a GM that already has been shrinking at a desperate pace. Fourteen more plants are to be boarded up, another 21,000 jobs eliminated and a remarkable 40 per cent of GM dealerships closed.

Washington is widely accused of throwing good money after bad in its long-shot rescue bid of a company that managed to lose $88 billion over the past four years. "I think this is going to be Obama's Vietnam," U.S. auto historian Bob Elton told Reuters on Sunday. "Every time he turns around, there goes another $20 billion."

Indeed, it will take some doing to renew America's affection for Chevys, Buicks, Cadillacs and GMCs, after a restructured GM has shed its Pontiac, Saturn, Saab, Hummer, Opel and Vauxhall brands. (Control of the last two, GM's European brands, was tentatively won by Magna International Inc. last weekend.)

GM had begun its death spiral about a decade before Michael Moore's 1989 breakout classic, Roger & Me. The film misses the point in savaging then-GM chief executive Roger Smith for his alleged insensitivity to laid-off GM workers in Moore's native Flint, Mich. Smith's real crime was failing to cut deeper and reduce GM's overcapacity. Instead, Smith and his successors continued to flood the market with vehicles North Americans didn't want.

And so came yesterday's great reckoning. For all that Americans have spurned GM in the showroom, the parlous state into which GM has steadily slipped over the past three decades is, for many, as unthinkable as the earlier demise of Penn Central, Pan Am and the Great Atlantic & Pacific Tea Co.

"The phrase `bankrupt General Motors,' which we expect to hear uttered on Monday, leaves Americans my age in economic shock," P.J. O'Rourke wrote in a Wall Street Journal essay over the weekend. "The words are as melodramatic as `Mom's nude photos.'"

GM Questions

By PETER ZIMONJIC

2nd June 2009

IS GM BANKRUPT?

No, the American parent company has filed for a form of bankruptcy protection in the U.S. called Chapter 11. It means a court will decide which groups GM owes money to (shareholders, banks and bondholders) will be paid, and how much they will get. When the court is finished its work, GM will emerge as a newly restructured company.

WHAT ABOUT GM CANADA?

The Canadian arm of GM is totally owned by the U.S. parent company but it doesn't trade on the stock market like the U.S. company does. The Canadian company hasn't filed for bankruptcy protection in Canada because it managed to strike a deal with its creditors by paying them an unspecified amount of cents on the dollar for debt owed.

WHAT DOES THIS MEAN FOR MY CAR WARRANTY?

If you bought your car "during the restructuring period" the Canadian and U.S. governments will back up your warranty completely, even if GM ultimately fails. For Canadian buyers, that means you're covered if you bought their car or truck from April 7 onwards. Governments have yet to say when the end of the restructuring period will be.

WHAT IF I BOUGHT MY CAR BEFORE THE RESTRUCTURING PERIOD?

You will still have your warranty honoured, but only if GM manages to survive when it emerges from court in the U.S. Should GM collapse a few years down the road, only those who bought their cars "during the restructuring period" will have their warranties backstopped by the government.

WHAT DOES THIS DEAL MEAN FOR TAXPAYERS?

The bottom line: Taxpayers are now owners of GM. The Canadian government is taking an 11.7% ownership stake in the company and another US$403 million of preferred shares in GM. Should GM's restructuring plans fail and the company goes belly-up, the Canadian and Ontario governments will be in bankruptcy court here waiting to see how many cents they get on the dollar for the $10.6 billion they are now committed to investing in GM.

***************************************

Letter Sent to GM Employees June 1st from GM Canada President

DETROIT/WASHINGTON – General Motors Corp. filed for bankruptcy on Monday, forcing the 100-year-old automaker once seen as a symbol of American economic might and dynamism into a new and uncertain era of government ownership.

The bankruptcy filing is the third-largest in U.S. history and the largest ever in U.S. manufacturing.

The decision to push GM into a fast-track bankruptcy, and provide $30 billion (dollar figures U.S.) of additional taxpayer funds to restructure the automaker, is a huge gamble for the Obama administration.

But in a sign of progress in the government's high-stakes effort, a bankruptcy judge approved the sale of substantially all of U.S. automaker Chrysler's assets to a group led by Italy's Fiat SpA in an opinion filed late on Sunday.

Chrysler's bankruptcy, also financed by the U.S. Treasury, has been widely seen as a test run for the much bigger and more complex reorganization of GM.

The GM plan is for a quick sale process that would allow a much smaller GM to emerge from court protection in as little as 60 to 90 days.

"Now the hard part begins, which is making GM and Chrysler competitive. If they don't do that, then we'll be doing this all over again in a few years," said Christopher Richter, auto analyst at CLSA Asia-Pacific Markets in Tokyo.

"The immediate implication is that the companies are going to get smaller and so market share is up for grabs, which means that rivals like Toyota, Honda, Nissan and Hyundai are going to gain share."

LIFELINE

Since the start of the year, GM has been kept alive with government funding as a White House-appointed task force vetted plans for a sweeping reorganization that will be undertaken with $50 billion in federal financing.

By taking a 60 percent stake in a reorganized GM, the Obama administration is gambling that the automaker can compete with the likes of Toyota after its debt is cut by half and its labour costs are slashed under a new contract with the United Auto Workers union.

The governments of Canada and Ontario agreed to provide another $9.5 billion to GM in a late addition to the plans for the bankruptcy.

GM plans to close 11 U.S. facilities and idle another three plants. It has not provided an updated target for job cuts but had been looking to cut 21,000 factory jobs from the 54,000 UAW workers it now employs in the United States.

The UAW would have a 17.5 percent stake in the "new GM." The Canadian government would own 12 percent and GM bondholders would get 10 percent.

RELUCTANT INVESTOR

Officials involved in the planning for GM said the White House was a "reluctant investor" in GM but had to prevent a liquidation that analysts say would have cost tens of thousands of jobs at a time when the economy is mired in recession.

GM alone employs 92,000 in the United States and is indirectly responsible for 500,000 retirees.

"We want a quick, clean exit (from bankruptcy) as soon as conditions permit," Treasury Secretary Timothy Geithner told students at Peking University in Beijing. "We're very optimistic these firms will emerge without further government assistance."

President Barack Obama is due to speak on the auto industry shortly before noon on Monday. A news conference by GM Chief Executive Fritz Henderson is to follow.

U.S. officials said there was no plan to provide any further funding for GM and insisted that all of the Detroit Three could survive. Ford Motor Co has not sought emergency federal aid.

"We do believe, and completely endemic in the president's decision, was a belief that this country can support three domestic successful viable auto companies," a senior Obama administration official said.

In the case of GM, the goal of restructuring is to allow it to return to profitability if U.S. industry-wide auto sales recover even slightly to near 10 million annually.

Until now, to stop losing money, GM had counted on a recovery to the 16 million mark the industry last saw in 2007, officials said.

Even if GM and Chrysler emerge swiftly from bankruptcy this summer, the autos task force will stay in business – shifting to an investment management role.

Senior administration officials said on Sunday there was plenty to keep the task force staff busy, monitoring the government's stake of about 60 percent of GM and less than 10 percent in Chrysler.

CAREFULLY ORCHESTRATED FAILURE

GM's bankruptcy is the most carefully orchestrated Chapter 11 filing in the history of American business.

The automaker's final descent started with President George W. Bush administration's emergency aid announcement on Dec. 19 and accelerated in late March when the new Obama government gave it 60 days to restructure.

While the "new GM" is expected to emerge quickly from court protection, its shuttered plants, stranded equipment and other spurned assets would be left to liquidation in bankruptcy.

Al Koch, a managing director at advisory firm AlixPartners LLP, will be appointed chief restructuring officer in charge of liquidating those GM assets.

A veteran restructuring adviser, Koch has had prominent roles in Kmart Corp's restructuring and other turnarounds.

Over the weekend, GM won support for the government's plan from investors representing 54 percent of the company's $27 billion in bondholder debt.

Bondholders could take up to 25 percent of GM if it recovers to be worth what it was in 2004.

Founded in 1908, GM rose to dominate the U.S. and global auto industries under the stewardship of pioneering chief executive Alfred Sloan, who famously pledged that the automaker would deliver "a car for every purse and purpose."

By the mid-1950s, at the peak of its success, GM had some 514,000 employees. It accounted for about half of U.S. car production and its sales were twice as large as the No. 2 corporation, Standard Oil.

GM's stock fell to 75 cents on Friday, a level last seen during the Great Depression.

Canadian taxpayers will provide reeling General Motors Corp. with $9.5 billion (U.S.) in aid and take a 12 per cent stake in the once mighty automaker, which will seek court protection from creditors today.

In the biggest corporate rescue package in Canadian history, Prime Minister Stephen Harper and Ontario Premier Dalton McGuinty will announce in Toronto this afternoon the repayable loan and what taxpayers will get in preferred and common stock under a restructuring plan to save the automaker and turn it into the "New GM."

GM, once the biggest company in the world, will file for court protection under Chapter 11 of the U.S. Bankruptcy Code in New York but it hopes to emerge in 60 to 90 days. It is not clear if GM of Canada Ltd. will file for protection here.

Protection in the U.S. will be automatic. A judge will decide during the 90 days who all the creditors are and will resolve disputes about how much holdout GM bondholders will get for their debt, payments to other creditors and expenditures by the company.

Under the plan, the money from both governments will be used during the bankruptcy process and subsequent transition into a healthy company.

U.S. President Barack Obama will announce about $30.1 billion in extra loans for the company. In return, American taxpayers will get $8.8 billion in debt and a 60 per cent interest in the company. In addition to its 12 per cent stake in the company, the Canadian government will get $1.7 billion in debt.

There will be a new GM board with a minority of existing directors and a majority of new members, including one from Canada.

Obama and Harper will emphasize at separate news conferences that the aid should put GM on sound financial footing with a viable plan that takes into account conservative projections for the future of the industry.

They will also say there are no plans for further aid and it is their intent to sell government-held stock in GM as soon as appropriate.

"The government has no desire to own equity stakes in a company any longer than necessary," one U.S. official said last night.

The moves come after GM submitted a new restructuring plan to the governments with more concessions from stakeholders, additional plant closures and lower projections on sales and market share.

Under the North American government aid package, Ottawa and Ontario will contribute $9.5 billion or $10.58 billion (Canadian), far more than the $3 billion the two governments promised in December. At that time Harper acknowledged taxpayers would probably need to provide more help.

The U.S. has already pumped $19.4 billion (U.S.) into GM, whose sales have plunged in the past year.

Government leaders in both countries have said that allowing the collapse of GM and rival Chrysler would push the Canadian and U.S. economies into a much deeper recession and cost millions of jobs.

GM will announce 11 more plant closures and idle three operations as part of the restructuring. However, industry insiders say the moves will not affect Canadian operations.

Chrysler LLC, also surviving on a government lifeline, gained court protection in the U.S. last month and hopes to emerge within days in a partnership with Italian automaker Fiat SpA. Their Canadian subsidiary did not seek court protection.

GM has not indicated it will stop production in the U.S. or Canada during bankruptcy proceedings.

In the weeks leading up to the expected bankruptcy of this century-old icon, majority sentiment in the U.S., and to a lesser extent here, has been hostile about rewarding a chronically incompetent enterprise with a taxpayer-funded bailout.

And, to be sure, it does take a special kind of genius to lose $88 billion (U.S.) over the past four years, to have your shareholder value evaporate during that time from $30 billion to $702 million; lose to Toyota Motor Corp. the crown of world's biggest automaker after a 77-year run as No. 1.

Tough to say which is more remarkable: that perhaps half a dozen GM chief executives since 1980 alone, when GM claimed half the North American market, could bring about the near ruination of an enterprise that even today accounts for a full 1 per cent of U.S. GDP; or that American regard of failure and incompetence as shameful is so deeply ingrained that a mere 18 per cent of Americans support a government-backed rescue of GM and Chrysler.

So should Washington, Ottawa and Queen's Park pony up some $60 billion (U.S.) to finance GM's restructuring under bankruptcy?

Yes.

A humbled GM can change its ways, as a then-arrogant Fiat SpA did in pulling itself back from the brink only five years ago. (Fiat is now Chrysler's planned saviour.) And if a global credit crunch leaves government as the sole source of bailout financing, so be it.

As part of its restructuring, GM will close 14 plants, part ways with about one-quarter of its dealers (something it should have done years ago), and lay off yet another 21,000 employees. Yet, post-bankruptcy, a leaner and much healthier GM will continue to put bread on the table for tens of thousands of employees, about 4,000 suppliers, and several thousand dealership employees that often are the business mainstay in small-town North America.

GM remains the U.S.'s biggest manufacturer, still a powerhouse of engineering and technological breakthroughs, most visibly with its all-electric Chevrolet Volt. GM is America's biggest purchaser of information technology. Entire states in the industrial Midwest and Canadian cities such as Oshawa, Oakville, Windsor and St. Catharines rely on GM and its employees for an outsized portion of their property and income-tax revenue.

All of which is moot, if GM is ultimately destined, as many believe, for the scrapyard in the sky. Somehow, I don't think so.

GM will emerge from bankruptcy with only one-quarter or so of the debt it held earlier this year. It finally will be liberated from the burden of active and retiree health-care costs that have added an average $1,500 or so to the cost of each vehicle GM produces. (The health-care burden has been shifted to union-administered trusts financed in a one-shot deal by GM and with a top-up from government.)

GM's hourly wage costs, after enormous concessions by the Canadian Auto Workers and the United Auto Workers, are now in line with wage rates at "transplants" – the U.S. and Canadian factories operated by foreign-based automakers. The UAW has given up its right to strike until 2015.

After the waves of GM layoffs of recent years, and further reduction in capacity during the restructuring, GM will have cut its fixed costs to levels enabling it to compete on price with foreign-based rivals.

CEO Fritz Henderson told reporters last week that GM will be able to turn a profit even in the current dreadful market – with North American sales at a 27-year low of just 10 million vehicles and a GM market share of only 18.5 per cent, a slight reduction from the current 19.1 per cent.

"We will come out of this rid of some of the historic legacy costs that have been dragging us down for the last 20 years or so," Bob Lutz, GM vice-chairman, said in a Thursday speech. "We will come out of it with an all-new focus on product development."

In an off-the-record briefing of reporters that same day, an Obama administration official said: "GM should be highly, highly profitable given the new cost structure that is being put in place, given the vast reduction of liability that has been achieved."

Fact: "Auto companies rarely die," CEO Henderson reminded reporters last week.

He's not whistling in the dark, having overseen in the past few weeks the drastic makeover of GM that critics have demanded for decades. And he's right – out of national pride, France, Germany, Japan, China, Russia and others routinely subsidize profit-challenged local automakers.

Focused on just four brands rather than eight, Buick and GMC will no longer be deprived of new-product development funds. For the first time, Buick will have close to a full line of models. And GM will have a $1.3-billion annual marketing budget for each of Chevrolet and Cadillac, double the current ad spend, and close to what Toyota commits to its namesake and Lexus brands. That's crucial, because GM quality and reliability have vastly improved in the past decade (Buick typically tops or is near the top of J.D. Power quality surveys), but GM has lacked the money to tell that story to potential customers that first turned away from GM decades ago. A clean-slate GM has a decent shot at winning customers among Gen Y motorists (ages 22 to 32). At 70 million people, that group is larger than either Gen X or the baby-boom generation. Certainly GM has the J.D. Power- and Consumer Reports-acclaimed vehicles for making converts, including the Chevy Malibu, Impala, HHR and the Cadillac STS sedan.

One of the nice things about not being No. 1 is that rivals aren't all gunning for you. With half the market, GM had the most to lose over the past three decades. Now everyone from Kia Motors to Ford Motor Co. will have Toyota in their sights, instead. And Toyota, which lost more than $1 billion last year, has stumbled badly from overexpansion, several embarrassing recalls, and market-share reversals in Asia. The myth of Toyota's invincibility hasn't been shattered among potential customers. But Detroit finally has an opening to exploit.

And Detroit has a spokesman in Barack Obama, who at a news conference two weeks ago sang the praises of the Ford hybrid parked in his Chicago garage.

"A year or two of Obama emphasizing the restructured GM and Chrysler," U.S. marketing consultant Dennis Keene told Business Week recently, "which he has staked his reputation and taxpayer money on, and you could start to see Gen Y take a lot more interest in these brands and looking at them in a new light."

Alluding to some of the unexpected roles he has taken on as President, Obama joked at the annual White House Correspondents' Dinner a few weeks ago that Car & Driver had named him its "CEO of the Year."

We can only hope.

Frank Stronach, who once made parts and then delivered them in his own car to General Motors in Oshawa, and a Russian partner have gained control of the auto maker's giant European subsidiary.

The 76-year-old founder and controlling shareholder of Aurora-based Magna International Inc. and Russian lender Sberbank reached the framework of a deal yesterday that will put them in the driver's seat at Opel AG, GM's main operating unit in Europe.

Top Magna officials, including Stronach, hammered out terms with the German government and teetering GM on an unidentified investment to save Opel, a well-known European brand that could boost the Canadian company's international fortunes dramatically.

Under the deal, Magna will take a 20 per cent stake in Opel and the Russian-owned Sberbank will take a 35 per cent stake, giving their consortium a majority. GM will retain a 35 per cent holding, while the remaining 10 per cent will go to Opel employees.

The investment caps a brilliant business career for the hard-driving Stronach, an Austrian immigrant who opened a tiny tool and die shop in the Dufferin-Dupont Street area in 1957 and dared to dream big.

Over the years, many observers have acknowledged his talents in building an auto parts powerhouse. But few predicted Stronach would ever actually own a major international vehicle manufacturer.

"Without knowing all the details, this has got to be a big coup for Frank, for Magna and for Canada," said Ed Lumley, a former federal industry minister and company director. "He is one of our country's great success stories."

"It keeps Canada on the map in the global auto industry," added Richard Cooper, vice-president of J.D. Power and Associates.

"I think Magna has picked up a strong brand and should do well."

It marks the first time that a Canadian company has held a significant stake in a major international auto maker.

"I can't think there would have been anyone else," said auto historian Walter McCall, of Windsor.

The brash and sometimes flamboyant Stronach holds only a small percentage of equity in Magna but controls the company through the magic of multiple voting shares.

As a budding entrepreneur he worked alongside his small staff in stamping out sun visor brackets at his shop. Sometimes, they worked around the clock.

Stronach's fledgling shop quickly gained traction and steadily won more contracts.

He formed Magna in the early 1960s and the company took off with a combination of skilled trades people and an entrepreneurial culture that always emphasized "a better part at a better price."

Annual revenues hit $100 million in 1978 and topped $1 billion in 1987. Magna had become a job creating machine with thousands of workers and scores of plants in the Toronto region.

But Magna hit a big bump in the early 1990s because of over expansion, a heavy debt load and an industry downturn.

The company recovered and embarked on phenomenal growth in Canada and abroad. Sales reached a stunning $26 billion (U.S.) in 2007 before slipping to $23.7 billion last year. The company employs more than 70,000 workers in 25 countries.

After its brush with bankruptcy in the early 1990s, Stronach vowed he would never expose Magna to a significant debt burden again and that has turned into a huge advantage.

Magna currently has $1.7 billion in cash on hand to weather the industry's storm and bid for ailing companies such as Opel.

During the last decade, Magna has pushed its prowess in auto parts to assembling entire vehicles on contract for companies ranging from BMW to Chrysler.

The company bid on Chrysler two years ago but lost to U.S.-based Cerberus Capital Management.

Chrysler is now relying on U.S. and Canadian government aid to stay alive and is restructuring under court protection from creditors.

Under the latest deal, Magna would provide undisclosed short-term financing to become the preferred negotiating partner for Opel.

The German government would invest $2.34 billion in a bridge loan and make Opel an independent company.

That would shield it from creditors in looming bankruptcy court proceedings involving parent GM Corp. in the U.S.

Dennis DesRosiers, a veteran industry watcher, said the investment represents an "unprecedented opportunity" for Magna with high risk.

"It's a pure risk-reward situation. If it works, then Magna will win big. If Magna loses, it loses big."

Feds paid more than $20M in pensions to retired MPs

By ALTHIA RAJ, National Bureau, Sun Media

Last Updated: 29th May 2009

OTTAWA — The federal government paid out more than $20 million in pensions to retired MPs and senators last year.

According to a Treasury Board report, $20,790,863 was shelled out to 630 former parliamentarians and their survivors between April 2007 and March 2008.

“Their pension plan is more generous than any other pension plan in the rest of the country, except perhaps for CEOs of multinational corporations who make 20 million bucks a year,” said Kevin Gaudet, federal director of the Canadian Taxpayers Federation. “I think the average taxpayer has no idea how lucrative it can be to spend some time as a member of Parliament or senator.”

Eighty former members — 14 senators and 66 MPs — earned pensions worth more than $70,000.

MPs and senators who serve more than six years in office can access their pensions at age 55.

Parliamentarians contribute to the plan but the government kicks in most of it.

The average annual pension for senators was $55,012, and $48,985 for MPs.

“That doesn’t sound gold-plated to me,” said Liberal MP Marlene Jennings, adding MPs work seven days a week and put in 12-hour days.

Former Conservative MP Rahim Jaffer agrees.

“It’s not overly generous,” he said. “Compared to other pensions, people will say yes it is, but I think when you consider the work and the commitment you’re making, I think there was a reason why it was instituted that way.”

Jaffer will get his first pension cheque in 18 years.

The Conservatives are moving forward with a bill to limit Senate terms to eight years, which would add more people to the pension rolls.

“It will potentially send that number through the roof,” said the NDP’s David Christopherson.

But Cherie Godin, spokeswoman for Democratic Reform Minister Steven Fletcher, said there will be “no additional costs” associated with the reform.

Any new senators, as well as the 18 senators recently appointed by Prime Minister Stephen Harper, would be limited to one non-renewable eight-year term once the proposed legislation passes.

Christopherson said the Tory bill doesn’t make senators more accountable.

“Who are they accountable to for those eight years of pay and the lifetime of the pension?” he asked.

The government’s leader in the Senate, Sen. Marjorie LeBreton, said the reforms will inject new blood and new ideas.

But Liberal Sen. Serge Joyal, a constitutional lawyer, said the bill is unconstitutional and would strengthen the prime minister’s grip on the upper chamber.

“After eight years the prime minister would have appointed everybody,” he said.

DETROIT – The United Auto Workers union has ratified a package of concessions designed to reduce labour costs at General Motors Corp.

UAW President Ron Gettelfinger said at a news conference today that 74 per cent of GM's 54,000 U.S. production and skilled-trade workers voted in favour of the deal.

The vote comes before an expected Chapter 11 bankruptcy protection filing by GM (NYSE: GM) on Monday. Bankruptcy experts say having the labour agreement in place will help move the process through court more quickly.

The UAW says the cuts will save GM $1.2 billion to $1.3 billion a year.

"We very much appreciate the support of our employees and retirees," Diana Tremblay, GM vice-president for labour relations, said in a statement. "Their shared sacrifices will enable GM to become a stronger, more viable company that will continue to deliver world-class cars and trucks."

UAW leaders agreed to the revised contract last week that freezes wages, ends bonuses, eliminates noncompetitive work rules and ends the possibility of a strike until the next contract expires in 2015.

It also gives a union-run retiree health care trust 17.5 per cent ownership of a post-bankruptcy protection GM, with a warrant to buy another 2.5 per cent. The trust will take on the company's retiree health care costs starting next year. The stock will come in exchange for part of the company's $20 billion obligation to the trust.

The remaining 10 per cent would go to GM bondholders to wipe out $27 billion in unsecured debt.

Bondholders have until 5 p.m. EDT Saturday to accept or reject the stock-for-debt offer, under which they would get a warrant for an additional 15 per cent of the new GM's stock.

Existing GM shareholders would be left with little or nothing, and GM shares fell 32 cents, or 29 per cent, to 80 cents in afternoon trading. They fell as low as 75 cents earlier today, their lowest level since the Great Depression.

The UAW deal follows an agreement last week between the company's Canadian subsidiary and the Canadian Auto Workers union.

The CAW agreement freezes workers' pension benefits until 2015 and slashes labour costs by C$15 to C$16 an hour through cuts to benefits. The union has also agreed to negotiate a health-care trust, which it will administer to cover retirees' benefits.

Under the deal, GM Canada also agreed that it would give up its special status under Ontario law – a status that has allowed it to underfund its pension plan since the 1990s – and begin topping it up immediately.

GM has received $19.4 billion in loans from the U.S. government, which would get 72.5 per cent ownership of the new company, perhaps sharing with the Canadian government.

Federal officials said Thursday that Ottawa is budgeting about C$10 billion for its portion of bailouts at GM Canada and Chrysler Canada.

Plans are for GM to emerge from bankruptcy with lower labour costs, far less debt and with fewer factories, brands, models and dealerships.

Even workers at factories in Spring Hill, Tenn.; Pontiac, Mich.; and Orion Township, Mich., that are under discussion for possible closure approved the deal.

"I believe that our membership understands. They get it," said Ray Wood, president of a UAW local at a Toledo, Ohio, transmission factory that voted 78 per cent in favor of the deal.

On Monday, GM is to identify 14 assembly, parts stamping and engine and transmission factories that it plans to close as part of its restructuring plan, cutting 21,000 jobs.

GM announced earlier today that one of those 14 plants would be retooled to make subcompact cars starting in 2011.

Gettelfinger said four of GM's plants slated to close will remain on "standby" with the hopes that vehicle sales will rise, creating greater demand.

MONTREAL–Fiat SpA chief executive Sergio Marchionne says the Italian automaker fully intends to use Chrysler's Canadian plants in southern Ontario after the Italian company buys a stake in the ailing U.S. car manufacturer.

Marchionne says there's a collective view that Chrysler's assembly lines in Canada are efficient and churn out quality products.

Fiat is on the verge of taking control of a 20 per cent share in Chrysler, pending the completion of bankruptcy court procedures in New York.

The Italian carmaker has been plotting a return to North America, where it last sold cars two decades ago.

It would gain access to Chrysler's dealer network, while the U.S. company would expand into Fiat's international markets.

Marchionne says he hopes Fiat can work with Canadian auto workers, a relationship that he acknowledges got off to a bumpy start. The CAW, however, managed a cost-cutting deal that helps save Chrysler Canada on labour costs at its plants.

The Windsor.-based automaker, with more than 9,000 employees, operates vehicle assembly plants in the southwestern Ontario border city of Windsor as well as Brampton, just northwest of Toronto, and a parts plant in Toronto.

Marchionne, a dual Canadian-Italian citizen, says that while Fiat cannot substitute Chrysler's judgment on the North American market, it can offer technical expertise on how to produce smaller, more efficient cars.

The company has been developing a new fuel-efficient, cleaner-burning engine it hopes to put into its new vehicles.

Canadians may own
10% of new GM

Filings paint portrait of a once mighty auto giant majority controlled by North America's taxpayers

May 29, 2009

THE TORONTO STAR

Canadians will soon own more than 10 per cent of the "new" General Motors under a massive restructuring of the ailing auto giant.

Although government leaders won't confirm the taxpayer stake because of continuing talks, Ottawa and the province will likely commit about $10 billion in loans to keep the company alive and receive preferred and common stock in return.

The money is part of a Canadian-U.S. aid package for GM Corp. and its subsidiary here that will leave governments in both countries with almost three-quarters of the company.

In filings with securities regulators yesterday, the U.S. Treasury, which has already invested $19.4 billion (U.S.) in GM, said it will pump in another $30 billion and receive 72.5 per cent of the stock. However, it will allocate part of that stake to the federal and Ontario governments, the filings show.

Using Canada's portion of GM's North American auto production as a benchmark, that would leave taxpayers with an equity stake of between about 11 per cent and 12.5 per cent.

Washington would hold the remaining 60 to 61.5 per cent; a United Auto Workers health-care trust 17.5 per cent – and bondholders about 10 per cent, according to the filings.

The federal and Ontario governments had indicated they would contribute a proportionate amount in loans to reflect the 15 to 17 per cent of the company's production here.

GM's North American output here had hovered around 20 per cent, but the company recently closed a truck assembly plant in Oshawa and will shut a transmission factory in Windsor next year.

Last December, the federal and Ontario governments said they could become shareholders in GM and Chrysler, another reeling automaker, by receiving warrants that would give them the right to buy non-voting stock.

In GM's case, the governments would also get senior creditor status as security.

At that time, Prime Minister Stephen Harper acknowledged a planned contribution of $3 billion (Canadian) to GM of Canada and $1 billion to Chrysler Canada would likely increase as the two companies fought to recover from the worst slump in industry sales in more than a quarter of a century.

Harper and Ontario Premier Dalton McGuinty have stressed they don't want their governments to remain shareholders for a long time. However, they said the companies' deteriorating financial health left them no choice, because the fallout from a collapse of GM or Chrysler would push Canada into a much deeper recession.

Conditions worsened and GM's allocation climbed from $3 billion to a request for between $6 billion and $7 billion in February.

That amount has increased again in view of disclosures by the U.S. government about its growing aid package.

Earlier this month, the governments in Canada said they would jack up aid to Chrysler from the original allocation of $1 billion to $3.77 billion.

Chrysler gained temporary court protection from creditors in the U.S. and shut down its operations in both countries amid questions about whether it could pay suppliers.

Fiat SpA of Italy will hold a 20 per cent interest in Chrysler that could climb to 35 per cent – and would take over the company's so-called good assets.

The U.S. government will assume an 8 per cent equity stake, while Ottawa and the province will hold 2 per cent. The UAW union will own 55 per cent.

GM will also likely pursue court protection next week after it submits a restructuring plan to governments in both countries.

In addition to resolving creditor disputes, it will also allow GM to separate good assets from bad. The bad assets would be sold or closed.

"These discussions are still going on ... governments are still finalizing and working out the details," Ontario Finance Minister Dwight Duncan told reporters.

"There are too many moving parts."

Questions remain about whether GM will be able to continue production during bankruptcy protection, which could continue for 90 days.

A production stoppage would mean the layoff of tens of thousands more workers in the industry in both countries.

Visteon Corp., meanwhile, the top parts supplier and former subsidiary of Ford Motor Co., filed for bankruptcy protection in the U.S. early yesterday as it struggles with the big drop in auto demand.

Toronto Star

Sun editorial board meets
with autoworkers

The Toronto Sun took an editorial meeting to Oshawa to hear from current and retired autoworkers about the failing auto sector.

General Motors is desperately trying to keep its Canadian operations running as its parent heads towards bankruptcy court protection in the United States and possibly Canada during the next week, a top union leader says.

GM is even paying edgy suppliers in advance for parts to assure that production of popular models can continue at assembly plants during any court proceedings when payments might be in doubt, Ken Lewenza, president of the Canadian Auto Workers, said yesterday.

"They have indicated to us they are doing everything possible and in their power to avoid a Canadian shutdown," Lewenza said in an interview. "Whether they are successful remains to be seen."

Chrysler LLC immediately shut down its operations in the U.S. and Canada earlier this month when it gained temporary court protection from creditors south of the border.

Insiders said it did not matter if Chrysler assembly plants stopped production because high inventories could easily meet dealer demand for a short bankruptcy stay of 60 days or longer.

Furthermore, some parts makers had halted deliveries to Chrysler plants on both sides of the border because of payment concerns. Those moves made auto production impossible because a shortage of only a few parts can disrupt output.

The shutdowns have triggered the layoffs of thousands of Chrysler workers and their counterparts at parts makers that were already struggling to stay alive through a major downturn in North American sales in the past year.

A temporary GM shutdown would cause thousands more layoffs here and even more damage to the reeling auto sector, a key cog in Ontario's economy.

Lewenza explained GM wants to maintain output particularly at operations that build popular models, including the new Chevrolet Camaro sports car and Impala mid-size car in Oshawa and the Chevrolet Equinox sport-utility vehicle at the CAMI plant in Ingersoll.

Already, GM has scheduled overtime at the Oshawa plant for extra Camaro output and just started production of the new generation 2010 Equinox. It is also launching the GMC Terrain in August and does not want any delays for the fall selling season.

GM sees the models as important vehicles that will pull motorists into stores so they can consider other cars and trucks.

The company also runs parts plants in St. Catharines and Windsor that depend on U.S. assembly operations.

GM spokesman Stew Low would not comment on any production plans if the parent company pursues court protection in the U.S. and Canada.

"(I) can't comment on what has not happened," said Low, director of communications for GM of Canada.

But GM Corp. officials have said bankruptcy proceedings in the U.S. are probable within the next week. That appeared more likely yesterday after bondholders rejected an offer whereby they would exchange $27 billion (U.S.) in debt for 10 per cent of a reorganized GM.

Industry watcher Dennis DesRosiers added that whether plants stay open or not will depend on whether GMAC, the automaker's financing arm, can provide funds for dealers to buy vehicles from factories.

GM, the biggest industrial firm in Canada at one time, faces a June 1 deadline to resubmit a restructuring plan to governments in the U.S. and Canada to receive billions more dollars in additional public loans.

If there is no resolutions of debts with bondholders, GM would have little choice but to seek court protection where a judge would decide.

Also still in dispute is how much government aid would be used to address a huge shortfall in GM of Canada's pension plans.

This week, GM workers here accepted significant concessions to lower labour costs for the third time in a little more than a year to bolster the restructuring plan and quest for aid. GM's U.S. workers are now voting on concessions.

Analysts say Chrysler's bankruptcy protection proceedings, shutdowns and resulting negative media coverage are hurting sales. Early reports say business at Chrysler dealers in Canada plunged more than 50 per cent in the first 20 days of May, despite heavy incentives.

By Kristine Owram

TORONTO — A new fund to cover the health benefits of more than 50,000 auto-industry retirees would provide protection if one of the big carmakers folded, but could mean reduced benefits down the road.

Canadian Auto Workers economist Jim Stanford said Tuesday that the health-care trust, being negotiated as part of the union's new agreements with Chrysler and General Motors, is trading one form of risk for another, but it will provide more protection than retirees have now.

"With an independent trust with real, up-front money, we can now be assured of covering at least a good part of retiree health benefits even if the companies were to go broke next year," Stanford said in an interview.

The trust is to be run independently, with an initial contribution by the companies invested and managed by a group of outside directors.

Stanford said the trust will be subject to the same risks as pension funds, many of which saw their assets depleted dramatically by the stock market crash. This means retirees could see their benefits shrink if a similar crisis were to hit in the future.

"In the olden days, our folks believed that the company would look after them even after they retired," Stanford said.

"Today, the bitter reality is we can't count on our employers being there, and that's why we've had to consider this type of an arrangement. But it's better than the alternative of losing our benefits altogether if the companies go under."

Stanford said it's not yet clear how much the companies will contribute.

GM Canada wouldn't comment on the trust Tuesday, but indicated in March that it would remove a "significant" liability from GM's books.

The union, GM and Chrysler are hoping to get the trust running by the start of next year.

The trust will be loosely based on the Voluntary Employee Benefit Association, or VEBA, negotiated by the U.S.-based United Auto Workers. The VEBA will be much larger than the Canadian trust due to Canada's publicly funded health-care system, but is similar in many other respects.

In the United States, General Motors Corp. (NYSE:GM) plans to give the UAW 17.5 per cent of its common stock, US$6.5 billion of preferred shares and a $2.5-billion note to fund its VEBA.

Investment income earned in the U.S. VEBA will be exempt from taxes. The Canadian government has indicated it will create a similar provision, though Stanford said tax is likely to be levied on gains that are surplus to covering retiree benefits.

Since GM Canada and Chrysler Canada don't have their own stock, the Canadian trust will be funded by a one-time monetary contribution and then a series of smaller payments over time. GM and Chrysler have asked the federal and Ontario governments for billions in emergency loans, and it's likely this funding would help support the creation of the trust.

Copyright © 2009 The Canadian Press. All rights reserved.

DETROIT–A cost-cutting deal between the United Auto Workers and General Motors Corp. will give a union-run health-care trust fund a smaller stake in the automaker than expected, but it could be the catalyst that allows it to restructure outside of bankruptcy court.

GM, which has received $19.4 billion (U.S.) in government loans and faces a Monday deadline to restructure or be forced into bankruptcy protection, reached a concession deal with the UAW last week that gives the trust fund up to 20 per cent of the company's shares while freezing wages and cutting performance bonuses and cost-of-living raises.

Factory-level union leaders from across the United States unanimously endorsed the deal at a meeting yesterday in Detroit. The union's roughly 61,000 GM workers must vote on the agreement by tomorrow.

In a summary obtained by Associated Press, the union said it would get 17.5 per cent of GM's common stock, plus a warrant for an additional 2.5 per cent, as partial payment of the $20 billion GM must put into a trust that will start paying retiree health-care costs next year. The trust also will get $6.5 billion in preferred shares that pay 9 per cent interest, plus a $2.5 billion note. The other $10 billion is to come from existing GM health-care trust funds.

The trust gets a seat on GM's board but must vote at the direction of GM's other independent directors.

The UAW deal is another piece of GM's quest to restructure out of bankruptcy. The Canadian Auto Workers union approved wage reductions and other concessions Monday.

But unsecured bondholders are resisting an offer to take a 10 per cent stake in GM to wipe out $27 billion in debt. Analysts doubt that enough bondholders will approve the offer, meaning GM could still be forced to file for Chapter 11.

Under details released yesterday, the UAW trust is getting far less in stock than GM said it would earlier. Company disclosures in regulatory filings had said it was negotiating to give the government half its shares, with the union trust getting 39 per cent. The remaining 1 per cent would go to existing shareholders.

Under the planned exchange, GM would issue 62 billion new shares, then do a 1-for-100 reverse stock split. With UAW's share now at 20 per cent, not the 39 per cent of GM regulatory filings, that frees 19 per cent for Washington or the bondholders.

"It looks like the creditors will get a richer offer that hopefully will induce them to avoid a bankruptcy filing," said Harlan Platt, a corporate turnaround professor at Northeastern University in Boston. GM would not comment when asked if the offer could be sweetened. Previously the company has said the U.S. government was preventing it from offering bondholders more than 10 per cent of the restructured company.

Factory-level union leaders said that the 14 plants that GM intends to close were not identified in the agreement.

Those are part of GM's restructuring plan to be submitted to the government by the Monday deadline, said one official, who spoke on condition of anonymity because the details of the meeting have not been presented to union members.

GM plans to close 14 more factories. Two other were identified earlier.

Associated Press

Ottawa won't bail out
GM pensions: Clement

CAW Members Ratify Restructuring Deal
with General Motors

May 25, 2009

Toronto CAW members working at General Motors in Oshawa, Windsor, St. Catharines and Woodstock, Ontario have voted overwhelmingly in favour of a new collective agreement, ratifying the deal by 86 per cent after a series of meetings were held over the past two days.

CAW President Ken Lewenza said this new deal should provide a much-needed sense of security to the thousands of active members and tens of thousands of retirees at General Motors in Canada.

“This has been a grueling restructuring process, and no one has felt that more than our members and retirees,” Lewenza said. “Although we were forced to make a number of important sacrifices, the support we received from our members is proof that they recognize the incredible challenges the industry is facing, but more importantly that they are prepared to stand by each other and stand with their union.”

Lewenza credited the solidarity and activism of CAW members who held demonstrations across the province in recent weeks as having played a critical role in pushing the restructuring talks forward.

The deal includes cost-saving provisions affecting cash compensation, health benefits, other non-wage benefits, work practices and productivity improvements as well as a comprehensive restructuring of the company’s pension plan.

CAW Local 222 President and CAW-GM Master Bargaining Committee Chairperson Chris Buckley said the restructuring deal will help secure the company’s financial footing in Canada and protect thousands of Canadian jobs in the face of a possible bankruptcy protection filing.

 “This deal has provided us the path on which we can move forward, to ensure not only our members but all workers impacted by the auto industry feel a bit more secure at a time of tremendous economic uncertainty,” Buckley said.

The ratification results for each location are as follows:

CAW Local 636, Woodstock
Production: 87 per cent in favour
Skilled Trades: 75 per cent in favour
Combined total: 86.5 per cent in favour

CAW Local 1973, Windsor
Production: 97.2 per cent in favour
Skilled Trades: 96.2 per cent in favour
Combined total: 97 per cent in favour

CAW Local 199, St. Catharines
Production: 86.5 per cent in favour
Skilled Trades: 87 per cent in favour
Combined total: 86.7 per cent in favour

CAW Local 222, Oshawa
Production: 85 per cent in favour
Skilled Trades: 73 per cent in favour
Combined total: 82 per cent in favour

Overall combined total: 86 per cent in favour

Anxious autoworkers and retirees, some in tears, cast ballots in three southern Ontario communities yesterday on the latest labour concession package struck between their union and General Motors of Canada.

The tentative agreement, reached last week after days of tough bargaining talks between the company and Canadian Auto Workers union, would slash labour costs by more than $8,000 per worker, while protecting wages and pension benefits.

GM workers in the southern Ontario communities of Windsor, Woodstock and St. Catharines voted on the agreement while workers in Oshawa are to cast ballots on today.

"The St. Catharines meeting was very very emotional. "There were some retirees that were actually crying," CAW president Ken Lewenza said in a telephone interview from St.Catharines following the vote.

"We certainly understand that because it's been a very, very difficult three or four months."

It's the third set of negotiations between the GM and the CAW within the past year. Ottawa and Queen's Park have insisted on further cuts to labour costs for the automaker to get billions of dollars in taxpayer aid.

The vote comes just one week before a government-imposed deadline for GM to complete a restructuring plan or be forced into bankruptcy protection.

In Windsor, Walter Smith, who has been with company for 28 years, said he hopes this is the last time the workers have to vote on a cost-cutting agreement.

"This is the third time and I think all we want to know is this going to stop, when is it going to stop?" said Smith after workers at GM's transmission plant cast their ballots.

Overall however, Lewenza said the votes are bringing workers a sense of relief.

"When we talk to our retirees and talk about their existing pension funding at 39 per cent, and recognizing that this whole restructuring is going to improve that situation ... and for active members, to think that you have a job and an opportunity to raise a family, with reasonably good income, even with the sacrifices."

The latest agreement, announced Friday, reduces hourly labour costs by between $15 and $16 per worker, on top of a $7-an-hour cut agreed to in March.

The deal also freezes pensions until 2015 and cuts benefit costs by more than $8,000 per worker – including a $3,500 payment to each worker to compensate for vacation time lost in collective bargaining a year ago.

Results of the votes at the four southern Ontario GM plants were not expected to be announced until tonight.

GM has received $15.4 billion (U.S.) in American loans.

The automaker needs holders of $27 billion of its bonds to forgive what they're owed in exchange for equity in the company, reports Friday said the company's biggest bondholders won't support the offer.

GM has already cut its Canadian workforce heavily, with the recent closure of a pickup truck plant in Oshawa eliminating 2,600 jobs. It now employs about 7,500 hourly workers in Canada, and plans a shutdown next year of a transmission plant in Windsor, which employs 1,400.

The entire auto industry has been battered by the recession, which has cut demand for cars and trucks sharply, leaving massive factory overcapacity.

The credit crunch has made it harder to finance car purchases, while changing tastes and high fuel prices have cut into demand for SUVs and pickup trucks, a major market for GM, Ford and Chrysler for years.

The federal and Ontario governments will indirectly pump billions of taxpayer dollars into addressing a huge shortfall in the General Motors pension plan as part of a historic deal to help keep the automaker alive, the company's union says.

In announcing a tentative deal on labour cost concessions, the Canadian Auto Workers revealed yesterday that GM of Canada will soon dramatically increase payments to tackle a shortfall of more than $6.5 billion in the pension plan and the two senior governments will play a significant role.

"Money will be filtered that way," said CAW president Ken Lewenza about government loans helping the pension plan.

Sym Gill, the union's director of pensions and benefits, added that GM will use the government loans to pay its bills for operations including pension obligations.

"Inevitably, some of those restructuring funds are going to be used for that (pensions)," Gill said.

Industry Minister Tony Clement said earlier this month that Ottawa was not in the business of "bailing out pension plans or legacy costs" at GM. In December, the federal government said in a statement that public funds for teetering automakers would be used for "general business purposes."

Ontario Premier Dalton McGuinty has said the government would not boost a provincial fund that guarantees pensions.

But he acknowledged recently that the province bears some responsibility for the massive shortfall because it allowed GM to make small annual contributions to its plan under a legislative loophole. That eventually led to the massive shortfall.

Senior Ontario government sources said the final amount to ease GM's pension shortfall remains under "ongoing" negotiations with Ottawa and Washington this weekend.

GM, which is currently operating with government lifelines, is seeking billions of dollars more from the U.S. and Canadian governments. The governments have told GM Corp. to submit new restructuring plans – with concessions by stakeholders including workers, bondholders, other lenders and dealers – before June to qualify for additional aid.

But opposition politicians here said it's unfair that taxpayers don't know how much they will specifically spend on GM pensions.

"We deserve to know because this is taxpayers' money," said interim Progressive Conservative Leader Bob Runciman. "We're not talking about small change here."

As part of resolving the issue, Lewenza also noted GM made a commitment to soon start funding the plan on a solvency basis, including a significant "upfront" payment. Its funding status will reach the level of Ford and Chrysler in about a year, he added.

GM paid $240.9 million into the plan in fiscal 2007 and should have contributed another $254.5 million last year, according to its actuaries. However, the annual contribution necessary to keep the plan solvent would be several hundred million dollars more.

Union officials said that under GM's commitment to the plan, it would be fully funded in about 10 years if economic conditions remain stable.

GM spokesman Stew Low would not comment on any pension funding issues, including government and company commitments, until after some 7,500 workers vote on the concessions package during the next few days. The concessions will only apply if GM gets the aid.

The pension problem dominated negotiations for concessions between the CAW, GM and the two governments for 11 days at a downtown hotel before a deal late Thursday night.

The federal and Ontario governments pressed GM and the union to ease the plan's burden so it wouldn't cripple the company's future prospects.

In an indication of what obligations lie ahead, GM will have four retirees for every active worker in a few years.

At the same time, the two governments and union knew they couldn't afford to let GM fail because it would trigger the loss of hundreds of thousands of other jobs in the auto industry.

Lewenza also said that if GM collapsed, retirees from what was once the biggest company in the country would lose more than 60 per cent of their pensions because the plan is currently funded at 39 per cent on a wind-up basis.

"It's a catastrophe in every way," he said about the possibility.

The federal and Ontario governments have never indicated how much they will be offering GM in total public loans. GM has already accepted $500 million.

Some reports indicated the aid would reach $7 billion but the actual figure might change because GM of Canada's production – as a part of the parent company's North American production – appears to be declining. Last year, the company had about 19 per cent, but that could now shrink to as low as 15 per cent.

The two governments had made retaining production here at 18 to 20 per cent of GM's overall North America output a major condition for how much aid the company would get.

The tentative terms of the worker concessions at GM are similar to cuts in a three-year deal their counterparts accepted recently at Chrysler Canada, another reeling automaker.

Over the three years, it would reduce labour costs for active workers by about $15 an hour on top of $6 an hour in cuts accepted in March.

The GM contract calls for a freeze on worker wages and cost-of-living allowance until 2012. Workers currently earn about $33 an hour.

But GM retirees would face more adverse terms than Chrysler pensioners.

They wouldn't get any further cost-of-living protection and improvements in benefits until 2015. At Chrysler, the freeze for retirees is until 2012.

Under the deal's terms, GM workers, like their Chrysler counterparts, would also lose one week of annual vacation, a $1,700 Christmas bonus, $3,500 in one-time holiday pay, school tuition assistance for children and semi-private hospital coverage. They would pay more for drugs and face limits on dental coverage and long-term care.

Lewenza noted GM would use some of the savings to help the pension plan. Newly hired workers would also contribute $1 an hour to the pension plan.

**************************************

HIGHLIGHTS OF THE DEAL BETWEEN CAW AND GENERAL MOTORS

Company starts increasing funding to workers' pension plan to eliminate $6 billion to $7 billion shortfall over next decade.

Federal and provincial governments to give about $7 billion in loans to GM, which will use some of it to help reduce shortfall.

Workers' wages and cost of living allowance (COLA) will be frozen until 2012. Retirees won't get new COLA increases over the same period. Their benefits will also be frozen.

Workers will lose one week of vacation, $1,700 Christmas bonus, $3,500 in other holiday pay, tuition and hospital coverage. They'll face limits on dental coverage and long-term care.

Workers will pay a new health-care fee of $30 a month. Retirees will contribute $15 monthly.

New workers will contribute $1 an hour to pension plan.

GM to maintain 15 to 17 per cent of its North American production, down from about 20 per cent earlier.

Source: Canadian Auto Workers

GM, CAW reach tentative deal

Alisa Priddle / The Detroit News
Friday, May 22, 2009

General Motors Corp. and the Canadian Auto Workers union have reached a tentative agreement in negotiations to reduce labor costs as mandated by the Canadian and Ontario governments as a condition of securing government loans.

CAW President Ken Lewenza said the agreement between the United Auto Workers and GM a day earlier put pressure on the Canadian talks, as well as the need for GM to be able to put a comprehensive restructured business plan on President Barack Obama's desk within three days.

A tentative agreement was reached late Thursday night and received the initial approval of representatives of the Canada and Ontario governments.
 
The union will meet with its leadership Saturday with ratification meetings and votes to be completed Sunday.

The deal staves off threats that failure to reach an agreement would result in the liquidation of GM operations in Canada and maintain the same level of production in the country in return for Canadian government loans.

Lewenza said the union was promised the new contract would be honored by GM in bankruptcy. The automaker is expected to file for protection in both the U.S. and Canada by month's end.

Core wages and benefits were preserved, but the union gave concessions that will see workers and retirees pay for more aspects of health care and lose some benefits similar to the terms already agreed to by unionized Chrysler workers in Canada.

The cuts, combined with high productivity at GM's Canadian plants, bring labor costs to the same level as those at Toyota Motor Corp. facilities in Canada, Lewenza said. It represents a cut of about $20 an hour when all is factored in.

Key to the settlement was restructuring of the pension plan. GM's plan in Canada is underfunded by about $6 billion.

A pension benefit freeze will be in effect until 2015 and new hires will pay $1 an hour to the pension fund.

The union agreed to give up a $3,500 bonus and contribute that amount to a new trust fund established to manage retiree health care.

Lewenza said GM has made a commitment to return its plan to solvency and no longer take advantage of a Canadian loophole that designated the automaker as too big to fail and thus allowed it to contribute proportionately less than smaller automakers such as Chrysler LLC and Ford Motor Co.

GM is working with the Ontario government to resolve the amounts and payment schedule to restore the fund to adequate levels. Once GM receives government funding, some of that will be used to bolster the fund.

With the recent closing of the Oshawa, Ontario, truck plant and other Canadian plants still to close including a transmission plant in Windsor, about 3,000 retirees will join the roughly 25,000 GM retirees or a ratio of four retirees for each active employee.

GM slated for bankruptcy

Obama administration plan would give the U.S. automaker at least $30B more in public financing as it reorganizes

WASHINGTON–The Obama administration is preparing to send General Motors into bankruptcy next week under a plan that would give the automaker tens of billions of dollars more in public financing as the company seeks to shrink and re-emerge as a global competitor, sources familiar with the discussions said.

The move comes as the administration prepares to lift the other faltering U.S. car company, Chrysler, from bankruptcy as soon as next week, industry sources said.

The legal tactic is viewed by some as the best means of reviving the companies. But the speed of the government-led transformation has triggered complaints that the rights of investors and dealers are being trampled. Meanwhile, fears that a bankruptcy could lead to cascading business failures are spreading throughout GM's vast chain of suppliers.

Under the draft bankruptcy plan, the company would receive just short of $30 billion (U.S.) in additional federal loans, a source said. The figure is a starting point in negotiations between the government and the company, the source said, and could change before filing. A cash injection that large would boost the U.S. investment in GM to nearly $45 billion.

Pressure is increasing on GM and union negotiators to reach a deal on concessions for Canadian autoworkers after their U.S. counterparts signed a tentative agreement on cuts in labour costs yesterday, the Star's Tony Van Alphen reports.

"There is a little more pressure to get it done now," Ken Lewenza, president of the Canadian Auto Workers, said last night. "And we will get it done as soon as GM and the governments agree to take some offensive things off the table."

Lewenza revealed that company and government officials want to eliminate long-standing provisions whereby workers automatically retire after 30 years of service.

"We're obviously against anything like that," he said.

"At a time when our younger members are feeling insecure, this would be horrible."

The UAW and parent GM Corp. reached a deal earlier in the day, including some provisions that the company and governments in both countries want to impose on more than 7,500 employees here in exchange for public aid.

The CAW has rejected a "cookie-cutter" approach to bargaining because of different cost structures in each country and the advantage of lower health-care costs here.

The UAW did not release details of the U.S. deal, but it calls on the union to take a significant shareholder stake in GM in exchange for accepting future financial responsibility for a retiree health-care trust. GM also plans to cut 16 plants south of the border.

UAW reaches deal with
GM, government

DETROIT–The United Auto Workers union has reached a tentative deal with the U.S. government and General Motors Corp. that offers to cut labour costs and fund a union-run trust that will take over retiree health-care costs next year.

The union announced the deal in a short statement issued today that gave no details, which were withheld pending meetings with members to explain the terms.

The move is a key step toward GM's efforts to restructure outside of bankruptcy court.

The company, which has received US$15.4 billion in federal loans, faces a June 1 government-imposed deadline to restructure or be forced into bankruptcy protection.

The statement says union members still have to vote on the deal.

It makes no mention of factory closures or production of vehicles outside the U.S., items that the union has protested in Detroit and Washington as the deadline approaches.

GM plans to close 16 more U.S. factories, costing 21,000 hourly workers their jobs, as it tries to cut labour costs and shrink its manufacturing footprint to match lower demand for its products.

The Treasury Department, which has been overseeing GM's restructuring efforts, had no immediate comment.

GM has about 61,000 hourly workers in the U.S., but plans to take that number down to 40,000 by 2010.

Talks for worker concessions with the CAW and General Motors of Canada dragged on yesterday with some minor progress but no tentative deal.

Ken Lewenza, president of the Canadian Auto Workers, said last night that although there were some signs of movement, there would be no deal on big cuts in labour costs at the teetering automaker until at least today.

"We're still moving in quicksand," said Lewenza at a downtown hotel.

The union says the federal and Ontario governments and Washington, which are considering billions of dollars in public aid to GM, are trying to impose on workers here concessions similar to those of their U.S. counterparts.

The CAW, which represents more than 7,500 GM workers, has rejected "the cookie-cutter" approach. It is also resisting proposals that would make active employees pay into a pension plan for the first time and make retirees accept significant reductions in benefits to address the fund's huge deficit.

The two sides and governments have been negotiating since May 11.

May 20, 2009

TORONTO — General Motors of Canada Ltd. has confirmed it is informing almost two-fifths of its dealers that their sales-and-service relationships with the auto maker will end.

A spokesman said letters were being sent Wednesday to about 245 of GM Canada's 709 dealerships, and further consolidation is expected to increase the number of shuttered locations beyond that number by the end of 2010.

Spokesman Stew Low added that the auto maker will not publicly release a list of dealers facing the axe.

GM said that the “rationalization” is focused on key urban markets, and it aims to accomplish the reduction “in an orderly, cost-effective and customer-friendly way.”

The result, it says, “will be a more competitive dealer network with higher volumes, while continuing to maintain the strongest and broadest dealer network in the country.”

While GM Canada has cut its direct work force to 12,000 people, the dealer chain is estimated to employ 33,000 people.

“The economic implications, of course are huge,” said Michael Hatch, chief economist at the Canadian Automobile Dealers Association.

“People look at the auto sector, sometimes, and they think it's just Detroit and Oshawa and Windsor, but dealerships are the retail presence ... and everybody knows that they're located in virtually every community in the country.”

While dealers normally see their sales shrink in economic downturns, they now face closings and thousands of job losses.

Marc Comeau, GM Canada's vice-president of sales and marketing, last week said the company plans to pay all the money it owes dealerships.

One dealer pointed out, however, that if he is forced to shut down and let his 60 employees go, legacy costs will be between $700,000 and $800,000.

“Who is going to pay that?” the dealer asked at the time.

GM Canada spokesman Stew Low last week said the auto maker has recently spoken with all its Canadian dealers.

“Our objective in the next few weeks is to achieve solutions that will best serve our current and future customers while also recognizing some of the unique aspects of our Canadian dealer network,” Mr. Low said.

U.S. dealers who sell less than 35 cars a year were among those notified in the first round of cuts.

Wednesday's GM announcement — following last week's termination notifications to about 1,100 U.S. dealers — came as the auto maker continued talks to extract further concessions from its Canadian unionized work force.

The Canadian Auto Workers told members Tuesday that the “incredibly intense” talks “are approaching a moment of truth.”

A May 15 deadline set by the federal and provincial governments has passed, and the governments “continue to interfere in the process, making new demands all the time,” the union said.

Federal Industry Minister Tony Clement said Wednesday that his officials have told him progress has been made.

“As long as we're moving in the right direction, not the wrong direction, I'm willing to be patient on this,” Clement told reporters in Washington.

With files from Globe and Mail reporters Greg Keenan and Karen Howlett

Being 'blackmailed,' CAW says

\GREG KEENAN

Under siege are hundreds of defined benefit pensions crafted a generation ago to offer guaranteed incomes to retirees. The fixed legacy pension incomes are much more lucrative than modern plans, which call for companies to contribute only set payments to pensions.

Many distressed companies are already billions of dollars short of the funds they are required to set aside for defined pension plans. Executives of the worst basket cases are raising the spectre of corporate liquidations in a bid to pressure workers, governments and the courts for a pension do-over.

Against this backdrop, lawyers are girding for waves of pension litigation and collective bargaining battles. Pensions have always been fertile ground for legal fights, but the ground is shifting. For decades, most legal challenges involved pension surpluses. Companies wanted the right to tap surplus funds and workers fought back, arguing that surpluses should be kept for rainy days.

Well, the rainy days are here and troubled companies saddled with pension shortfalls are fighting again, this time to trim defined pension benefits they say they can no longer afford.

“History has led us to the point where employers have shirked their obligations to properly fund their pensions,” said Susan Philpott, a pension expert with Koskie Minsky LLP representing a group of Nortel retirees. “I expect to see some hard, hard fought changes to these pension plans. It is not going to be easy.”

Ms. Philpott's corporate world opponents are also bracing for conflicts. “We are going to see a dramatic increase in pension litigation,” said Brett Ledger, a pension litigation specialist with Osler Hoskin & Harcourt LLP who represents several Canadian companies.

In the face of so much economic turmoil, he said companies will push the courts to revisit pension plans. Historically, Canadian courts have been reluctant to tamper with pensions because they were developed here under our trust laws, making it very difficult to impose changes detrimental to the interests of pensioners.

In a few recent cases, the courts have shown a greater willingness to tamper with pensions with an eye to the broader interest of preserving a company and its ability to support pensioners in some fashion over the long term.

“It has been very hard to mess with or change pensions. But the question now is: Are the courts going to make an accommodation with these traditional trust principles to achieve a reasonable commercial result?” Mr. Ledger said.

The answer appears to be yes if the company is forest products business AbitibiBowater Inc. Earlier this month, Quebec Superior Court Justice Danièle Mayrand stunned AbitibiBowater's unions by allowing the company's request to suspend $13-million in monthly payments it owed to replenish a pension shortfall of $1.4-billion that is required by federal and provincial laws.

The company has sought court protection from its creditors under the Companies' Creditors Arrangement Act in Canada and Chapter 11 in the United States. Legal experts said Judge Mayrand's decision is part of a developing body of law that has seen judges allow the pragmatic, corporate problem-solving spirit of CCAA to trump federal and provincial pension funding laws.

The Communications, Energy and Paperworkers Union at AbitibiBowater is reviewing legal options since the decision.

Another pension battle appears to be brewing at Nortel, the fallen telecommunications giant that is also operating under CCAA to restructure its debts. It is actively seeking buyers for most of its assets, a strategy that could ultimately leave Nortel with limited resources to finance its pensions.

By law, companies are legally bound only to honour pension agreements as long as they are in business. If a company is insolvent and liquidated, federal and most provincial laws allow it to wind up pension plans. If Nortel were allowed to wind up its pensions, retirees could face an income cut because the company is operating with a $1.8-billion pension shortfall.

When companies are wound up with underfinanced pensions, the remaining pension fund is distributed as a kind of retirement annuity and divided on a pro-rata basis to each eligible employee and retiree.

“My clients are very concerned,” said Christopher Rootham, a lawyer with Nelligan O'Brien Payne LLP who represents a number of current Nortel employees. “They have been long-serving employees and they are worried that the retirement savings that they bargained for over the years is going to disappear or be significantly reduced.”

Similar fears can by found at Air Canada, whose directors and new chief executive officer Calin Rovinescu have placed a priority on shaving the airline's defined pension costs.

Mr. Hargrove's brave assertion of immutable auto pensions seems like the cry of a bygone generation. Chrysler Canada's parent is fighting for survival in bankruptcy court and General Motors Corp. is likely days away from a similar fate. Mr. Hargrove's successor, Ken Lewenza, has been locked in bargaining with GM officials who are seeking, among other things, steep pension cuts.

He emerged from negotiations over the weekend to express frustration with GM's demands, which, he warned, were pushing the union near “the point of despair.”

Federal Industry Minister Tony Clement has indicated the government is flexible about when General Motors Canada and its unionized workers reach a new labour agreement, so long as it's part of a finished restructuring plan delivered by the end of May.

The Canadian Auto Workers union has said the federal and Ontario governments set last Friday as the deadline for GM to reach a labour agreement with the CAW.

But the two sides are still mired in negotiations this afternoon.

Clement had planned to travel to Washington, D.C., today to discuss the new deal with U.S. officials, but a spokeswoman in his office said his trip had been delayed until later this week.

Clement says May 31 is the hard and fast deadline for GM to present its restructuring plans to governments in the U.S. and Canada and the government wants a labour agreement to be reached and ratified before then.

GM has asked the Ontario and federal governments for $6 billion in emergency loans to get the automaker through a severe slump in sales.

The Canadian Auto Workers union says Ottawa must make sure General Motors of Canada doesn't import any more vehicles from offshore countries if the government wants to protect jobs here and assure protection of public investment in the teetering automaker.

As talks for worker concessions continue in Canada, Detroit-based parent GM Corp. – which is seeking billions of dollars in public loans – has revealed to the U.S. Congress it plans to start importing small cars from China within two years. Union officials in both countries say the move will kill jobs in North America.

"Obviously the federal and Ontario governments should maximize their return from GM and Chrysler and possibly Ford by limiting imports which have been costing us jobs for years," CAW president Ken Lewenza said in an interview yesterday.

He said the union has pressed Ottawa for years to stop a flood of auto imports here because offshore countries don't offer the same access to Canadian-made vehicles.

GM is already importing South Korean-made small cars to Canada despite union efforts to limit them since Canadian automakers face trade barriers in that Asian country.

"In China, it's the same thing – a one-way flow of trade out," Lewenza said. "Here, we leave it wide open. If this keeps up, the only question for government is when are we (the domestic auto industry) going to die."

Chris Buckley, chairman of the union's bargaining committee, said he finds it "absolutely mind-boggling" that GM is trying to increase imports into North America at a time when it is shutting down North American plants.

In negotiations for worker concessions with General Motors and struggling Chrysler, the union and the federal and Ontario governments have insisted that the companies maintain current levels of output as a percentage of their North American production. If output slid in the U.S., it could drop here too and still hold the production threshold.

The union has repeatedly told Ottawa to fix the trade problem and limit imports, but Buckley would not comment on whether the federal and Ontario governments should refuse GM's current requests for loans if the company plans to increase imports here.

In the U.S., the United Auto Workers union has complained to the government about GM's plan to close 16 plants while "dramatically" increasing auto imports from Mexico, South Korea, Japan and China.

The UAW said GM wants to nearly double the number of imports from those countries, which would cost 21,000 unionized jobs south of the border.

GM acknowledged it plans to start importing small cars from China starting in 2011 and gradually bump up the number to 51,000 by 2014. But the company says the percentage of cars made and sold in the U.S. will remain stable, with fewer imports likely from Canada.

Some industry watchers say GM needs to import small cars from countries with lower labour costs to remain competitive.

GM shut down its truck assembly plant in Oshawa last week and plans to close a transmission operation in Windsor next year. At one time in the 1990s, GM had six assembly plants in Canada but now operates only two, one in Oshawa and one in Ingersoll. The Ingersoll plant is a joint venture with Suzuki.

The issue over imports has overshadowed continuing negotiations for worker concessions, particularly in the U.S. GM must reach deals for concessions from workers, debtholders and other stakeholders by June 1 to qualify for billions of dollars in additional aid from governments in both countries. GM has already received $15.4 billion (U.S.) in loans from the American government and another $500 million (Canadian) from Ottawa and the provincial government.

Meanwhile, negotiations for concessions by workers here dragged through the weekend at a downtown hotel without resolution on how to reduce GM's huge underfunded pension plan. The governments had set a "deadline" of last Friday night for a deal.

Sources close to the talks said GM now wants thousands of active workers to start paying into the fund, which had a shortfall of more than $4 billion in 2007. GM has not yet released 2008 figures but experts say the shortfall could now be higher than $7 billion.

GM and Lewenza would not comment on demands, but the union leader said there are "multiple proposals for active workers which are much different" than what Chrysler employees recently accepted so that company could qualify for aid.

"We are close to the end of our ability to give," Lewenza said last night. "Sooner or later, GM and the federal and provincial governments will realize that."

Both sides agree that GM's pension plan is in far worse shape than Chrysler's fund after years of making minimal contributions under a special provision in provincial legislation.

Chrysler workers ratified a deal that froze wages, cut benefits, eliminated bonuses and some vacation time. They also agreed for the first time that new employees would contribute $1 an hour, or about $1,700 annually, to the company's defined pension plan.

Labour concession talks between General Motors of Canada and the Canadian Auto Workers are progressing slowly largely because there are so many parties involved, says the union president, who predicts talks may continue several more days.

"What we consider close and what all the parties consider close is what separates us," CAW president Ken Lewenza said. "This isn't two-sided bargaining."

Both the Ontario and federal governments, along with the U.S. Treasury Board and U.S. Auto Task Force, are additional players as the union aims to negotiate a cost-saving deal that will unlock $6 billion in financial assistance for the automaker. A midnight-Friday deadline imposed by the governments passed without a deal being reached. Officials have since told Lewenza they will allow discussions to continue "at least a couple more days" as long as there is no sign of either side leaving the table.

Lewenza said he believes the union has already made greater concessions than were asked of Chrysler when they worked out a similar deal to access bailout funds last month.

Pensions, health-care costs and benefits are the main stumbling blocks, he said.

Chrysler reached a deal with union members last month that cut the company's labour costs by $19 an hour.

The CAW in a statement late Saturday cited some headway in the last-ditch talks, though key issues remained.

Without a stringent deal, the worst-case scenario for GM would see the company's Canadian assets liquidated.

GM has until the end of May to provide governments in Canada and the United States with a restructuring plan that could include filing for bankruptcy protection.

GM Canada currently employs 7,500 hourly workers at a car plant in Oshawa, a transmission plant in Windsor and an engine plant in St. Catharines. It also operates the GM-Suzuki joint-venture CAMI plant in Ingersoll, also in southern Ontario.

A truck plant in Oshawa closed Thursday and the Windsor transmission factory will be shut next year.

From the Star's wire services

General Motors of Canada and the Canadian Auto Workers union were still trying to negotiate a labour concession agreement yesterday as the union president expressed frustration at the company's unwillingness to compromise.

"It's not a matter of the CAW with overzealous proposals. It's a matter of General Motors at this particular time being overzealous," CAW president Ken Lewenza said in a phone interview yesterday evening. "But we keep talking."

The two sides failed to reach an agreement by a government-imposed deadline of midnight Friday and continued talking through the night.

Lewenza said the federal and Ontario governments told the two sides yesterday they could wait a few more days as long as there was progress at the bargaining table.

"The minute we quit talking, then the whole process is in jeopardy and I'm not prepared to jeopardize ... that," he said.

A deal has not yet been reached because the union believes the sacrifices being asked of GM membership are "much more significant" than those asked of Chrysler employees, he said.

"We've already made some productivity improvements that are over and above what we did at Chrysler," he said. "There's no question General Motors is getting more at this particular time than what we provided Chrysler."

Government officials were also working behind the scenes to help broker a deal, Lewenza said.

Both GM and Chrysler must present restructuring plans to the government if they want to receive billions in bailout money.

Chrysler reached a deal with union members last month that cut labour costs by $19 an hour through concessions.

But GM is in a worse financial position than Chrysler, due in part to a ballooning pension deficit.

At one point in the talks with GM yesterday evening, Lewenza said he thought a deal was within reach, but it slipped away and he couldn't predict how much more bargaining was ahead.

Without a more stringent deal, Ottawa and the province have said they won't give GM Canada the $6 billion in aid it has requested.

GM Canada currently employs 7,500 hourly workers in southern Ontario.

General Motors wants more concessions from workers than those Chrysler employees recently accepted in the effort to stay alive, a top union leader says.

Ken Lewenza, president of the Canadian Auto Workers, said late yesterday GM and union negotiators remain far apart on an agreement and bargaining would continue past a midnight government "deadline" last night.

"GM is telling us the labour-cost savings by Chrysler workers are now not enough," Lewenza said in an interview. "They are being overzealous in every area."

Lewenza stressed that the union bargaining committee would not accept lower wages, benefits and pensions than Chrysler workers.

The federal and Ontario governments had set a midnight deadline for the two sides to reach a tentative deal on concessions that would form part of a GM restructuring plan required to qualify for several billions of dollars in public loans.

A spokesperson for GM, which closed its truck plant in Oshawa on Thursday, could not be reached for comment on the talks.

GM must submit the plans by the end of the month to governments in Canada and the United States. The parent company and the United Auto Workers are also negotiating concessions in the U.S.

Lewenza said the union didn't negotiate a deal at Chrysler until two days after deadline last month and negotiations at GM are at least a few days behind that pace.

The union's bargaining committee distributed a leaflet in GM plants earlier this week that said "we are fighting for our lives" and called the government demands in negotiations "outrageous."

GM had said a concessions deal in March with the union made the company competitive with rivals in the U.S. But the governments here instructed the two sides to resume bargaining for more labour-cost cuts so they would be competitive with Toyota in Canada.

The governments also want GM and the union to address a huge long-term pension deficit and retiree health-care costs.

Negotiators for the union and Chrysler agreed on reducing pension expenses by halting cost-of-living payments and accepting contributions by new workers to the company plan for the first time. They also agreed on introduction of a health-care trust that will eventually shift financial responsibility for retiree health-care costs to the union from the company.

But the pension issue poses a much more difficult problem at GM because of huge funding shortfall.

In the three-year Chrysler deal, workers, who currently earn an average of about $35 an hour, also accepted freezes in wages and cost-of-living allowance; higher health-care and drug payments; loss of some vacation time and bonuses; a reduction in child-care benefits and the elimination of a tuition refund program. The union said it would save Chrysler about $240 million annually.

GM Talks will continue past
midnight deadline

May 15, 2009

BUSINESS REPORTER

General Motors wants more concessions from workers than what Chrysler employees accepted recently in efforts to stay alive, a top union leader says.

Ken Lewenza, president of the Canadian Auto Workers, said late today GM and union negotiators remain far apart on an agreement and bargaining would continue past a government midnight deadline tonight.

"GM is telling us the labour cost savings by Chrysler workers are now not enough," Lewenza said in an interview. "They are being overzealous in every area."

Lewenza stressed that the union bargaining committee would not accept lower wages, benefits and pensions than Chrysler workers.

The federal and Ontario governments had set a midnight deadline for the two sides to reach a tentative deal on concessions that would form part of a GM restructuring plan so it can qualify for several billions of dollars in public loans.

A spokesperson for GM, which closed its truck plant in Oshawa earlier this week, could not be reached for comment on the talks.

GM and its Detroit parent must submit the plans by the end of the month to governments in Canada and the U.S. The parent company and the United Auto Workers are also negotiating concessions in the U.S.

Lewenza said the union didn't negotiate a deal at Chrysler until two days after a government deadline last month and negotiations at GM are at least a few days behind that pace.

The union's bargaining committee distributed a leaflet in GM plants earlier this week that said "we are fighting for our lives" and called the government's demands in negotiations "outrageous."

GM had said a concessions deal in March with the union made the company competitive with rivals in the U.S. But the governments here instructed the two sides to resume bargaining for more labour cost cuts so they would be competitive with Toyota in Canada.

The governments also want GM and the union to address a huge long-term pension deficit and retiree health care costs.

Negotiators for the union and Chrysler agreed on reducing pension expenses through a stoppage in cost of living payments and contributions by new workers to the company plan for the first time. They also agreed on introduction of a health care trust that will eventually shift financial responsibility for retiree health care costs to the union from the company.

But the pension issue poses a much more difficult problem at GM because of huge funding shortfall.

In the three-year Chrysler deal, workers, who currently earn an average of about $35 an hour, also accepted freezes in wages and cost of living allowance; higher health care and drug payments; loss of some vacation time and bonuses; a reduction in child care benefits and the elimination of a tuition refund program. The union said it would save Chrysler about $240 million annually.

thestar.com

'Not even close' to deal with GM, CAW president says

The Canadian Auto Workers union was "not even close" to reaching a new labour agreement with General Motors Canada, union president Ken Lewenza said Friday afternoon.

Lewenza gave the brief update with just hours to go before a midnight deadline set by the federal and Ontario governments with negotiations expected to go right to the deadline.

A GM Canada spokesman wouldn't comment on the details of the negotiations, but said there was "lots of hard work going on."

Although CAW members ratified a deal with GM back in March, less than a year after the two sides had reached a three-year contract, the two governments almost immediately said it didn't do enough to cut costs.

Without a deal, the governments have said they won't give GM Canada the $6 billion in financial assistance it has requested, meaning that in a worst-case scenario the company's Canadian assets could be liquidated.

GM has until the end of May to provide governments in Canada and the United States with a restructuring plan that could include filing for bankruptcy protection.

Prime Minister Stephen Harper said he realizes the government is asking a lot of GM workers, but it's the only way the company will survive.

"I understand for many people, particularly the people on the line, these are very difficult decisions with very real impacts on their lives," Harper said Friday in Toronto.

"But at the same time, the taxpayers of Canada cannot be expected to support the restructuring unless the restructuring will be successful, and that is going to require difficult decisions on the part of everyone."

Ontario Premier Dalton McGuinty echoed Harper, emphasizing the need for "extraordinary decisions" and an "extraordinary new arrangement."

"There's much at risk here and I think our response given how much is at risk has to be proportional in nature, which means we're all going to have to dig deep if we're going to make a go of this," McGuinty said.

Federal Industry Minister Tony Clement plans to head to Washington, D.C., on Tuesday to present details of the agreement to U.S. officials.

At particular issue is GM Canada's ballooning pension deficit, which was about $4.9 billion as of November 2007. Reports say it jumped to about $7 billion after financial markets crashed in late 2008.

Lewenza has said the issue of pensions cannot be resolved at the bargaining table.

The CAW has blamed the Ontario government for giving GM Canada a holiday on contributions to its own pension fund in the 1990s, back when it was widely considered "too big to fail."

Ontario Economic Development Minister Michael Bryant has said retired workers' pensions won't be touched.

Instead, it's likely the CAW will be asked to give GM similar concessions to those it gave Chrysler Canada in a deal reached last month that cut that company's labour costs by about $19 an hour.

Among many other concessions, that agreement will help Chrysler reduce its legacy costs by giving it 10 years instead of five top up its pension fund and, for the first time ever, workers will contribute $1 per hour toward their pensions.

GM Canada currently employs about 7,500 hourly workers in southern Ontario at a car plant Oshawa, a transmission plant in Windsor and an engine plant in St. Catharines. It also operates the GM-Suzuki joint-venture CAMI plant in Ingersoll.

A truck plant in Oshawa closed Thursday and the Windsor transmission plant will close next year.

GM plans to cut 1,100
dealers in U.S.

DETROIT–A day after Chrysler LLC told a quarter of its dealers that it won't renew their contracts, owners of General Motors Corp. dealerships are awaiting word on whether they will be next.

GM said it will notify 1,100 U.S. dealers on Friday that their franchise agreements will not be renewed. Dealers expect to hear either by telephone or FedEx letters that will begin arriving Friday morning.

GM spokeswoman Susan Garontakos said the company will not make public a list of dealers to be cut, leaving the decision to release information to individual business owners.

The company has scheduled a conference call for noon Friday to explain its dealer reduction strategy.

The cuts will come just a day after crosstown rival Chrysler announced it was dropping 789 of its roughly 3,200 dealerships by around June 9. Both companies have too many dealerships for too few sales are slashing costs as they race to restructure.

GM's dealer cuts are part of the company's plan announced last month to cut more than 2,600 dealers by 2010. The remaining cuts will come from closed Saturn and Hummer dealers, along with 400 dealers that the company expects will close voluntarily. Another 500 would be consolidated into other dealerships.

The GM dealer cuts are likely to have a much greater impact than Chrysler's. While many Chrysler dealers also sell other brands and will stay open after losing their franchises, a large number of GM dealers sell only GM vehicles. So if their franchises are revoked, they run a greater risk of closing for good.

In both cases, the cuts will cost thousands of jobs, create holes in local tax bases, eliminate community pillars and create economic ripple effects across the country.

Chrysler is operating under bankruptcy protection, so it is likely to have an easier time tearing up its franchise agreements with its dealers than GM. A hearing is scheduled for June 3 in U.S. Bankruptcy Court in New York for the judge to determine whether to approve Chrysler's motion to fire its dealers.

Chrysler executives said Thursday the company is trying to preserve its best-performing dealers and eliminate ones with the weakest sales. More than half of the dealerships being eliminated sell less than 100 vehicles per year, they said, and account for 14 percent of U.S. sales.

Chrysler has received $4 billion in government aid, while GM has received $15.4 billion. GM is continuing to restructure out of court and faces a government-imposed deadline of May 31 for doing so. Several difficult hurdles remain, and many experts say that it is all but inevitable that it will follow Chrysler into Chapter 11 bankruptcy.

To remake itself outside of court, GM must persuade its bondholders to swap $27 billion in debt for 10 per cent of its risky stock. In addition, it must work out deals with its union, announce factory closures, cut or sell brands and shutter dealers.

Swapping its bond debt for equity may be its most difficult task. The company is trying to get 90 percent of its bondholders on board for the so-called debt-for-equity swap. A committee representing the bondholders has rejected the swap, saying it unfairly favors the government and the United Auto Workers union. They have counteroffered seeking a 58 percent ownership stake, which the automaker in turn rejected.

On Thursday, GM said that bankruptcy is possible if it doesn't get enough takers on the exchange. If that happens, it likely would sell most of its assets to a new company and liquidate the rest, the automaker disclosed in a regulatory filing.

The automaker also says it could seek court approval of its reorganization plan even if creditors vote against it.

Shares of GM closed Thursday at $1.15.

Pension issue threatens GM Canada's survival

* CAW says not much progress in GM talks
* Ottawa warns GM Canada not viable without more cuts
* Union says pensions cannot be dealt with in bargaining

By John McCrank and Randall Palmer

TORONTO/OTTAWA, May 13 (Reuters) - Pension issues are stymieing efforts to reach a new concession deal between the Canadian Auto Workers union and General Motors Corp that is needed to keep the automaker's Canadian operations from liquidation, the head of the union said on Wednesday.

The two sides have until Friday to strike a new cost-cutting deal or the automaker could miss out on billions of dollars in government loans needed to keep GM Canada afloat.

"We're not making much progress at all," CAW President Ken Lewenza told Reuters during a break in the negotiations, which have been ongoing since Sunday.

"We're talking to each other, but we've got some major issues," he said."
A GM spokesman was not immediately available for comment.
The biggest hurdle involves the cost of pensions for GM's retired workers, Lewenza said.

GM Canada has been making vehicles for around a century and has about five retirees for every active worker.

Complicating matters is a pension fund shortfall at GM Canada estimated to be as high as C$7 billion ($6 billion).

GM and the CAW signed a cost-saving contract agreement in March that the company said would cut nearly C$1 billion related to retirees from its books, on top of big savings on the active worker side.

Industry Minister Tony Clement said on Wednesday the concessions from March did not go far enough.

Ottawa recently sent the two sides back to the bargaining table with a deadline of May 15 and a goal of bringing costs at GM Canada into line with those at the nonunionized Toyota and Honda plants in Canada.

"The general determination is, given the deterioration of the market, even since that moment (March), there is no question that for GM to be viable there has to be more on the table," Clement told Reuters.

"We're at a very critical juncture. Over the next 48 to 72 hours there's a lot that has to fall into place and then we'll make a determination on where we stand," he said.

Jim Stanford, the CAW's economist, said on Wednesday that Ottawa had given little in the way of guidelines about what it expects to see in the final deal.

"We don't have an agreement on a particular target, other than the broad, nonspecific direction from government to be comparable to Toyota Canada," he said.

Labor costs for automakers include the costs of both active and retired workers, among a host of other items.

Toyota Canada has a similar pension plan to GM Canada's, but it has only been producing autos in the country for just over 20 years, and has nowhere near as many retirees as GM.

"It's not apples to apples," Lewenza said. "We can't handle the pensions. That can't be dealt with at the bargaining table."

The CAW and GM are also involved in ongoing committee discussions with the governments of Canada and the province of Ontario on how to deal with pension and healthcare issues, Stanford said.

GM Canada currently employs about 10,300 hourly workers, but has said that number will fall substantially as planned plant closures take effect.

GREG KEENAN and KAREN HOWLETT AND SHAWN MCCARTHY

Mindful of a potential political backlash if Ottawa is seen to be bailing out lucrative auto worker pensions, Industry Minister Tony Clement has insisted federal taxpayers will not be on the hook for GM Canada's pension shortfalls, which are regulated and guaranteed by the province.

The Ontario government's position is that the shortfall in the pension plans is a significant component of the GM situation and cannot be isolated from the overall negotiations, said an Ontario government source who asked not to be named.

“All of the parties – the unions, GM, U.S. Treasury and the Canadian and Ontario governments – are working together to try to keep GM viable now and sustainable in the long term,” the source said.

The Canadian and Ontario governments will decide how much money they are prepared to lend GM once the company and the CAW present their plans for restructuring the company's operations and cutting overall labour costs.

Still, provincial Finance Minister Dwight Duncan warned that Ontario's Pension Benefits Guarantee Fund is not in a position to bail out the GM plan. He said it would be unfair to ask taxpayers to bail out any pension plans that are under water, including GM's, because about two-thirds of Ontarians don't even have a pension.

GM Canada's plan had a deficit of $4.5-billion in its most recent public information released in November, 2007, but sources said the amount ballooned to more than $7-billion at the end of 2008 on declines in the stock market last year.

Since then, the Toronto Stock Exchange's leading index has regained about 12 per cent of its value, paring the pension shortfall somewhat. As well, the CAW says it already gave GM Canada $500-million worth of pension savings in March when the union agreed to freeze basic benefits and eliminate cost-of-living adjustments for retirees. Those changes won't come into effect, however, unless GM signs a final loan agreement with the federal and Ontario governments.

GM Canada spokesman Stew Low said the latest public figures are still those from November, 2007.

With government officials acting as mediators, the union and company are huddled in talks this week aimed at wringing out further cost savings after governments said a March agreement did not provide enough to make the company competitive and viable over the longer term.

The Detroit-based parent, General Motors Corp., is negotiating with its United Auto Workers union to reach the level of concessions demanded by President Barack Obama in return for a U.S.-led bailout that would provide more than $30-billion (U.S.) in loans to the company.

Even with deals with unions and governments, GM is likely to file for bankruptcy protection in the United States – and its subsidiary may seek similar protection in Canada – to dramatically reduce its debt load.

A settlement of GM Canada's pension problem is likely to involve financial contributions from GM Canada and the Ontario government, plus a reduction in future benefits for unionized employees at GM Canada who are still working and will retire in future years.

The fund will face a big hit in payouts over the next few years as the auto maker reduces its hourly work force to about 4,400 by 2014, from more than 10,000 now. Based on the November, 2007, shortfall of $4.5-billion in the funds, the deficit would amount to more than $1-million for every active GM worker by 2014.

CAW union says pressing
for new GM Canada deal

* Pushing to meet May 15 government deadline
* Costs related to GM retirees seen as key hurdle
* Oshawa truck plant set to cease operations Thurs

By John McCrank

TORONTO, May 12 (Reuters) - The Canadian Auto Workers union said on Tuesday it is working hard to reach a new contract agreement with General Motors of Canada ahead of a government imposed deadline of May 15, but cautioned there are no guarantees a cost-saving deal will be reached.

The union said at the end of last week that Ottawa had warned that without new cost concessions with the struggling automaker, GM would likely be forced to liquidate its Canadian operations.

"This is extremely painful and that we're doing everything within our power to protect the interests of our active and retired members," said Chris Buckley, chairman of the CAW-GM bargaining committee and president of CAW Local 222 in Oshawa, Ontario.

"The alternative is the company going into liquidation (in Canada) and we're trying to avoid that because then nobody wins."

The CAW and GM began bargaining on Sunday and Buckley said the two sides were pushing hard to meet the government's deadline, "but there are no guarantees."
A spokesman for GM Canada was not immediately available for comment.

GM's CEO said on Monday that it was probable the company would have to seek bankruptcy protection to help it restructure.

The union reopened its three-year collective agreements with GM and Chrysler, reached last May, to help the companies survive the brutal downturn in the auto sector and qualify for government aid.

The CAW and GM reached a new agreement in March that the company said would made its Canadian plants cost competitive with its U.S. operations.
However, the federal government said that deal did not go far enough for them to justify supporting GM with taxpayer-funded loans.

The union later struck an agreement with Chrysler that would put its labor costs on par with nonunionized automakers operating in Canada, such as Toyota and Honda -- a move that Ottawa supported.

"Unfortunately, General Motors is a totally different situation," said Buckley, noting that costs related to retirees at GM are much higher than at Chrysler.
Labor costs include the costs of active workers, retirees, payroll taxes, and benefits, among a host of other items.

General Motors, whose origins in Canada date back more than a century, has about five retirees for every active worker. Chrysler has about 1.5 retirees for every active worker, while Toyota, which is not unionized, has very few retirees in Canada, where it first set up shop in 1987.

Separately, GM Canada is set to shutter its Oshawa truck plant on Thursday, putting about 2,600 people out of work.

His comments came as the auto maker opened talks with the Canadian Auto Workers (CAW) yesterday to reduce hourly labour costs - just two months after the union agreed to concessions such as extending a pay freeze, eliminating one week of paid time off and halting cost-of-living adjustments for retirees.

Also yesterday, federal Industry Minister Tony Clement pointed to Mr. Henderson's statements about not making a debt payment owed by June 1 as a sign bankruptcy protection may be unavoidable.

One option is for GM and its Canadian subsidiary to go into a "surgical" bankruptcy process, under which the company would, in theory, emerge quickly, Mr. Clement said.

Mr. Henderson said yesterday that bankruptcy filings are being evaluated "country by country. It's not a foregone conclusion that a U.S. filing would result in filings in other locations."

Among the tasks GM needs to complete are reaching agreements with the CAW and the United Auto Workers; convincing thousands of unsecured debt holders to swap that debt for equity in a restructured GM; and announcing the closings of several more U.S. plants.

The federal and Ontario governments set a deadline of May 15 for the company to reach a deal with the CAW.

Since the union agreed in March to concessions at GM Canada amounting to about $7 an hour, the CAW conceded even more - cuts worth $240-million annually or about $19 an hour - at Chrysler Canada Inc., as workers faced the prospect of that company's Canadian operations being liquidated in its parent company's Chapter 11 filing in the United States.

The two governments warned the CAW last week that the same threat hangs over General Motors of Canada Ltd. facilities in Oshawa and St. Catharines, Ont.

Mr. Henderson also said two investors are interested in the Hummer brand and several are kicking the tires at its Saturn Corp. unit. Multiple bidders also are vying for German division Adam Opel AG.

Ford to sell 300 million
common shares

DETROIT, May 11 (Reuters) - Ford Motor Co said on Monday that it would sell 300 million common shares and use part of the proceeds to pay off its healthcare obligations to the United Auto Workers under the terms of a recently concluded deal with the union.

Ford also said it expects to grant to the underwriters -- Citigroup, Goldman Sachs, JPMorgan and Morgan Stanley -- a 30-day option to buy up to 45 million shares of common stock.

Ford shares fell 4.6 percent to $5.80 in after-market trade following the stock offering. At that price, the new shares would raise about $1.7 billion for Ford.
Ford is the only U.S. automaker that has not sought government aid.

Ford's stock offering comes on the heels of a successful debt exchange. Ford shares have had a four-fold rise in price since hitting a low of $1.50 on Feb. 20.
Ford said net proceeds from the stock offering would also be used for general corporate purposes.

"Today's equity offering is another example of the fast, decisive action we are taking as we build momentum on our plan, including further progress on improving our balance sheet," Ford Chief Executive Alan Mulally said in a statement.

Ford is trying to raise capital to fund the Voluntary Employee Beneficiary Association (VEBA), a union-run fund set up for retiree healthcare expenses.
Ford restructured payments into the VEBA, including the option to contribute about half in company stock, to conserve cash. But the plan to make payments in stock requires shareholder approval at Ford's annual meeting this week.

Ford, which posted a net loss of $1.43 billion in the first quarter, has said it believes it has adequate liquidity to operate through the economic downturn without seeking emergency U.S. government loans.

From Monday's Globe and Mail

Letter from Alan Mulally

From: Alan Mulally
To: The Ford Team
Sent: Thu Apr 30 13:07:11 2009

Subject: Changing Competitive Landscape

Today’s announcement that Chrysler is filing for Chapter 11 bankruptcy is an important development during this unprecedented period for the auto industry and the global economy. 

Our teams are monitoring the situation and have been working hard for months to ensure that the external environment and industry restructuring do not slow progress on our Ford transformation plan, which remains solid and unchanged:

Importantly, we share President Obama’s hope that Chrysler’s bankruptcy will be controlled and quick, while we continue planning for all contingencies as a prudent business measure.  Our industry is highly interdependent, and the health of the supply base and dealer network is critical for all automakers.  Ford appreciates that the U.S. Automotive Task Force is focused on the stability of the supply chain and is committed to ensuring that a healthy U.S. auto industry emerges from this difficult economic period

At this time, we do not expect any disruptions to our operations as a result of today’s news.

With the continued industry restructuring in the weeks and months ahead, the most important point for the Ford team is to remain absolutely focused on our plan.  I am more convinced than ever that we have the right plan, the right products and the right ONE Ford team to allow us to operate through the downturn and emerge as a lean, globally integrated automaker poised for profitable growth when the economy rebounds.

As you have seen, people everywhere have noticed that Ford is different, and the real difference is in our plan and our great products – particularly our leadership in quality, fuel efficiency, safety, smart technologies and value.