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News
         
         THE VIEWS & OPINIONS EXPRESSED HERE ARE
                NOT NECESSARLY THE VIEWS OF CAW LOCAL 584.
                THEY ARE POSTED FOR INFORMATION PURPOSES.

 

January 2, 2008 to December 31, 2008
      

 




2008 MONTHLY ARCHIVES

 

GMAC
`back in the game'
on lending

Auto financing firm modifies credit criteria following cash injection

Dec 31, 2008
Edmund L. Andrews
Bill Vlasic
THE New York Times

GMAC, the automobile financing company, said yesterday it would immediately resume financing to a wider range of car buyers, a day after the U.S. Treasury Department injected billions of dollars into the lender.

GMAC said it would modify its credit criteria to include financing for customers with a credit score of 621 or above, a significant expansion of credit compared with the 700 minimum score put in place two months ago. GMAC had significantly cut back on the number of loans it offered as it struggled to stay afloat.

And General Motors said yesterday it would begin to offer zero-per cent financing on some models as it tries to jump-start sales.

"That brings a lot more customers into play for us," said Mark LaNeve, GM's vice-president for North American sales and marketing.

"It's a strong signal that GMAC is back in the game, and that GM dealers are back in the game of financing vehicles."

On Monday, the Treasury Department injected $5 billion (U.S.) into GMAC as part of a deal that will let the lender convert itself into a bank holding company to reduce borrowing costs and thus borrow at low rates from the Federal Reserve.

"This is exactly what some of the government money was intended to do – stimulate credit, stimulate business," LaNeve said.

The deal came as the Treasury was preparing to provide General Motors and Chrysler with $4 billion each in the first part of a bailout plan for the car companies.

Under the financing deal, the Treasury will buy $5 billion worth of preferred equity shares in GMAC, which used to be the financing subsidiary of General Motors and is now owned jointly by GM and Cerberus Capital Management, the private equity firm that owns Chrysler.

A Treasury official said on Monday the deal had closed and that GMAC already had the money. In addition, the Treasury said it would lend General Motors $1 billion so it could purchase additional equity offered by GMAC.

"We will immediately put our renewed access to capital to use to facilitate the purchase of cars and trucks in the U.S.," GMAC president William Muir said yesterday.

GMAC said, however, that it would not finance higher risk transactions characterized by a credit bureau score of 620 or below.

The Treasury deal, using money from the $700 billion Troubled Asset Relief Fund set up for financial institutions, came after intense efforts to prevent a collapse of GMAC, a crucial source of automobile sales financing. It has been reeling from both the paralysis in credit markets and huge losses from its mortgage lending subsidiary, Residential Capital.

 

Kerkorian's Tracinda
sells last of Ford stake

Dec 30, 2008

Billionaire investor Kirk Kerkorian has sold off his remaining shares of Ford Motor Co., a spokesperson for his investment firm, Tracinda Corp, said yesterday.

Tracinda, which ranked as Ford's largest outside investor earlier this year, said in a regulatory filing in October that it had started working with bankers to sell the 133.5 million shares it held at the time.

It was not clear when Tracinda had completed selling the stock.

The pullout from Ford completed a costly retreat for Kerkorian, who has a mixed investment track record at the Big Three automakers in Detroit.

Kerkorian surprised analysts and investors in April when he began buying Ford shares.

He spent more than $1 billion (U.S.) to take a stake in Ford at an average per-share price of $7.10.

Since then, Ford's shares have traded between a low of $1.02 in November to a high of $3.54 earlier this month.

 

Ford announces new
self-parking technology

Dec 30, 2008 07:08 AM
ERIN CONROY
The Associated Press

NEW YORK – Sit back, relax and let your car parallel park itself – without a single scratch or ding to your bumper.

That's what Ford Motor Co. said Tuesday about its new self-parking technology, which it announced will debut as an option on the 2010 Lincoln MKS sedan and the new seven-passenger Lincoln MKT luxury crossover vehicle.

The technology uses ultrasonic sensors on the front and rear of the vehicle, combined with electric power steering to angle and guide it into a snug parking space – all with the push of a button.

Ford isn't the first to introduce cars that practically park themselves. Toyota Motor Corp.'s Lexus luxury line has a video camera-based parking system that can calculate whether the vehicle has enough clearance for a particular spot.

But Ford's technology is easier to use and works in downhill parking situations, unlike competing systems, according to Ford's president of the Americas, Mark Fields.

"This one-touch function will be much safer to use and less intimidating," Fields said. "It's all part of our strategy to introduce smart technology to a vehicle that will make our lives easier.''

The driver will still need to shift the transmission and operate the gas and brake pedals, as a visual or audible driver interface advises about the proximity of other cars, objects and people. Still, the driver never has to touch the steering wheel.

The sensor system also monitors blind spots, and can notify the driver with a warning indicator light in the side view mirror if something is detected or if traffic is approaching. Meanwhile, the electric power steering can improve fuel economy and reduce carbon emissions because it is powered by the vehicle's battery rather than hydraulic pump systems, Ford said.

The company plans to fit nearly 90 per cent of its Ford, Lincoln and Mercury vehicles with electric power steering by 2012.

The parking assistance technology will be featured at the North American International Auto Show in Detroit in January, and will be available in its new models in mid-2009.

Among Detroit's auto makers, Ford is considered the best positioned to weather the industry slump and has said it does not need federal loans to survive, but its sales have withered and its stock has plunged.

Fields said pricing on the new models wasn't available, but added he believes it's an affordable way to eliminate unease about parking.

"I don't know about you, but when I was taking my driving test, parallel parking was the most stressful part," he said.


Massive CAW clawbacks
likely: expert

Dodge Ram trucks sit parked outside a Chrysler manufacturing plant December 19, 2008 in Fenton, Missouri. Chrysler announced plans to idle North American manufacturing plants until January 19, 2009.

DesRosiers: 'They have no choice'

Jamie Sturgeon, Financial Post

Ken Lewenza, the chief of the Canadian Auto Workers, said yesterday the union felt no pressure to agree to wage concessions for its 27,800 workers at troubled automakers General Motors Corp., Chrysler LLC and Ford Motor Co.

"I don't imagine there will be anything happening until after the holiday season," said Mr. Lewenza, referring to when union officials meet with the Canadian arms of GM and Chrysler to begin hammering out restructuring plans required by Ottawa and Ontario in exchange for emergency loans.

Mr. Lewenza said the companies won't likely be in touch until Jan. 5, the date work usually resumes in the new year.

That leaves the automakers and union just six weeks to negotiate "acceptable" restructuring plans that are due on Feb. 20 and that "include specific actions sufficient to ensure long-term viability," according to the loan terms, "including agreement with all stakeholders of needed reductions in structural costs."

Six weeks to table plans designed to reinvent the companies, or the $4-billion loans could be called in.

But while there is no apparent pressure on union wage concessions, there will be pressure, when the time comes, on the union to accept massive clawbacks on at least non-wage benefits that have become an achilles heel for Canadian autoworkers, said Dennis DesRosiers, president of independent industry researcher DesRosiers Automotive Consultants Inc.

"You're going to have to see a very proactive approach in January," he said yesterday. "At one level, they have no choice. They'll have to give up a substantial amount of non-wage benefits."

Chiefly, "a very long list" of so-called penny funds that the companies pay a certain amount per hour per employee into to fund a litany of perks -- from workers' legal bills when buying a home to scholarship funds and charitable causes.

"All in, it amounts to millions and millions of dollars a year," said Mr. DesRosiers. "There's no negotiation ... gone."

The 10 or so Special Paid Absence -- or SPA -- days workers get on top of normal sick leave and paid vacation days will almost assuredly be cut, the analyst said.

Many of the targeted extras don't extend to United Auto Workers in the United States. Instead, they've been built up over years of bargain negotiations to offset health-care savings GM, Ford and Chrysler receive because of Canada's publicly funded systems.

Begun last year, the U. S. union started making arrangements to handle medical costs for workers and retirees with their Voluntary Employment Benefit Associations (VEBAs), Mr. DesRosiers said.

The result works out to be around a $15-per-hour cost advantage for U. S. assembly workers, he said, making Canada the "highest-cost location anywhere in the GM, Ford and Chrysler worlds for manufacturing vehicles."

"That's not a good position to be in."

Before the VEBAs were commissioned in Detroit, average compensation plus benefits -- the total cost -- for factory labour was about US$75 an hour, whereas in Canada it is US$67 at Big Three operations, the analyst said. With the implementation of the VEBAs, labour costs are heading toward US$55.

Canadian compensation fares worse against foreign-based suppliers such as Honda and Toyota, where costs stand at about US$45.

"This is why Canada is in so much trouble from a labour perspective," said Mr. DesRosiers.

"At the end of the day, the labour cost differential is very real and if they don't address it, they'll continue to lose market share."


Canada needs its own car czar

(STAR EDITORIAL)

Dec 27, 2008 04:30 AM

Restructuring the North American auto industry is a complicated challenge. There are three different assembly companies involved (General Motors, Chrysler and Ford) with plants on both sides of the border, hundreds of suppliers of auto parts, tens of thousands of dealers and hundreds of thousands of employees.

That's why President-elect Barack Obama is considering the appointment of a "car czar" with powers not unlike those of a bankruptcy overseer to spread the pain of restructuring and make the sector viable again, with perhaps just two assembly companies instead of three emerging from the process.

Among those rumoured for the position is Paul Volcker, the redoubtable former chair of the U.S. Federal Reserve Board. He's someone who would command respect from all sides.

It's a good idea, one that should be picked up by the Canadian government. If Ottawa were to appoint someone of similar stature – say, David Dodge, former governor of the Bank of Canada – with similar powers, that person could work with the U.S. car czar to ensure that Canadian interests are given full consideration.

There is a real danger that restructuring – essentially a euphemism for closing plants and consolidating assembly in fewer locations – will be done at Canada's expense. Take, for example, Chrysler's minivans. Until two months ago, they were assembled at two different locations, St. Louis, Mo., and Windsor. With sales falling, Chrysler decided to idle the St. Louis plant and do all the assembly in Windsor. Under prodding from the U.S. car czar, that decision could be reversed.

A Canadian car czar could enter into tough negotiations with his or her U.S. counterpart to ensure that not all the trade-offs favour the Americans.

But Ottawa does not appear inclined toward such an appointment. Indeed, the governing Conservatives seem to be headed in the opposite direction. Last week, they severed connections with Jim Arnett, the corporate executive (former Molson CEO, current chair of Hydro One) whom they appointed just a few weeks ago to help them do "due diligence" on any auto bailout. "I'm not sure we need a new special adviser just yet," an unnamed "high-ranking" government official told the Star.

When asked directly this week whether consideration was being given to the appointment of a car czar, a spokesperson for federal Industry Minister Tony Clement replied that "there will be stringent oversight" of the auto bailout and added:

"As for a czar or any option to head up that oversight function on a long-term basis, we are looking at all options to determine what is best for the Canadian auto industry, as I understand Mr. Obama is in the United States. Given that, it is premature to say what will be best for either Canada or the U.S. in that respect."

This ambiguous response could be interpreted in one of two ways: either Ottawa is waiting for Obama to move first, or the appointment of a czar is not on Ottawa's agenda.

If the former, why not get ahead of the Americans by appointing our own czar before Obama does?

If the latter, will the auto bailout and restructuring be run out of the Prime Minister's Office? Now that is a frightening thought.

 

 

Bush's tough auto talk
puts CAW in crosshairs

GREG KEENAN
Tuesday, December 23, 2008

With just a few words, U.S. President George Bush has done what the Detroit Three were unable to achieve with decades of negotiating: eliminate the iron grip the mighty United Auto Workers union has held for decades on setting labour rates in the auto industry.

Chrysler LLC, Ford Motor Co. and General Motors Corp. have been effectively ordered to make their labour rates competitive with Japanese auto makers in the United States.

In the process, Mr. Bush has cast the future of those companies' operations in Canada into the hands of the Canadian Auto Workers union, which divorced from the UAW in 1986, but now will have to find ways to match what the UAW does or risk watching about 30,000 jobs in this country vanish.

Prime Minister Stephen Harper echoed Mr. Bush's thoughts in announcing a $4-billion rescue package for Chrysler Canada Inc. and General Motors of Canada Ltd. on Saturday when he said all stakeholders will have to make sacrifices.

The CAW "would have to sign on to the same deal" as the UAW, said Sean McAlinden, an expert on automotive labour issues and chief economist of the Center for Automotive Research, an industry think tank in Ann Arbor, Mich.

The problem for the unions, Mr. McAlinden noted yesterday, will come during the GM restructuring talks, when the largest Detroit company asks holders of its debt to trade that debt for equity.

"The bondholders are going to say: 'Why should we swap debt for equity, unless we see a really rich, big union concession in Canada and the United States?' " he said.
But the key question is which labour rate will set the benchmark: Will it be the approximately $49 (U.S.) hourly costs at the Georgetown, Ky., operations of Toyota Motor Corp., or will it be the new Honda Motor Co. Ltd. plant in Indiana, where wages are about $21?

The $49 Toyota figure creates a competitive gap of about $18 an hour at unionized Canadian plants, using the CAW figure of $67 (Canadian) an hour for labour costs in this country based on the two currencies trading at par and excluding payments to retired workers.

CAW economist Jim Stanford argues that labour costs here equate to $53.60 when the dollar is trading at 80 cents (U.S.). Given the volatility of currency markets, however, and wild fluctuations in the commodity prices that propel the Canadian dollar, that advantage can be wiped out virtually overnight.

The Detroit Three will find it impossible to invest in their Canadian operations if the UAW agrees to cut labour costs and the CAW does not, said industry analyst Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc. in Richmond Hill, Ont.

Talks with GM Canada will likely begin in early January, Chris Buckley, president of CAW local 222 in Oshawa, Ont., said yesterday.

He said he's confident the CAW can reduce costs without touching base wage rates of $35 (Canadian) an hour.

Sticking deeply in the craw of Canadian managers are the so-called SPA days, or special paid absense: two weeks off the job that have been criticized in the vocal public debate about whether to offer financial assistance to Detroit.

Even if the CAW agrees to cut costs to match new UAW labour rates, some assembly plants operated by the companies in Canada are in danger as the three auto makers slash production over the next few years to make themselves more competitive.

Detroit Three production will drop by about two million vehicles between 2008 and 2010, Michael Robinet, vice-president of global vehicle forecasts for consulting firm CSM Worldwide Inc., said in a presentation in Detroit earlier this month.
That's the equivalent of about eight assembly plants. Some of those have already been announced, such as the GM truck plant in Oshawa as well as Chrysler and Ford factories in the U.S. Midwest.

The obvious decisions about plant shutdowns have already been made.
"The facilities that are going to have to close from here on out, it's going to hurt," Mr. Robinet said yesterday.

Ottawa and Ontario offered the loans in part to ensure Canada maintains its 20-per-cent share of North American production, but as that production shrinks, the Canadian plants become vulnerable.
One of the wild cards is whether Chrysler can survive even with the $4-billion (U.S.) in loans Washington earmarked for it on Friday and the $1-billion (Canadian) Ottawa outlined the next day.

There is a widespread belief in the industry that Chrysler will be forced into bankruptcy and its assets sold off. Its minivan plant in Windsor, Ont., is viewed as a valuable asset, but there is uncertainty about whether a buyer would be interested in its Brampton, Ont., large-car facility.


FORD (F)
Close: $2.59 (U.S.), down 36¢
GENERAL MOTORS (GM)
Close: $3.52, down 97¢

© The Globe and Mail

 

Ford Will Likely
Benefit From Bailout

GM, Chrysler Will Seek Concessions From
Suppliers, Unions, Dealers and Debt Holders

DETROIT -- As the lone Big Three auto maker passing on a federal bailout, Ford Motor Co. won't have to undergo an intrusive government review of its books and its business plans to become a viable company in order to qualify for --and keep -- the low-interest loans authorized by the Bush Administration Friday.

At the same time, the Dearborn, Mich. car company is likely to benefit from many of the concessions that General Motors Corp. and Chrysler LLC exact from the suppliers, unions, dealers and debt holders shared by all three companies.

"The clear winner in this game is Ford," Kimberly Rodriguez, a principal at Grant Thornton consulting firm and an adviser to Ford senior management, said in an interview Friday.

The Bush administration said it would provide a total of $17.4 billion in loans for GM and Chrysler. As part of the bailout, GM and Chrysler will have to open their books to the government and meet restructuring targets such as reducing their debt and hammering out deals with the United Auto Workers to cut labor costs.

Ford is still seeking a $9 billion line of credit from the government, though it adds it may not need to tap it. In addition, Ford wants $5 billion from the Energy Department program.

Most experts agree that Ford is in better shape than GM and Chrysler, in large part because it mortgaged almost all of its assets in 2006 to raise $24.5 billion.

"As we told Congress, Ford is in a different position. We do not face a near-term liquidity issue, and we are not seeking short-term financial assistance from the government," Ford Chief Executive Alan Mulally said in a statement Friday.

Still the company needed the Bush Administration to rescue GM and Chrysler because of fears that a failure of one or both of those companies could imperil their shared base of auto-part suppliers. "The U.S. auto industry is highly interdependent, and a failure of one of our competitors would have a ripple effect that could jeopardize millions of jobs and further damage the already weakened U.S. economy," Mr. Mulally said.

In the third quarter, Ford burned through $7.7 billion in cash, which left it with $18.9 billion. At the current rate Ford is using up cash, however, the company would have enough money to last only until April. Ford also has $10.7 billion in available credit lines, which could give it another four months of breathing room. But the auto maker has said that the company does not expect to continue to burn cash at the same rate in the fourth quarter.

To conserve cash, Ford is laying off salaried employees and cutting between $500 million and $1 billion in capital expenditures in both 2009 and 2010. Company officials have said the cutbacks would only slightly delay -- and not irreparably harm -- the auto maker's ability to bring new products to showrooms.

As part of their plan submitted to Congress earlier this month, Ford pledged to accelerate their efforts to bring new gas-electric hybrids and plug-in electric vehicles to market.

Still the overall decline in sales for cars and trucks continues to weigh Ford down greatly. The company this week confirmed it would extend its two-week holiday shutdown by an extra week at 10 plants in order to meet a goal of lower production.

 

Concessions loom for auto workers
Prime Minister Stephen Harper and Premier Dalton McGuinty say all stakeholders will need to cut costs soon.

PM, McGuinty stress cuts in labour costs
will be needed in exchange for $4 billion in loans

Dec 21, 2008 04:30 AM
Tony Van Alphen
Robert Benzie
STAFF REPORTERS

The federal and Ontario governments increased the pressure on thousands of auto workers at General Motors, Chrysler, Ford and scores of suppliers yesterday to accept concessions in efforts to keep the reeling automakers alive.

In announcing $4 billion in loans to GM and Chrysler, Prime Minister Stephen Harper and Ontario Premier Dalton McGuinty emphasized that in exchange for the money, all stakeholders – including unionized workers – would need to cut costs soon.

Pressure had been building for weeks as the automakers pleaded for public aid. On Friday, the Bush administration announced a $17.4 billion (U.S.) rescue package in exchange for major concessions from auto industry employees there.

Ottawa and the provincial government underlined the need for cuts in labour costs as a condition of the aid packages. They also noted that even with the reductions in those costs, there would be unidentified job losses.

In Canada, that would mean a reopening of contracts and concessions from the tens of thousands of unionized auto workers at GM, Chrysler and Ford.

Ford didn't seek any immediate aid but it has sought a $2 billion line of credit, if necessary.

Production technicians at the three automakers currently earn $33.90 an hour, including cost of living allowance.

Harper and McGuinty also said the automakers would need reductions in costs from their suppliers. That could affect the wages and benefits of more than 20,000 parts workers who are primarily represented by the Canadian Auto Workers and the United Steelworkers unions.

Many of those workers have already accepted concessions in recent years as the automakers tried to stay competitive against surging foreign-based companies.

CAW president Ken Lewenza said yesterday there would be "pain" but it was difficult to comment on the extent of concessions.

He noted the United Auto Workers union in the U.S. is hoping president-elect Barack Obama will soften conditions for concessions when he assumes power next month and that could affect the situation here.

"The automakers haven't specifically indicated what they want from us," he said. "But we will be part of any solution to retain our competitive edge in productivity."

Meanwhile, Ontario NDP Leader Howard Hampton, who attended the Harper-McGuinty press conference, told reporters that workers shouldn't have to bear the brunt of the restructuring.


Destroying What the UAW Built

By Harold Meyerson

December 2008

In 1949, a pamphlet was published that argued that the American auto industry should pursue a different direction. Titled "A Small Car Named Desire," the pamphlet suggested that Detroit not put all its bets on bigness, that a substantial share of American consumers would welcome smaller cars that cost less and burned fuel more efficiently.

The pamphlet's author was the research department of the United Auto Workers.

By the standards of the postwar UAW, there was nothing exceptional about "A Small Car Named Desire." In its glory days, under the leadership of Walter Reuther, the UAW was the most farsighted institution -- not just the most farsighted union -- in America. "We are the architects of America's future," Reuther told the delegates at the union's 1947 convention, where his supporters won control of what was already the nation's leading union.

Even before he became UAW president, Reuther and a team of brilliant lieutenants would drive the Big Three's top executives crazy by producing a steady stream of proposals for management. In the immediate aftermath of Pearl Harbor, Reuther, then head of the union's General Motors division, came up with a detailed plan for converting auto plants to defense factories more quickly than the industry's leaders did. At the end of the war, he led a strike at GM with a set of demands that included putting union and public representatives on GM's board.

That proved to be a bridge too far. Instead, by the early 1950s, the UAW had secured a number of contractual innovations -- annual cost-of-living adjustments, for instance -- that set a pattern for the rest of American industry and created the broadly shared prosperity enjoyed by the nation in the 30 years after World War II.

The architects did not stop there. During the Reuther years, the UAW also used its resources to incubate every up-and-coming liberal movement in America. It was the UAW that funded the great 1963 March on Washington and provided the first serious financial backing for César Chávez's fledgling farm workers union.

The union took a lively interest in the birth of a student movement in the early '60s, providing its conference center in Port Huron, Mich., to a group called Students for a Democratic Society when the group wanted to draft and debate its manifesto.

Later that decade, the union provided resources to help the National Organization for Women get off the ground and helped fund the first Earth Day. And for decades after Reuther's death in a 1970 plane crash, the UAW was among the foremost advocates of national health care -- a policy that, had it been enacted, would have saved the Big Three tens of billions of dollars in health insurance expenses, but which the Big Three themselves were until recently too ideologically hidebound to support.

Narrow? Parochial? The UAW not only built the American middle class but helped engender every movement at the center of American liberalism today -- which is one reason that conservatives have always held the union in particular disdain.

Over the past several weeks, it has become clear that the Republican right hates the UAW so much that it would prefer to plunge the nation into a depression rather than craft a bridge loan that doesn't single out the auto industry's unionized workers for punishment. (As manufacturing consultant Michael Wessel pointed out, no Republican demanded that Big Three executives have their pay permanently reduced to the relatively spartan levels of Japanese auto executives' pay.)

Today, setting the terms of that loan has become the final task of the Bush presidency, which puts the auto workers in the unenviable position of depending, if not on the kindness of strangers, then on the impartiality of the most partisan president of modern times.

Republicans complain that labor costs at the Big Three are out of line with those at the non-union transplant factories in the South, factories that Southern governors have subsidized with billions of taxpayer dollars. But the UAW has already agreed to concessions bringing its members' wages to near-Southern levels, and labor costs already comprise less than 10 percent of the cost of a new car. (On Wall Street, employee compensation at the seven largest financial firms in 2007 constituted 60 percent of the firms' expenses, yet reducing overall employee compensation wasn't an issue in the financial bailout.)

In a narrow sense, what the Republicans are proposing would gut the benefits of roughly a million retirees. In a broad sense, they want to destroy the institution that did more than any other to raise American living standards, and they want to do it by using the power of government to lower American living standards -- in the middle of the most severe recession since the 1930s. The auto workers deserve better, and so does the nation they did so much to build.


PM, McGuinty pledge
$4B in auto aid
Prime Minister Stephen Harper and Ontario Premier Dalton McGuinty have pledged $4 billion in aid to GM and Chrysler.

Dec 20, 2008 11:05 AM

Robert Benzie
Queen's Park Bureau Chief
Tony Van Alphen
Business Reporter

Prime Minister Stephen Harper and Premier Dalton McGuinty have announced a $4 billion (Cdn.) bailout for General Motors Canada and Chrysler Canada.

Following the $17.4 billion (US) rescue package announced yesterday by President George W. Bush, the two leaders this morning announced the long-awaited deal.

"This is a regrettable but necessary step to protect the Canadian economy," the Prime Minister said.

"Today's announcement is not a blank cheque."

McGuinty, who has been fighting for such an aid plan for weeks, praised the agreement.

"Here in Ontario, we've got thousands of people and their families who rely on the auto industry to be on firm ground so they can put food on the table and keep a roof over their heads," the premier said.

The accord, which represents 20 per cent of the U.S. scheme, will loan GM $3 billion and Chrysler $1 billion. Ford, which has been seeking a standby line of credit if necessary, is not part of today's announcement.

It's not immediately known how many jobs are guaranteed under this deal.

 

Detroit faces change
imposed from the outside

Citing danger to the economy, President Bush approved an emergency bailout of the U.S. auto industry, offering $17.4 billion in rescue loans in exchange for tough concessions from the deeply troubled carmakers and their workers. (Dec. 19, 2008)

Listen

Dec 20, 2008 04:30 AM

David Olive

As stays of execution go, the Detroit Three bailout unveiled yesterday by U.S. President George W. Bush was done on the cheap.

Time was, the $17.4 billion (U.S.) with which Washington rescued General Motors Corp. and Chrysler LLC would have been considered a lot of money.

But that sum works out to a mere 1.1 per cent of the combined $700 billion effort by the U.S. to bail out its crippled banking system and the $850 billion stimulus package that U.S. President-elect Barack Obama is preparing to roll out soon after his inauguration Jan. 20, rumoured in yesterday's Washington Post.

Previous estimates have put Obama's planned stimulus only as high as $700 billion. But U.S. economic conditions are deteriorating rapidly. So this might not be the time, in a year when the American workforce already has shed 2 million jobs, to let GM and Chrysler go to the wall, jeopardizing Ford Motor Co. as well since it shares key suppliers with its rivals. The result would be to risk inflating the dole by another million or so auto assembly workers, parts-plants employees and dealership personnel.

The American taxpayer is spending a comparatively small sum to spare the U.S. the fate of Canada and Britain in being the only G8 nations without a substantial domestically owned auto sector. But Bush has been crafty enough to provide only just enough emergency loans to get GM and Chrysler through the year – a mere $13.4 billion upfront for GM and Chrysler combined, with another $4 billion to come in February.

Bush won't be president then, of course, and The Economist was quick to observe that the automakers' plight is now "Barack Obama's problem." The Detroit automakers will be back for more – tens of billions of dollars more – to finance their urgently required restructuring. With Obama as president, Detroit is likely to get its money. But the individuals asking for it might not be around to collect it.

Every year for the past two decades, Detroit has vowed to reconnect with American motorists and offer them the vehicles they want to buy. And every year it has reneged. America's domestic auto industry has few rivals for insularity. Can a century-old industry long protected from foreign competition learn new tricks? Is it willing even to try? Evidence suggests no.

Last year, Candidate Obama, in a Motown speech, blasted the Detroit Three for "failing to make changes they should have made 30 years ago," and offered that federal assistance should he become president would be tied to meaningful progress on fuel efficiency and a focus on the small cars the U.S. market now demands. More recently, President-elect Obama has vowed to save Detroit, but neither with a "blank cheque" nor the same Detroit management that so stubbornly resists change.

To save Detroit – the city and its mainstay industry – will require a radical transformation that could see its three players merged into one. Or just the opposite, the breaking up of GM, Ford and Chrysler into nimbler competitors.

What appears certain is that the change will have to be imposed from outside Detroit, where countless layers of middle management know things that are no longer true. With a "car czar" waiting in the wings – often rumoured to be Paul Volcker, the most successful chairman in the history of the U.S. Federal Reserve Board – Detroit either will propose its own radical restructuring next spring or have one forced on it by a president elected by lunch-bucket votes in the auto-producing heartland of the U.S. Midwest.

David Olive writes on politics and economics.

 

PM, McGuinty to announce Canadian bailout

 

Dec 19, 2008

Prime Minister Stephen Harper and Ontario Premier Dalton McGuinty will announce an aid package for the Canadian auto industry tomorrow after the U.S. government announced a $17.4-billion (U.S.) bailout package for its own auto industry today.

No details of the Canadian aid package have been issued but it is expected to be worth several billion dollars, since both the federal and Ontario governments have said they would provide a package proportional to the size of the industry in Canada.

That would be about 20 per cent of production capacity in North America.

Kory Teneycke, communications director for Prime Minister Stephen Harper, said that McGuinty and Harper "will address the Canadian response tomorrow."

Asked if the Canadian bailout will include the kinds of concessions and controls the United States is insisting on, he said: "You'll see similar things in a Canadian package," that will give governments a larger say in how the companies restructure.

"We're a partner, but a minority partner in this, and we'll be a partner to the extent to which we are a part of this industry. Canada will work to maintain its market share in the North American auto industry."

Harper will make the announcement alongside McGuinty in Toronto.

McGuinty's aides at Queen's Park were scrambling today to organize the event. There were concerns about whether the prime minister could make it from Winnipeg to Toronto in the fierce winter storm.

U.S. President George W. Bush said earlier today that his government will provide the beleaguered automakers with emergency loans while they implement plans to restructure. The aim is to prevent an industry collapse that could send the economy into a deeper and longer recession.

The Detroit Three - General Motors Corp, Ford Motor Co and Chrysler - have been hit hard by the sharp slowdown in U.S. demand.

GM and Chrysler have asked for bridge loans and credit guarantees to keep them alive while restructuring. Ford has asked for a line of credit to tap into in case their finances worsen more than expected.

The companies have until the end of March to present viable restructuring plans.

"We don't know what GM or Chrysler has put on the table in terms of Canadian operations," said Richard Cooper, executive director of Canadian operations at J.D. Power & Associates.

"For GM to remain viable, they are going to have to make a lot of changes. For Chrysler to remain viable, they are going to have to make a lot of changes and we don't know what those changes are going to look like and how they will impact the Canadian operations."

The sudden announcement of the U.S. government package appeared to send aides to Harper and McGuinty scrambling to put together a joint announcement of the Canadian package. Harper, in Winnipeg today, was scheduled to travel to Calgary to begin Christmas holidays with his family but will instead head to Toronto for the announcement.

Details were still not available about where they would unveil the package.

As late as last night, while taping an interview to air tomorrow, Harper told CTV that no deal had been reached.

"The truth is we haven't settled on a dollar figure nor have we have we settled on a package. We're working with the United States Administration with them on what they are putting together."

Harper said the Canadian and American auto industries are so entwined that "we cannot have a solution unless we have an integrated approach and an integrated action with the United States administration."

But Harper suggested the Canadian package will mirror much of the controls that the U.S. is prescribing.

"I think it's safe to say if you look at what's on the table in the United States right now, there will be some significant say of governments in the future of those companies."

Harper said the Canadian government and the government of Ontario "have concluded we either do our share of the restructuring or we will have no share of that industry in Canada."

"If the United States does all the restructuring themselves, the industry will move to the United States. That's not acceptable to the government of Canada. So we will work with the Americans, make sure that we get our share of a restructured industry.

"Obviously as public money goes into that, there will be more public say about how that money is used, but we should be under no illusions: there is going to be significant restructuring. And the aim at the end of this is to make sure that, while those companies will be smaller, they will be viable and they will make money."

Harper admitted he finds himself "uneasy" as a small-c conservative at all the government intervention in the economy that he finds himself forced to adopt.

"As a conservative, not ideal circumstances, but this is — my training as an economist tells me — that these are the policies we must adopt under these circumstances."

He said his main goal is to help ordinary people and communities in transition. He also said he wants the country to emerge from the recession without a "permanent deficit."

 

Bush offers Detroit $17.4B

2009 Ford F-150 trucks are ready to leave the assembly line at the Dearborn Truck Assembly in Michigan in this October 2008 file photo

Tim Harper

Washington Bureau Chief

Dec 19, 2008

WASHINGTON–President George W. Bush threw the staggering U.S. auto industry a short-term $17.4 billion (U.S.) lifeline today.

With General Motors and Chrysler on the verge of collapse, the U.S. president stepped in after Republicans in the Senate last week blocked congressional approval of a similar bailout plan.

The White House plan gives automakers three months to restructure themselves and make themselves "viable,'' Bush said, but if that cannot be done, these loans would allow them to make the necessary preparations to declare bankruptcy.

If new, acceptable business plans are not completed by March 31, Bush said, the money must be repaid.

The $13.4 billion in short-term financing will be drawn from the $700 billion Wall Street rescue program, White House officials said, with another $4 billion to be made available in February.

"The American people want the auto company to succeed and so do I,'' Bush said.

He said he grappled with a thorny question involving the proper role of government in grim economic times.

"If we were to allow the free market to take its course now, it would almost certainly lead to disorderly bankruptcy,'' Bush said.

Under ordinary circumstances, Bush said, he would allow the collapse, but in the current economic crisis, he cannot allow that, the president said.

"These are not ordinary circumstances,'' he said.

"In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action.

Bankruptcy at this point would not be an option, Bush said, because consumers would shun the companies.

Ford will receive none of the money and, in submissions to the U.S. Congress, the company said it would seek taxpayers help only if one or both of its competitors declared bankruptcy, creating a ripple effect throughout the industry.

General Motors is expected to receive $9.4 billion of the money immediately available, with Chrysler receiving $4 billion.

Bush also stressed that a responsible business plan will include concessions from management, unionized workers and industries which depend on the automakers.

"The convergence of (economic) factors means there is too great a risk that bankruptcy now would lead to a disorderly liquidation of American auto companies,'' Bush said.

"My economic advisers believe that such a collapse would deal an unacceptably painful blow to hardworking Americans far beyond the auto industry.

"It would worsen a weak job market and exacerbate the financial crisis.

"It could send our suffering economy into a deeper and longer recession.''

Chrysler announced an extended shutdown earlier this week, idling their plants beginning today and keeping them dark until the third week of January.

Canadian government reaction is expected later this morning.

 

Ford vehicles finalists
for U.S. top car

Dec 19, 2008 07:41 AM

The Associated Press

DETROIT–Two Ford Motor Co. large vehicles are finalists for the 2009 North American Car and North American Truck of the Year awards.

The Ford Flex, a seven-passenger crossover vehicle will be considered for top car of the year. Ford's F-150 truck is a finalist for best truck of the year.

Winners will be announced on Jan. 11, the first press day of the North American International Auto Show in Detroit.

Both the 2009 Flex and the F-150 made the Insurance Institute for Highway Safety's list of the safest new cars last month.

Other finalists include the Hyundai Genesis luxury sedan and Volkswagen Jetta TDI in the car category. The Mercedes-Benz ML 320 Bluetec and Dodge Ram pickup were the other finalists in the truck category.

Ford's Lincoln MKS, a luxury crossover vehicle, was a candidate in the car category, but did not make the finalist list.

Shares of Ford dropped 30 cents or 9.6 per cent Thursday to $2.84.

 

$3.4 billion bailout
just 'bit of a lifeline'

McGuinty admits cash will keep industry alive only in the short term

Dec 18, 2008 04:30 AM
Robert Benzie
Robert Ferguson
Queen's Park Bureau

The proposed $3.4 billion auto industry bailout from Ontario and Ottawa is just the beginning of help for the troubled Detroit Three, Premier Dalton McGuinty acknowledged yesterday.

"This is a bit of a lifeline at this point in time to sustain the industry," the premier said as the White House in Washington continued to mull the size of an aid package for General Motors, Ford and Chrysler.

The Canadian money – designed to help the automakers stay afloat while they restructure – is contingent on the U.S. providing assistance first.

When asked how big the Canadian bailout could be, McGuinty said: "We don't know right now because we haven't completed our due diligence, and neither has Washington, to get a good sense of what's going to be involved ultimately."

The Canadian Taxpayers Federation continues to oppose a bailout, saying the automakers have been loaned or granted $782 million from taxpayers in the last five years.

"Throwing good money after bad won't fix big auto but it will drive Canada and Ontario further into deficit," warned spokesperson Kevin Gaudet, calling GM, Ford and Chrysler a "bottomless pit."

"Each announcement of government cash support was followed by downsizing, layoffs of Canadian workers, and the demand for even more cash by the Big Three. Be assured, these companies will be back for more before spring."

The $3.4 billion in aid from Canada was based on last week's failed U.S. plan for $14 billion (U.S.) in emergency cash for the automakers – a 20 per cent share when the exchange rate is taken into account. That plan was rejected in the Senate, leaving the White House scrambling for alternatives.

McGuinty said he wants to ensure that the Detroit Three's operations in Ontario come out with a 20 per cent share of their parent companies' North American production following the restructuring.

Meanwhile, NDP Leader Howard Hampton urged McGuinty to do an immediate $2 billion made-in-Ontario stimulus package without waiting for Ottawa or the U.S. to rescue the Detroit Three.

"Ontario simply can't afford to wait for Washington to act," Hampton told a news conference yesterday at Queen's Park.

He implored McGuinty to expedite auto aid, accelerate spending on infrastructure, expand a "buy Ontario" policy for transit and other expenditures, implement an industrial hydro rate to provide cheaper power to manufacturers and mills, and raise the minimum wage to $10.25 right away to inject cash into the economy.

In a sign not every segment of the economy is suffering, the premier attended an unpublicized $5,000-a-plate Ontario Liberal fundraiser at a Forest Hill mansion with about 20 guests last night. Liberal sources told the Star the event was a chance to give lobbyists private face time with the premier. The dinner was left off McGuinty's official itinerary because it was deemed "private."

 

Ford builds image as
strongest of Big 3

But a GM bankruptcy could sink Blue Oval; suppliers grow jittery.

Bryce G. Hoffman / The Detroit News

DEARBORN -- Ford Motor Co. is trying to pull itself up by its own bootstraps, and it hopes America notices.

As crosstown rivals General Motors Corp. and Chrysler LLC ask the White House for $14 billion in emergency loans just to tide them over until March, the Dearborn automaker maintains it has enough cash to weather the current economic crisis. It is still asking the federal government for a $9 billion line of credit, but it is not asking the Bush administration for immediate cash assistance.

Ford executives think this fact has not been lost on the American people, and it is hoping to use its comparative financial strength to position itself as the most viable of Detroit's Big Three. That might not be saying much -- particularly given that Ford does not expect to post a profit until at least 2011 -- but experts agree that the situation represents an opportunity for Ford to begin rebuilding its brand image.

But this strategy is not without its risks. The biggest danger facing Ford today is a GM bankruptcy, which could pull Ford into bankruptcy court, too. It also knows that suppliers are becoming increasingly jittery about the state of the entire domestic automobile industry and could begin demanding quicker payments than Ford could make. The last thing Ford wants is to be too heavy-handed with its message and risk exacerbating these problems.

"We are trying to tell our story, but we also think it's very important that we don't appear to be turning our back on our industry," Executive Chairman Bill Ford Jr. said Tuesday. "The good news for us is we're starting to get some separation in the customers' minds and people see that we're trying to make it on our own. We're hearing comments in the showroom to that effect."

December is "starting off relatively well," Bill Ford said, noting that his company has already gained a point of market share over the past couple of months -- a significant accomplishment for a business that has seen its share steadily erode for more than a decade.
Analyst Erich Merkle of Crowe Horwath says Ford stands to gain even more market share.

Like most analysts, he thinks Ford has enough cash to make it through until next year when the full benefits of its landmark labor agreement with the United Auto Workers kicks in. As GM and Chrysler struggle just to stay out of bankruptcy court, consumers are less inclined to consider their cars and trucks. And Merkle says Ford has a slew of new products coming out over the next year that should demonstrate just how much progress it has made in its turnaround campaign.

"They're very well positioned for when we come out of this and people start buying cars again," he said, though he added the company needs to be careful not to be too assertive. "Ford can separate itself, but to do that now with everything the industry is going through -- particularly GM and Chrysler -- could hurt everyone."

Ford Americas President Mark Fields says it is all about striking the right balance. "Our job going forward is to be confident, but not arrogant," he told The Detroit News Tuesday.

The recent Congressional hearings have focused the national spotlight on the domestic automobile industry like never before. For the first time in a long time, the American people want to hear what Detroit's Big Three have to say. Ford sees that as an opportunity to speak to millions of potential customers.

"They clearly understand that Ford is in a different place," said Ford CEO Alan Mulally. "The most important thing is that we help everybody understand where Ford is and where it's going. We're looking at every medium we have to tell that story."

Over the past couple of weeks, the Dearborn automaker has been making its executives available -- not only to major media outlets, but also to newspapers and television stations around the country. Bill Ford himself was the scheduled guest on Larry King Live last night. The company is also being more aggressive in trying to get its message out through online social media Web sites like Facebook.

But analyst Jim Hall of 2953 Analytics LLP says the company could do more. He says Ford needs to make consumers feel like they are part of its solution.

"What you do is say, 'We're working through this with " he said. "You make the your help. Vote for Ford with your dollars,' customer one of the winners. And you can do that without taking the mallet to anyone else."

Even with the right marketing message, Ford still needs to contend with the economy. Its market share may be up, but like every other automaker its sales are down sharply, and there is no sign of a recovery anytime soon.

"At a certain point, if customers are just completely stressed out and tapped out, all the messaging in the world isn't going to get them in," Bill Ford said.

Moreover, while Ford may not need government help today, its finances are still a disaster. The company has lost $24 billion since 2005, its stock is trading for just over $3 a share and its bonds are worth pennies on the dollar.

But Ford continues to aggressively restructure its business to match the actual demand for its cars and trucks, to consolidate its global operations and shed what it calls "non-core operations" like Jaguar and Land Rover to concentrate its resources on saving the Blue Oval itself.

It is finally getting credit for the strides it has made in quality, safety and reliability. And Ford is about to begin one of the most aggressive product launch cycles in recent automotive history.

Jim Farley, Ford's global sales and marketing chief, says that's the story Ford needs to share with the American people.

"They're all ready to listen and they're all paying attention," he said. "It may not be the best starting point, but Americans love a good underdog."


 

Detroit's Problem:
It's Health Care,
not the Union

by Christopher R. Martin

The Senate's failure to pass the bailout of the U.S. auto industry strikes a big blow at one of labor's last stands in manufacturing in the U.S.

What's at stake? According to the bill: 355,000 workers in the U.S. directly employed by the automobile industry; 4,500,000 employed in related industries (the auto industry has the highest job creation multiplier effect of any industry); 1,000,000 retirees (with pensions and health care benefits).

Vice President Dick Cheney, mindful of his administration's economic legacy, reportedly pleaded to fellow Republicans in the Senate, "If we don't do this, we will be known as the party of Herbert Hoover forever."

Welcome to forever, Dick.

It's too late for Cheney, as his party and their think tank associates celebrated the opportunity of Detroit's woes to pin blame on their perennial target, labor unions. In September, the conservative Heritage Foundation, with a barely concealed smirk, was already spreading disinformation:

"There are plenty of auto industry jobs being created every day right here in America - and with no government help. Toyota recently opened a new plant in Texas, and is building another factory in Mississippi. Toyota already produces more than 1.5 million cars in America, and that number is set to soar as more factories like those in Texas and Mississippi come on line. Unlike the Detroit automakers, Toyota has a union-free workforce, which gives the company a huge competitive advantage. Toyota still pays good wages but its workforce is younger, not burdened by seniority rules, and the company has smarter and lower benefit costs."

Two contentions - that foreign automakers in the U.S. have received no government help, and that union workers are grossly overpaid - are either misleading or completely untrue.

First, let's start with government assistance. It's easy to forget that there are government subsidies other than the ones asked for in Congressional hearings. For foreign automakers such as Toyota, Nissan, Honda, Hyundai, Mercedes, and BMW, the better way of wringing out public subsidies is to get Southern states to battle for your plants by offering a bevy of tax abatements, infrastructure projects, and even employee recruitment, screening and training. According to the Center for Automotive Research at the University of Michigan, between 1998 and 2003, the Southern states paid out an average of $87,700 in "government help" per nonunion auto job created - an average of $143 million per facility - compared to $50,180 per job created in the haplessly unionized North.

The second contention - that the unionized autoworkers of the north are grossly overpaid - is misleading. In fact, Sen. Bob Corker (R-Tennessee), one of the opponents of the bailout, encouraged the deception. The Chattanooga Times Free Press reported the Senator "said the automakers pay their rank-and-file employees an average of $70 to $74 an hour, including benefits, while foreign automakers pay an average of $42 to $44 an hour." The quote, repeated nearly everywhere in the news media over the past few weeks, obscures the situation.

Only a very few news organizations - Jonathan Cohn at the New Republic and David Leonhardt at the New York Times, among the few - bothered to break it down. As it turns out, the base wages are fairly close - about $29 an hour for Detroit's three automakers, and about $26 for the foreign automakers in the U.S. What nearly every Republican politician and news report fails to mention, though, is that wages in Detroit are already dropping. The UAW gave major concessions to GM, Ford, and Chrysler in 2005 and 2007, setting a new second tier starting wage at $14. This lower wage will continue to decrease the base wage cost going into the future.

Another difference in North vs. South autoworker wages is benefits. Adding in things like healthcare, training, vacation, and overtime, Big Three autoworkers make about $55 compared to about $46 for nonunion workers. True enough, unionized workers do better here. But a big part of this expense is healthcare.

Healthcare also is part of the largest difference between North and South: what the industry calls "legacy costs" - the pensions and health care of retirees. The foreign auto companies currently don't have these costs, since they've been operating in the U.S. for only about 25 years or less, and have few retirees. But, the Big Three have more than a million retirees and their families to cover. Corker and others unfairly lump this into average wage costs and arrive at something over $70 an hour.

So, when the Senate Republicans are talking about equalizing wages, what they are really talking about is taking pensions and healthcare away from retirees. That doesn't sound as nice as "equalizing" the wage of current workers, so they never say it that way.

The UAW has made a number of concessions over the years, but that's where they said no. They wouldn't sell out the dignity and well being of their retirees.

Back in 2006, GM vice president Bob Lutz famously said, "Sometimes it feels like we're a health-care company that tries to sell enough cars to pay the bills."

Exactly. Hello Washington? This is a primarily a health care problem, not an auto problem.

Corker and his colleagues might begin with a better comparison for the Big Three's unionized autoworkers -- their union colleagues in Canada. Their work and wages are similar, except that Canada has a public healthcare system that evens the playing field for all companies. According to the Canadian Labour Congress in 2006, health benefits for unionized autoworkers in Canada cost $120 per car. In the same year, health benefits for Big Three autoworkers cost $1,500, and they're still rising.

If Corker and his colleagues are truly serious about changing the structure of the auto industry, they should start by working to give people health care, not take it away. And if the news media wants to get to the bottom of Detroit's problems, health care is what they should be writing about.

Christopher R. Martin is an associate professor in journalism at the University of Northern Iowa in Cedar Falls, Iowa. His research has been published in Journalism Studies, Journal of Communication Inquiry, Communication Research, Labor Research Journal, Popular Music and Society, Journal of Communication, Z magazine and the Web journal Images. With Richard Campbell and Bettina Fabos, he is co-author of Media and Culture: An Introduction to Mass Communication (Bedford/St. Martin's, 2008), now in its 6th edition update, and author of an award-winning book on how labor unions are covered in the news media, Framed! Labor and the Corporate Media (Cornell University Press, 2004). Martin previously taught at Miami University (Ohio), and holds a Ph.D. from the University of Michigan.


517,000 Ontario jobs at risk

If Big Three automakers go out of business,
the entire economy will be devastated, report says

Dec 16, 2008 04:30 AM
Robert Benzie
Rob Ferguson
QUEEN'S PARK BUREAU

Ontario would lose 517,000 jobs within five years if the Big Three automakers went out of business, according to a new provincial report obtained by the Star.

The review, prepared for the Ministry of Economic Development and to be released today, warns the collapse of General Motors, Ford and Chrysler would send lasting shock waves through the economy.

If auto output by U.S.-based manufacturers in Canada were cut in half, at least 157,000 jobs would be lost right away, 141,000 of them in Ontario. By 2014, job losses would rise to 296,000 nationally, including 269,000 here.

If production were to cease completely, 323,000 jobs would be lost immediately in Canada, including 281,800 in this province, rising to 582,000 nationally and 517,000 in Ontario by 2014.

The Ontario Manufacturing Council, an arm's-length provincial government panel, commissioned the 11-page report, which was prepared by the Centre for Spatial Economics. The report paints a gloomy picture if governments at Queen's Park, in Ottawa, and in Washington do not bail out the automakers.

"The depreciation of the dollar, lower interest rates, and lower production costs eventually help the economy to partially recover (over the following five years, 2015 to 2019) but the loss of the Detroit Three leaves a permanent dent in Canada's economy in terms of jobs and output," the report says.

"For any Canadians who feel that the auto industry is expendable to our economy, this report is a wake-up call," Economic Development Minister Michael Bryant said in an interview yesterday.

"This report suggests that even under a scenario where half the auto sector is lost, our economy (in Ontario) basically craters and brings the whole rest of the (Canadian) economy with it," Bryant said.

The damage would extend well beyond the auto and related parts industries to housing and a broad range of consumer spending, said Jayson Myers, an economist who is president of Canadian Manufacturers and Exporters.

Myers is a co-chair of the manufacturing council with Jim Stanford, economist for the Canadian Auto Workers union.

"We were surprised how big the impact is. ... It shows the importance of ensuring we maintain production here."

The impact on citizens would be huge, Bryant predicted.

"If the auto industry is somehow allowed to part (from) our economy, it's the equivalent of a nuclear winter with lasting effects ... and would require enormous cuts to public services plus massive deficits every year."

North American automobile demand is already down to 11 million vehicles from a previous 19 million.

"Let's hope that doesn't last long," said Myers. "I'm pretty certain we will see demand rebound, but certainly it won't rebound to 19 million units."

Because automakers have been offering plenty of sales incentives and rebates in the past few years, which eat into future sales, "it's not going to be easy" to get demand up given the economic crunch facing consumers, Myers said.

Nor could Japanese-based automakers like Toyota and Honda, which already build cars and trucks in Ontario, be expected to fill the void left by GM, Ford and Chrysler.

"The economic impacts estimated by this analysis are likely to understate the true economic impact for several reasons, despite the possibility that foreign vehicle producers could expand production in Canada," the report states.

First, "a permanent contraction of the motor vehicle industry would negatively impact the U.S. and, indeed, the global economy, reducing the demand for Canadian exports from all industries."

That would depress prices of commodities such as oil and minerals, hurting resource-rich provinces like Alberta and Saskatchewan.

Second, the bankruptcy of any of the Big Three automakers might have serious implications for their pension funds and retirees' incomes.

Third, the study suggests "more than 80 per cent of the parts industry would vanish in the event of the failure of all three Detroit companies," which would temporarily disrupt foreign automakers' production in North America.

A subsequent housing slump would cast a pall over construction jobs as well as hurt the retail, insurance, real estate and financial services sectors, the report said.

Bryant said it underscores the necessity of keeping the Big Three in business.

"We have to mitigate the impact as much as possible."

The study comes as Ottawa and Queen's Park are preparing a $3.4 billion (Cdn.) emergency aid package if Washington comes through with a $14 billion (U.S.) rescue.

The U.S. Senate last week rejected a $14 billion bailout, but President George W. Bush is expected to resurrect it as early as this week.

In Canada, both levels of government are still determining how much money Ottawa and Queen's Park would each contribute.

Both Prime Minister Stephen Harper and Premier Dalton McGuinty have been in constant contact and Ottawa is talking with the White House to track the status of the U.S. bailout, Bryant said.

In the wake of Harper's offer of help for automakers, Alberta Premier Ed Stelmach yesterday urged assistance for his province as well.

Stelmach asked Ottawa to match the $2 billion Alberta is spending on carbon capture and storage technology to fight climate change, saying it would generate tax revenue and create manufacturing jobs across the country.

 

CAW warns plants could go south

Union chief says government bailout package must
be contingent on auto jobs staying in Canada

Dec 14, 2008 04:30 AM
Kenyon Wallace
Staff Reporter

Canadian governments must intervene to prevent the loss of whole auto assembly plants to the United States, says the president of the Canadian Auto Workers.

Despite $3.4 billion in conditional emergency aid promised to Canada's ailing auto makers Friday by the Ontario and federal governments, Ken Lewenza says excess capacity at Canadian auto plants must be protected or General Motors, Ford and Chrysler could move plants and equipment south of the border.

"If the Canadian government doesn't do anything ... you've got to believe that over time, our products would be moved," Lewenza said yesterday in an interview. "We don't want GM to pick up and say, it's been nice doing business in Oshawa but sorry we've got a better deal in the United States. We want to ensure that when the Americans put their legislation together, it isn't on the backs of Canadian jobs."

Lewenza also said that thousands of jobs could still be lost even with additional aid unless the money is contingent on manufacturers keeping workers in jobs and plants open.

Lewenza's warning comes on the heels of Federal Industry Minister Tony Clement's announcement late Friday of the conditional $3.4 billion for Canadian operations of General Motors, Ford and Chrysler based on the $14 billion (U.S.) the White House is contemplating in rescue money for the Detroit Big Three.

The Bush administration spent yesterday weighing its options, but details were scarce as to how much interim financial aid the U.S. government would provide to stave off a collapse of the troubled industry. On Thursday, Republicans in the U.S. Senate refused to pass a $14 billion (U.S.) rescue bill, throwing the future of the Big Three into doubt. GM and Chrysler have already warned they could run out of cash in a matter of weeks without immediate government aid.

But Ontario's assembly plants are already on the brink. Chrysler's Windsor minivan plant will be shut down for the month of January, while GM's car plant in Oshawa is scheduled for a six-week closure starting at the same time. Lewenza said Ford's Oakville plant is also anticipating shutting down operations for two weeks early in the New Year. The three companies employ more than 30,000 people in Ontario.

 

  Gettelfinger blasts GOP's tactics

Gettelfinger

He says union was 'set up'; Corker says
he couldn't get a date for union to take pay cuts.

Louis Aguilar / The Detroit News
December 13, 2008

Union Auto Workers President Ron Gettelfinger and Senate Republicans from the South spent Friday blaming each other for killing the congressional bailout that would have provided emergency loans to keep the domestic auto industry going until January.

Hours after the Washington deal fell apart, Gettelfinger was at Detroit's Solidarity House charging that a minority of southern Republicans was trying to "set up" the union by demanding concessions no other party -- the automakers and bondholders, for example -- were being asked to accept.
The breaking point of the negotiations was the UAW's refusal to agree to lower wage and benefit rates as soon as next year, Gettelfinger said.

"The GOP caucus was insisting the restructuring had to be done on the backs of workers and retirees rather than have all stakeholders come to the table," Gettelfinger said. "They were trying to pierce the heart of organized labor while representing foreign brands," that have plants in the southern United States and use non-union workers.

Shortly after the UAW press conference in Detroit, Republican Sen. Bob Corker of Tennessee roared back at the union from Washington. Corker suggested the union bore the burden for the measure's failure.

"I offered them a solution," Corker said of the Thursday talks. "Our caucus was 100 percent behind it. Do we own it, or does the UAW own it?" Corker chided Gettelfinger for not participating in the discussions. "I asked him to come to the table, not assign somebody to come back and forth. It didn't work out."

Corker said he proposed that wages and benefits of UAW members be lowered next year to match rates at American plants run by foreign automakers, and gave the UAW the chance to pick the date when the pay cuts would be made. He could not sell a compromise to other Republicans without that agreement. "We just could not get a date," Corker said of his Thursday discussions with the UAW. "It was an amazing thing to me."

Gettelfinger countered there is no way to tell what Republicans mean by competitive wage and benefit rates. In the 2007 labor agreement, the UAW agreed to slash starting wages and benefits for newly hired autoworkers at the Detroit automakers to as low as $14 an hour. Those cuts don't affect current workers, whose hourly pay and compensation is about $55 an hour. The figure climbs to more than $70 an hour when automakers' costs for health care for retired workers and retirement benefits are factored in.

The hourly pay and compensation at foreign automakers is about $45 an hour, labor analysts say. Gettelfinger said that excluding benefits, UAW workers earn just over $28.12 an hour in wages, on average. That compares with $30.45 an hour, which includes profit-sharing bonuses, for non-union workers at Toyota's Georgetown, Ky., plant.

The UAW's back is up against the wall, said Gary Chaison, labor professor at Clark University in Massachusetts.

"This whole bailout, at least today, has become a debate that is very ideological and geographical, and the UAW is in a very difficult position now," Chaison said. "It's become about the American labor movement, about North versus South, about labor and anti-labor, about free trade versus regulation. Gettelfinger must be frustrated because he's a practical guy, but, with this ideological fight now, it limits his options and how much he can bargain."

Gettelfinger indicated Friday "we were prepared to make further concessions" but didn't provide details.

The debate over UAW wages and benefits is something that's often argued, even in Detroit. UAW members such as Local 22 President George McGregor say they occasionally have to defend themselves to other working-class residents.

"I get it sometimes from the cashier where I buy my groceries over on the east side," of Detroit, McGregor said, who represents workers at GM's Hamtramck Cadillac plant. "I'm wearing my shirt with the UAW logo, and I'm paying cash, when the cashier asks, 'How come you all make so much money? " McGregor said. It's unfair,'

In the student center at Wayne State University on Friday, a group of classmates also were discussing the pros and cons of UAW wages and benefits.

"If you put in the seniority, I don't see why you should lay blame towards them," said Courtney Griffith Jr., 18, of Detroit, whose father is a GM hourly worker.

But Mikaela Manley, 18, of Oak Park, says the wages of UAW workers should be cut. "A lot of them don't even have college degrees, and here we are, working hard and sacrificing to get an education, and yet they will get paid more than us," Manley said.

 

Every assembly plant
in Ontario facing cuts
Listen

Lengthy downtime bound to trigger layoffs at auto-parts suppliers

Dec 13, 2008
Tony Van Alphen
Isabel Teotonio
Staff Reporters

Tens of thousands of anxious workers in Ontario's auto industry will be off the job during the next few months as plunging sales in the U.S. hammer production here.

Company and union officials confirmed yesterday a new round of production cuts for December and the first few months of next year that will hit every assembly plant in Ontario for some time.

The lengthy downtime at some assembly plants in Oshawa, Oakville and Windsor will also trigger significant layoffs at scores of parts makers who supply them.

"All of our (auto) workplaces in Canada are experiencing reductions and temporary layoffs," said Ken Lewenza, national president of the Canadian Auto Workers. "Every company is being very stringent on overbuilding now."

Industry leader General Motors of Canada Ltd. said it will idle its Oshawa car plant for three more weeks in January and February, in addition to the two weeks announced earlier. The plant, which primarily builds Chevrolet Impalas, is also reducing output from three to two shifts.

The company, whose U.S. sales have crashed more than 40 per cent in recent months, has already scheduled four weeks of downtime at its adjacent Oshawa truck plant in the first few months of next year. That plant will close later in the year.

The growing cuts are increasing anxiety among workers. At My Sister's Place, a popular bar around the corner from the Oshawa complex, much of the talk centred on the pending shutdowns.

"I mean, it's only people's lives that they're playing with, but who cares about that?" said Gregg Barton, 49, taking a swig of beer. "The company is not telling us anything."

It's not only the uncertainty that has left him shaken. Barton, who is eligible for retirement next year, fears GM may declare bankruptcy and his pension will be in jeopardy.

"A lot of people don't realize just how serious this," said Barton, whose comments were greeted with nods from fellow workers.

"This is going to impact everyone," added Mike Moher. "The whole economy is going to be hurt."

Debbie Comartin, a 21-year GM veteran, always thought she would have a "stable job" with the company, but the shutdowns have shaken her confidence.

"I just assumed I'd be here for 30 years, but will I be here for nine more years?" said Comartin, 46.

CAMI, a joint venture between GM and Suzuki Corp. in Ingersoll, disclosed that it will extend downtime from three weeks to six in January and February.

In another huge production cut, Ford Motor Co. of Canada Ltd. will stop building crossover utility vehicles, including the Edge, at its Oakville complex for 10 of 19 weeks between Monday and the end of April.

Ford is also idling its sputtering car assembly plant in St. Thomas next week and the week of Jan. 5. It was down this week, too.

Chrysler Canada Inc. is halting production at its minivan plant in Windsor during January. It will also close some engine operations for two weeks this month and next.

The company is slashing output at its Brampton plant, which builds the Chrysler 300 and two sports cars, for two weeks in January.

Laid-off workers at GM, Ford and Chrysler will get about 65 per cent of their gross pay through a combination of company benefits and federal employment insurance.

Honda Canada said it's slowing output in Alliston by about 9 per cent during the next three months – despite producing the Civic, one of the most popular vehicles in North America. Workers will have the option of taking vacation time or extra training.

Toyota is also curbing January production at its Cambridge operation and a new plant in Woodstock.


Ottawa pledges billions
to avert auto meltdown

Listen

Queen's Park joins $3.4B plan to bail out struggling GM, Chrysler
and Ford, provided U.S. aid approved and Canadian firms'
restructuring plans are sound

Dec 13, 2008
Tony Van Alphen
Business Reporter
Rob Ferguson
Queen's Park Bureau

Canada's struggling automakers will get roughly $3.4 billion in emergency aid to "keep the doors open" – but only if the Americans put money on the table first, says federal Industry Minister Tony Clement.

The aid is also conditional on restructuring plans by the Canadian arms of General Motors, Ford and Chrysler meeting government approval, Clement told a news conference last night.

"The federal and the Ontario governments are prepared to move quickly if and when the Americans approve a support package," Clement said following weeks of talks between Ottawa and Queen's Park.

"It's absolutely not a blank cheque ... we have to protect the interests of the taxpayer. This is about conditional support based on their long-term plans, based on them working with the parts suppliers, based on the unions being at the table, based on the United States continuing to be part of the solution."

The U.S. government pulled the auto industry from the brink of collapse earlier yesterday with a pledge for interim financial aid, although an amount is still being worked out.

In an escalating crisis, the Bush administration said it would step in to provide billions of dollars in loans and lines of credit for the next few months to reeling GM, Ford and Chrysler in the United States.

The move came after Republicans in the U.S. Senate stunned the industry by refusing to pass an interim $14 billion (U.S.) rescue bill late Thursday.

The Canadian aid package will be proportional to any U.S. assistance, based on the Canadian share of North American auto production, putting the price tag to taxpayers at about $3.4 billion (Canadian) based on the $14 billion American proposal.

The final amount "depends on what the U.S. administration comes up with," Clement said.

In total, the Canadian automakers are seeking up to $6.8 billion in emergency and long-term aid to cope with plunging sales and the need to restructure operations.

Hopes for a bailout didn't stop the automakers from announcing yesterday a slew of production cuts and temporary layoffs later this month and into the new year.

The governments still need to work on details of conditions that the automakers will face, said Clement, who walked away from reporters when asked how soon the companies could expect to receive money. A source close to the federal-provincial negotiations said the auto companies should not expect cheques immediately, because they will have to prove they have met the conditions first and that will take time.

"There will be some back and forth with the auto companies after the announcement's made," the source said.

The Canadian announcement detailing the amount of aid and how it will be shared among the automakers will come "a short time" after a U.S. package is finalized, the source added.

Both GM and Chrysler have said they need emergency cash before year's end to stay afloat. Ford does not have an immediate cash flow crunch and is seeking a government-backed line of credit for future needs.

Clement made the announcement in Toronto shortly after Premier Dalton McGuinty and Prime Minister Stephen Harper met secretly in Ottawa for an hour late yesterday afternoon.

McGuinty said the two governments had to intervene given the huge number of auto assembly, parts and related jobs at stake.

"If 400,000 folks were to go on employment insurance that would cost us billions and billions," the premier told CTV.

While Ontario had been arguing that emergency aid should be solely a federal responsibility, with the province providing money later to help the automakers retool their plants, it appears Ontario taxpayers will be on the hook after all.

"We are in this together," said a provincial source.

That means Ontario's forecast $500 million deficit for this fiscal year could balloon because of the auto aid deal.

Earlier in the day, the New Democrats were critical of any plans to wait for American aid.

"That's a very dangerous game for Ontario workers and Ontario communities because you can end up with a pattern that works against Ontario," warned party leader Howard Hampton.

GM and Chrysler have indicated they will run out of cash to operate their U.S. and Canadian plants within weeks, which would also cripple hundreds of parts companies and stall production at other automakers who rely on them.

That would push the U.S. and Canadian economies into a deeper recession and trigger heavier job losses. Lack of aid could also force one or more automakers and many suppliers into temporary court protection from creditors, creating a crisis in consumer confidence that would eventually lead to their demise.

Even as the U.S. and Canadian governments work on details of interim and long-term aid packages, the downturn in the two economies prompted more major production cuts.

Chrysler will close its giant Windsor minivan plant for more than a month; GM is extending a stoppage at its Oshawa car factory and Honda said it would slow Civic production in Alliston. Ford is curbing production at its Oakville plant by a total of 10 weeks. In the U.S., the Detroit Three were seeking $14 billion immediately and more than $35 billion in total aid from the U.S. government. None of the automakers and their Canadian subsidiaries have revealed publicly how they would spend government aid nor provided any details of plant closures, shrinkage of operations or job losses. That has led to opposition demands for more transparency in talks for aid.

The Canadian Auto Workers union, which represents more than 30,000 production workers and skilled tradespeople at the three companies, had urged the federal and Ontario governments to move quickly in confirming aid.

"It has been a roller-coaster for our members ... and for our communities who rely so heavily on the auto industry," said union president Ken Lewenza.

Outside the sprawling GM operations in Oshawa, auto worker Debbie Comartin's voice began to choke and her eyes welled up in tears because of some public opposition to government aid.

"They're not looking at what we've put back into the community," Comartin said, adding she feels the public has turned its back on auto workers.

Comartin, a 21-year GM veteran, said she is willing to take a pay cut but now worries about losing her benefits and pension.

"The worst fear is that if they go bankrupt, we will lose everything."

In Washington, administration officials offered no information on what funds it would tap for interim aid, or the amount, terms and conditions for the automakers, workers and other stakeholders.

The U.S. Senate rejected the $14 billion aid plan after the United Auto Workers union refused demands from primarily southern Republicans for wage cuts at the three companies. The UAW charged that Republican senators who oppose the aid hail from states where governments have used billions of dollars in incentives to attract plant investments from non-unionized foreign-based automakers.

Lewenza, whose union is also under pressure to accept some concessions, said U.S. politicians are using workers as "scapegoats" in the battle for public aid.

"We could work for free for the next month and it wouldn't sell one more car," he said.

The downturn in the North American economy, tighter credit and soaring fuel prices have hammered auto sales this year in the U.S. and created a liquidity crisis for the Detroit-based companies.

However, other automakers are now also feeling the pain and slashing output.

With files from Isabel Teotonio and Robert Benzie

 

U.S. auto bailout deal collapses

Auto executives listen as United Autoworkers Union President Ron Gettelfinger, right, testifies on Capitol Hill in Washington on Nov.19, 2008, before the House Financial Services Committee. From left are, GM chief executive Richard Wagoner; Chrysler CEO Robert Nardelli and Ford chief executive Alan Mulally.

Dec 12, 2008

WASHINGTON–A $14 billion emergency bailout for U.S. automakers collapsed in the Senate last night after the United Auto Workers refused to accede to Republican demands for swift wage cuts.

The collapse came after bipartisan talks on the auto rescue broke down over Republican demands that the UAW union agree to steep wage cuts by 2009 to bring their pay into line with Japanese carmakers.

The Senate rejected the bailout 52-35 on a procedural vote – well short of the 60 required – after the talks fell apart.

The White House said it was evaluating its options in light of the breakdown.

"It's disappointing that Congress failed to act tonight," a White House statement said. "We think the legislation we negotiated provided an opportunity to use funds already appropriated for automakers and presented the best chance to avoid a disorderly bankruptcy while ensuring taxpayer funds only go to firms whose stakeholders were prepared to make difficult decisions to become viable.''

Majority Leader Harry Reid said he hoped President George W. Bush would tap the $700 billion Wall Street bailout fund for emergency aid to the automakers. General Motors Corp. and Chrysler LLC have said they could be weeks from collapse. Ford Motor Co. says it does not need federal help now, but its survival is far from certain.

The collapse followed unprecedented marathon negotiations at the Capitol among labour, the auto industry and lawmakers who bargained into the night in efforts to salvage the auto bailout.

The group came close to agreement, but it stalled over the UAW's refusal to agree to wage cuts before their current contract expires in 2011. Republicans balked at giving the automakers federal aid.

Reid called the bill's collapse "a loss for the country,'' adding: "I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight.''

Last night's bailout collapse left Canada's situation in limbo.

The Detroit Three are seeking at least $6 billion (Cdn.) in public money, but have released few details about restructuring plans, including the future of plants, jobs or how they would spend the money.

Any financial help from the federal and Ontario governments was likely to have been piggybacked with the U.S. legislation, which would have given automakers until the end of March to submit restructuring plans, Ontario Economic Development Minister Michael Bryant said earlier yesterday.

The lack of disclosure about the impact on operations and employment has sparked criticism from the Ontario government and opposition politicians who remain in the dark about the future of some plants and thousands of jobs.

Last night's collapse was reminiscent of the defeat of the $700 billion Wall Street bailout in the House, which sent lawmakers back to the drawing board to draft a new agreement to rescue financial institutions and halt a broader economic meltdown. That measure ultimately passed.

It wasn't immediately clear, however, how the auto aid measure might be resurrected in a bailout-fatigued post-election Congress.

In Ottawa earlier yesterday, a senior official for the Conservative government said it was expecting to offer a "stimulus" package to the automakers before the Jan. 27 budget to be "in sync" with U.S. aid.

Supporters of aid in both countries say failure by governments to approve the rescue would trigger the collapse of the North American auto industry and push the economies in the U.S. and Canada into deep recession.

The parents of GM and Chrysler have told Congress they will soon run out of money to operate their plants. If one automaker fails, it would cripple parts makers who also supply other vehicle companies.

The U.S. legislation had set a March 31 deadline for GM Corp., Ford Motor Co. and Chrysler LLC to agree with a new U.S. "car czar" or presidential designate on restructuring plans that would make the automakers viable.

A summary of the U.S. legislation revealed the auto loans were for seven years or longer at interest rates of 5 per cent in the first five years and 9 per cent after that.

Bryant said governments on both sides of the border will have to set "tough terms" for aid "to make sure this is not throwing good money after bad."

Bryant said the North American auto industry is integrated between the two countries so it makes sense to manage the restructuring in the same way, with Canadian action mirroring the U.S.

With files from Rob Ferguson, Tonda MacCharles and Tony Van Alphen

Toronto Star

 

Automakers told to 'come clean'

Ontarians have right to know plans, McGuinty says
as U.S. House passes $14 billion American bailout


Dec 11, 2008 04:30 AM
Rob Ferguson
Queen's Park Bureau
Tony Van Alphen
Business Reporter

Canada's three struggling automakers must come clean on plans to cut jobs if they hope to win taxpayer support for the $6 billion in aid they're seeking, Premier Dalton McGuinty says.

General Motors, Ford and Chrysler submitted their restructuring plans to Queen's Park and Ottawa last Friday but have yet to publicly reveal what would happen to their Ontario factories.

McGuinty signalled his patience is wearing thin with the companies, which employ more than 30,000 workers.

"We're on a two-way street here," the premier said yesterday. "Ontarians are people of goodwill and they do want to lend a hand ... but don't try to pull the wool over our eyes, be honest with us."

American legislators battled yesterday over a proposed $14 billion (U.S.) emergency aid package that would increase pressure on Canada to respond in kind.

The House approved bailout legislation last night that forces U.S. automakers to restructure or fail. The 237-170 vote sends the measure to the Senate where a vote could come as early as today. But some Republicans have vowed to slow or even block the legislation.

Ford and Chrysler did not respond to inquiries from the Star yesterday seeking comment on McGuinty's request, but GM pledged to release its 35-page plan by week's end after meetings with government officials, said vice-president David Paterson.

Overall, GM is seeking $800 million by year's end and $1.6 billion later, Ford wants a "standby" line of credit worth $2 billion and Chrysler $1.6 billion. GM, which is Canada's largest automaker, has signalled it may need another $1 billion if the rapid vehicle sales decline continues.

Federal Industry Minister Tony Clement said officials were going to the "data centres" of the Detroit 3 to go over their most confidential financial information as part of the decision-making process.

"I haven't seen anything on timelines," said a spokesperson for Clement.

McGuinty's push for details followed days of criticism from opposition parties worried that an aid deal could be cut with taxpayers knowing nothing about the fate of thousands of auto jobs and how their money will be spent.

"Everything is done in secret," said NDP Leader Howard Hampton. "This is the wrong way to do it."

Ontario's economic development minister said time is running short for the automakers to go public with details of their plans.

"If the industry won't do it, the government will do it," Michael Bryant said yesterday, noting the automakers have been worried that any leaks could jeopardize U.S. aid.

McGuinty noted the automakers have made public far less information about their plans in Canada compared with their U.S. parent companies, leaving lawmakers here in a difficult position in trying to sell an aid plan to taxpayers already feeling the pinch of the economic downturn themselves.

"I think Ontarians ... are entitled to know," McGuinty said.

Chrysler has already warned its car assembly plant in Brampton and minivan plant in Windsor may not be able to survive without financial help soon.

Meanwhile, a top U.S. auto watcher said yesterday Chrysler Canada's U.S. parent likely won't survive the current financial crisis.

"A controlled wind down of Chrysler is in everybody's interest," said Michael Robinet, an analyst for CSM Worldwide, adding a probable scenario would be the sale of some assets. McGuinty also reiterated the Canadian Auto Workers union must step up to help if the public is to be sold on aid. CAW president Ken Lewenza said this week the union doesn't need to cut benefits and pay because it's already agreed to wage freezes.

- With files from Tonda MacCharles and Star wire services

 

No need to chop labour costs: CAW

Canadian Auto Workers President Ken Lewenza speaks to the media following his meeting with Minister of Industry Tony Clement in Ottawa Dec. 9, 2008.

Auto union chief tells federal industry minister
concessions should not be part of sector's rescue

Dec 10, 2008 04:30 AM
Tony Van Alphen
Rob Ferguson
Staff Reporters

The Canadian Auto Workers is insisting the union doesn't need to cut wages and benefits to become "part of the solution" for massive public aid packages to the country's reeling automakers because employees are already competitive.

Union president Ken Lewenza said he told federal Industry Minister Tony Clement yesterday that current pay for workers at General Motors of Canada Ltd., Ford Motor Co. of Canada Ltd. and Chrysler Canada Inc. would not scare away future auto investment or jeopardize existing assembly plants.

"We are pretty comfortable knowing we are competitive with the U.S., Europe and Japan" Lewenza said in an interview after a 30-minute meeting with Clement and senior government staff. "Our compensation will not put us at a disadvantage when it comes to investment. In fact, our labour rates should encourage investment."

Clement called the meeting as the federal and Ontario governments work to craft an emergency aid package for the automakers.

Last week, the automakers made submissions seeking $6 billion in government aid in the form of loans, loan guarantees and lines of credit.

Clement, who could not be reached for comment last night, has indicated the union and such other stakeholders as parts suppliers would need to show their willingness to help save the automakers before Ottawa provided any multibillion-dollar aid package.

A spokesperson for Clement said after the meeting the government is still conducting "due diligence," but acknowleged Ottawa is waiting to see what U.S. lawmakers will offer the Detroit-based automakers.

The U.S. Congress could vote on a $15 billion (U.S.) interim package today.

Some union critics have said the CAW must lower labour costs to save the automakers in Canada and in view of concessions by the United Auto Workers in the U.S.

But CAW officials say the arguments are based on inaccurate information.

In talks with U.S. lawmakers, the UAW has modified a jobs bank that pays laid-off workers almost full wages. Furthermore, the union has agreed to allow the companies to delay payments to a union retirement trust.

But the CAW, which represents more than 30,000 active workers at Canadian Detroit Three plants, does not have such funding plans here.

At the meeting, Lewenza said he informed Clement that this spring, the union negotiated savings of between $750 and $900 million for the three automakers in contracts during the next three years to help them cope with looming financial problems.

Under those contracts, production technicians currently earn about $33.90 an hour and receive numerous benefits.

Lewenza added he also pressed Clement on the need to revitalize the sputtering Canadian Automotive Partnership Council; design a national auto policy to lure and nurture the industry, and deal with unfair trade that has led to a flood of imports with no corresponding access to foreign markets.

Meanwhile, Ontario Premier Dalton McGuinty said the government is still in the "investigative phase" of examining auto aid possibilities and the public will see any packages including corresponding commitments from the companies.

But McGuinty also noted again that taxpayers should brace themselves for job losses, even with government aid.

"Governments alone can't make up for a dramatic decline for auto products," McGuinty said. "There will be some more restructuring in the auto sector. I think we need to be honest about that."

But Lewenza said it's too early to predict what the industry will look like here during the next few years and whether the Canadian industry will suffer serious job losses.

McGuinty said the federal and Ontario governments will have to step up with interim aid quickly if the U.S. does so to protect the Canadian industry.

"I know that there's a real state of urgency here and I expect that if Washington comes forward with an interim support package, `a bridge to Obama as they're calling it,' there will be heightened pressure on us to respond with an interim package."

In the Ontario legislature, opposition MPPs expressed concern about a lack of transparency from the automakers about their restructuring plans, including plant and job losses.

"It's undue pressure and irresponsible on their part to expect taxpayers to come running when they're not prepared to give assurances that this money will be well spent," said Bob Runciman, who acts as leader of the Progressive Conservatives in the Legislature.



Tentative deal reached
in US auto bailout talks


WASHINGTON, Dec 9 (Reuters) - The White House and congressional Democrats on Tuesday night reached an agreement in principle on a $15 billion proposal for bailing out U.S. automakers, officials said.
A Bush administration official and a Democratic leadership aide said the accord covered key points but a few final details still needed to resolved and put in writing.

Democrats have arranged to have the U.S. House of Representatives vote on a bill as early as Wednesday and send it to the Senate for consideration.
President Bush and President-elect Barack Obama were both urged by a key Democrat to help rally support by Democrats and Republicans for the pending measure.

"Bipartisan hard work has paid off," said Democratic Sen. Carl Levin of Michigan, whose home state headquarters General Motors Corp , Ford Motor Co and Chrysler LLC.

"I understand an agreement has been reached," Levin said in a statement.
The bailout is designed to allow GM and Chrysler to avert threatened bankruptcy through March with short-term loans. Ford Motor Co is not requesting immediate help but would like a line of credit in case its finances worsen.

The parties agreed last week that the money would come from an Energy Department fund established in September to help Detroit make more fuel efficient cars.

Listen

 

China automaker eyes Ford's Volvo
December 9, 2008

BEIJING–A Chinese partner of Ford Motor Co. is talking to the U.S. automaker about the possible purchase of its Volvo unit, a Chinese newspaper reported Tuesday.

Changan Auto Co.'s president, Xu Liuping, talked with Ford executives about a possible sale at an auto show last month in China, the National Business Daily said, citing an unnamed source at Changan. It gave no other details.

A spokeswoman for Ford Motor (China) Ltd. said Ford was evaluating possible options for Volvo Car Corp. including a possible sale but declined to comment on the Chinese report.

"It will take some months to assess all of our available options," spokeswoman Lynn Ouyang said in a written statement.

Employees who answered the phone at Changan referred calls to a spokesman who they said was unavailable.

Ford is trying to raise money to see the company through a severe slump in the U.S. auto industry. Ford and rivals General Motors Corp. and Chrysler LLC are seeking government aid.

Ford bought Volvo, based in Goteborg, Sweden, in 1999.

Changan and Ford have been joint venture partners in China since 2001.

China's small but ambitious automakers have acquired other foreign brands in an effort to expand abroad.

Nanjing Automobile Group bought Britain's MG-Rover brand in 2006 after its owners went bankrupt. Shanghai Automotive Industries Corp. owns 51 per cent of South Korea's Ssangyong Motor Co.

Car sales in China, the world's second-largest auto market, have weakened but not as severely as in the United States.

China's auto sales fell 10.3 per cent in November from a year earlier, state media reported Monday, citing industry data. It was the third month out of four that car sales have contracted. Sales rose in October.

Ford sold its Jaguar and Land Rover units to India's Tata Motors Ltd. in March for $1.7 billion.


U.S. forges $15B rescue
for automakers

Dec 08, 2008 04:30 AM

Star wire services

WASHINGTON–White House and congressional negotiators sought yesterday to remove remaining differences over an emergency rescue for the auto industry, a wounded giant of the struggling U.S. economy.

Prodded by shock jobless data that showed the U.S. shed more than half a million jobs in November alone, negotiators tried to forge an agreement in principle to provide ``The Detroit Three" automakers with at least $15 billion (U.S.) in short-term loans.

Negotiators hope to reach a final deal today and win congressional passage this week. The measure would then be sent to President George W. Bush to sign into law before Democrat Barack Obama succeeds him as president on Jan. 20.

The Senate is due back in session today and backers hope to have a package ready that can win quick approval.

Lawmakers fear a recession will deepen if any of the three collapses. Primarily Republican critics contend market forces ought to determine the fate of the auto industry, not intervention from a government saddled with a record deficit.

In addition to reorganizing and protecting taxpayer investment, possible conditions include creating a government "car czar" to oversee the bailout, new corporate leadership and additional concessions by the United Auto Workers union.

Senate banking committee chair Christopher Dodd said GM Corp. chair Rick Wagoner should resign to allow new leadership to restructure the faltering company.

"He has to move on," Dodd, a Connecticut Democrat who is leading efforts to craft bailout legislation, told CBS's Face the Nation.

Faced with plummeting sales they blame largely on the credit crunch and recession, GM, Chrysler LLC and Ford Motor Co. sought $34 billion from Congress last week to avoid possible collapse. A deal negotiated by the White House and Congress would provide no more than $17 billion to last into March.

Critics have said any loans would be a waste of money unless automakers cut costs and better compete with more fuel-efficient, foreign-made cars.

 

 Bad Mouthing
American/ Canadian
Vehicles Get the
Facts Straight !

Here are some facts from the WEB that don't get the press they deserve - next time you hear negative comments about domestic this may come in handy it also has the sites that the info came from as well. Pay particular attention to #13 - It says a lot

1. Which country can boast that their brands occupy 2 of the top 3 spots for long-term reliability?
a. Germany
b. Japan
c. Korea
d. United States

2. As of August 2007, which manufacturer had the most recalled vehicles in the U.S. for that year?
a. Chrysler
b. Ford
c. GM
d. Nissan
e. Toyota
f. Volkswagen

3. Pick the brand from each group that has the highest initial quality.
a. Acura, BMW, Cadillac (all luxury makes)
b. Honda, Mercury, Nissan (all non-luxury makes)
c. Acura (lux), Chevrolet (non-lux), BMW (lux), Mazda (non-lux)

4. Which midsize sedan has the highest initial quality?
a. Accord (Honda)
b. Altima (Nissan)
c. Camry (Toyota)
d. Malibu (Chevrolet)

5. Which large sedan has the highest initial quality?
a. Avalon (Toyota)
b. Grand Prix (Pontiac)
c. Sable (Mercury)

6. Which midsize pickup has the highest initial quality?
a. Dakota (Dodge)
b. Ranger (Ford)
c. Tacoma (Toyota)

7. Which car is the most economical overall?
a. Aveo (Chevrolet)
b. Fit (Honda)
c. Prius (Toyota)

8. Which car did the LA Times describe as “a better car than BMW or Mercedes or Lexus or Infiniti”?
a. A6 (Audi)
b. CTS (Cadillac)
c. RL (Acura)

9. Which company makes the winner of the 2008 “Green Car of the Year” award?
a. Chevrolet
b. Honda
c. Toyota

10. Which car was selected by the North American automotive press corps as the “North American Car of the Year” for 2007?
a. Aura (Saturn)
b. Camry (Toyota)
c. Fit (Honda)

11. Which car won the same award for 2008?
a. Accord (Honda)
b. Altima coupe (Nissan)
c. Malibu (Chevrolet)

12. Which company had a luxury vehicle, a midsize sedan, and a large truck removed from the Consumer Reports recommended vehicles list in October 2007 because of mounting quality problems?
a. Chrysler
b. Ford
c. General Motors
d. Hyundai
e. Toyota
f. Volkswagen

ANSWERS:

1. Which country can boast that their brands occupy 2 of the top 3 spots for long-term reliability?

Answer: United States.
Per J.D. Power Vehicle Dependability Study, Mercury and Cadillac are in the top 3, along with Lexus. And in 2007, Buick was tied with Lexus for the top spot.
www.jdpower.com/corpor...

2. As of August 2007, which manufacturer had the most recalled vehicles in the U.S. for that year?

Answer: Volkswagen.
According to Business Week, Volkswagen had the most recalls at this time a year ago. The second worst was Toyota.
www.businessweek.com/a...

3. Pick the brand from each group that has the highest initial quality.

a. Answer : Cadillac (better than both Acura and BMW)
b. Answer: Mercury (better than both Honda and Nissan)
c. Answer: Chevrolet (better than Acura, BMW, and Mazda)
This is according to J.D. Power’s Initial Quality Survey.
www.jdpower.com/corpor...

4. Which midsize sedan has the highest initial quality?

Answer: The Chevrolet Malibu has better initial quality than any competitor, including the Honda Accord, Toyota Camry and Nissan Altima. The Ford Fusion also beat all 3 Japanese competitors.

This too is from the J.D. Power Initial Quality Survey, which also reveals that above average are American brands Mercury, Ford, Cadillac, Chevrolet , Pontiac, Lincoln, and Buick. Below average are import brands Acura, Kia, Nissan, BMW, Mazda, VW, Subaru, and Scion (and several others).
www.jdpower.com/autos/...
www.jdpower.com/corpor...

5. Which large sedan has the highest initial quality?

Answer: Again per J.D. Power, the highest quality large car is the Pontiac Grand Prix, beating the Toyota Avalon. Two other Detroit cars that beat the Avalon are the Mercury Sable and Mercury Grand Marquis.
www.jdpower.com/autos/...

6. Which midsize pickup has the highest initial quality?

Answer: The Dodge Dakota has the best quality for midsize pickups, proving that Chrysler too can beat the imports. Both the Dakota and the Ford Ranger beat the Toyota Tacoma.
www.jdpower.com/autos/...

7. Which car is the most economical overall?

Answer: Per Edmunds.com, the premier automotive analysis site, the most economical car in America, taking into account not only mileage but all costs, is the Chevrolet Aveo. The Honda Fit is #3 and the Toyota Prius is a distant #34.
www.edmunds.com/help/a...

8. Which car did the Los Angeles Times describe as “a better car than BMW or Mercedes or Lexus or Infiniti”?

Answer: “Cadillac makes a better car than BMW or Mercedes or Lexus or Infiniti, and that car is the 2008 CTS. No other car in the mass market dares so much as this expressive and audacious bit of automotive avant-gardism.” Dan Neil, LA Times.
www.latimes.com/classi...

9. Which company makes the winner of the 2008 “Green Car of the Year” award?

Answer: The Chevrolet Tahoe Hybrid is the winner of this award.. How could a full-size SUV defeat the media darling Toyota Prius? Read the link below and you will discover, “What’s equally eye-opening is that the Tahoe’s 21 mpg city fuel efficiency rating is the same as that of the city EPA rating for the four-cylinder Toyota Camry sedan. ”

Did you catch that? A huge, full-size SUV from Chevrolet that gets the same city mileage as a 4-cylinder Toyota Camry!! Chevy obtained this remarkable achievement through the use of its 2-mode hybrid system, a technology that Toyota does not have.
www.greencar.com/featu.../

10. Which car was selected by the North American automotive press corps as the “North American Car of the Year” for 2007?

Answer: Not only was the Saturn Aura picked by the automotive press corps as better than the Honda Fit and the Toyota Camry, “When a panel of 47 journalists named the Saturn Aura the North American Car of the Year over the Toyota Camry, the vote wasn't even close, 205-89.” Chicago Tribune, 1/15/07
www.northamericancarof...

11. Which car won the same award for 2008?

Answer: GM again crushed the Japanese competition in 2008 when the Malibu received 190 votes to the Honda Accord’s 95. The Accord actually came in 3rd since GM’s other finalist, the Cadillac CTS, received 165 votes.
www.northamericancarof...

12. Which company had a luxury vehicle, a midsize sedan, and a large truck removed from the Consumer Reports recommended vehicles list in October 2007 because of mounting quality problems?

Answer: Toyota’s much publicized quality problems resulted in Consumer Reports actually removing from their recommended vehicles list the Lexus GS luxury car, Camry V6 sedan, and Tundra pickup. This demotion occurred in October 2007.

13.If you are one of the many Americans & Canadians who gave up on Detroit’s cars because of a bad experience many years ago, it’s time to rethink your position. Rethink Detroit.

Detroit automakers: 79 U.S. jobs per 2,500 cars sold in America.
Foreign automakers: 33 U..S. jobs per 2,500 cars sold in America.
levelfieldinstitute.or.../


 

11th hour talks on
$15 billion auto aid

White House, political aides try to come up with deal to save Big 3

Dec 07, 2008 04:30 AM
Associated Press

WASHINGTON–Racing to seal a deal with the White House, Democratic congressional leaders dispatched aides yesterday to draft an emergency $15 billion (U.S.) aid package to pull Detroit's Big Three automakers from the brink of collapse.

Capitol Hill leaders prepared to sell yet another bailout to a skeptical Congress. It is an uphill battle: The anger is fresh over how the Bush administration used the $700 billion Wall Street rescue fund and lawmakers are questioning whether the once-mighty auto giants actually can survive.

Still, with Washington spooked by massive job losses that provided the latest evidence of a deepening recession, the White House said it was in "constructive discussions" with both parties. Voting on the plan is expected this week.

The emerging measure would speed short-term help to General Motors Corp., Ford Motor Co. and Chrysler LLC, while empowering the government to order a wholesale restructuring of the industry and imposing tight restrictions on the Big Three, according to officials close to the talks.

They described the developing plan on condition of anonymity because the details are not final.

It is intended to tide the companies – particularly GM and Chrysler, which have warned they are just weeks from going bust – over into March, when Barack Obama is president and a new Congress can consider a longer-term solution.

A breakthrough came Friday when House Speaker Nancy Pelosi, yielded to U.S. President George W. Bush on a key point: allowing the aid to come from an existing $25 billion fund marked for producing environmentally friendlier cars.


Car makers driving for
$6 billion rescue plan

Few details offered on plans for money from Ottawa, Queen's Park

Dec 06, 2008
Rob Ferguson
Queen's Park Bureau
Tony Van Alphen
Business Reporter

The Canadian subsidiaries of the reeling Detroit Three automakers want a total of at least $6 billion in loans and credit lines from the federal and Ontario governments to stay alive, but won't go into much detail on how they would spend the money.

General Motors of Canada Ltd., the country's biggest automaker, is seeking $800 million by year's end and $1.6 billion later, while Chrysler Canada Inc. is asking for $1.6 billion, according to sources familiar with the submissions.

GM may need a further $1 billion if vehicle sales continue to slide at a rapid rate, vice-president David Paterson told the Star last night.

Ford Motor Co. of Canada Ltd. confirmed it would need a "stand-by" line of credit of up to $2 billion, but would use it only if necessary.

The company also urged Ottawa to get into the consumer car loan business and urged both governments, struggling with their own cash crunch, to boost sales through a "tax holiday" on new car purchases.

The three automakers submitted restructuring plans – GM's spanned 35 pages – and the requests for rescue packages to the federal government and Queen's Park yesterday.

The move came on the same day GM confirmed it will lay off 700 workers and cut the third shift at its Oshawa car plant indefinitely starting the first week of February.

The extra money GM might need would boost the overall industry aid package to $7 billion.

"The numbers are going to seem big to taxpayers because they are big," said Ontario Economic Development Minister Michael Bryant.

The lack of public detail from most automakers came as a surprise after Bryant had suggested earlier in the day that more specifics would be released.

"We're certainly not going to say to taxpayers that `we're going to provide assistance, trust us, thank you very much.' No way," he said.

"Obviously, we have to be very transparent and accountable in our decision."

GM is happy to make its plan public but is keeping it private for the weekend at the request of the Ontario government.

"It's in their court," Paterson said, noting GM would use its aid to bring a hybrid variant of a yet-to-be revealed new car model planned for Oshawa, and add transmission production to its engine plant in St. Catharines.

In contrast to its U.S. parent, Chrysler Canada would not publicly disclose how much it needs.

The historic requests come after the automakers' Detroit-based parents filed restructuring plans and requests to the U.S. Congress earlier this week for a total of $34 billion (U.S.) in aid.

The North American-based automakers face a liquidity crisis because of a crash in sales south of the border and worsening economic conditions.

Analysts warn that if one of the automakers fails, it could cause a domino effect among parts suppliers, shut down the entire industry and push the economy into a depression.

If governments in both countries approve the aid packages, it would mark the first major auto industry rescue since they provided hundred of millions of dollars in loan guarantees to Chrysler in 1980.

In that case, the company paid back the money eight years before it was due.

Automakers will have to be more forthcoming to win public support for aid, said Progressive Conservative Leader John Tory. "Taxpayers have a right to know, within certain broad paramaters, what the money is going to be used for."

Ford of Canada said it expects to be profitable by 2011 and has the cash to weather the storm, but needs access to government-backed loans in case the economy worsens or a major rival goes bankrupt, causing a "ripple effect."

CAW president Ken Lewenza said the union will "do what it takes" to help the automakers stay afloat

 

Humbled auto execs
plead for lifeline

The heads of the troubled Detroit Three automakers — including Chrysler’s Robert Nardelli, shown here — arrived in Washington Dec. 4, 2008, to plead for a multibillion-dollar bailout in relatively fuel-efficient versions of their companies’ products.

Plaudits, skepticism greet call to Congress for $34 billion U.S.

Dec 05, 2008

WASHINGTON BUREAU

WASHINGTON–This time, they ditched the corporate jets, hit the Interstate in their hybrids and came armed with plans for deep cuts and a renewed commitment to fuel efficiency.

But it's not clear whether the Big Three – who have now rechristened themselves the Detroit Three – are any closer to a Congressional lifeline, one that will now cost American taxpayers at least $34 billion (U.S.), $9 billion more than the auto industry CEOs had sought just two weeks ago.

With time running out on both this Congress and at least two of the automakers, the Senate banking committee heard another stark warning yesterday.

"I believe we could lose General Motors by the end of this month,'' United Auto Workers president Ron Gettelfinger said a day after his union agreed to concessions on job security and health care for retirees.

Instead of focusing on the peril to the U.S. economy as they did in the first presentations to Congress, General Motors chair Rick Wagoner, Ford CEO Alan Mulally and Chrysler CEO Robert Nardelli outlined much more detailed plans to make their industry more competitive and cost effective.

It won them some plaudits from committee members, but no clear path to receiving the money.

And much skepticism remained.

U.S. public opinion polls are running heavily against any bailout.

"Inaction is unacceptable," said Christopher Dodd of Connecticut, the committee's Democratic chair.

"But we're not about to write a cheque and hand it over."

The auto executives, however, continued to resist suggestions they declare bankruptcy, even if all the terms of restructuring were handled ahead of the filing.

They said no one would buy cars from a bankrupt manufacturer and expressed skepticism they'd be able to emerge from bankruptcy.

Mark Zandi, co-founder of Moody's Economy.com, told the committee that while he backed a rescue, a $34 billion bailout would merely delay bankruptcy at some point over the next two years. "They would ultimately need ... somewhere between $75 billion and $125 billion to avoid this fate," he said.

Wagoner accepted GM has made mistakes, a change in tone from his testimony last month. He pledged a "renewed and expanded" commitment to new technologies, ramped-up production of fuel-efficient vehicles and a reduction in brands, models and retail outlets.

He said he'd take $1 per year in compensation from GM's board, reduce the salary of other executives and ground the corporate jet.

More than half the $34 billion, or $18 billion, is being sought by GM.

Wagoner promised to begin repaying the money by 2011 and have it fully repaid by the following year.

All the auto heads agreed to federal oversight of restructuring plans in return for federal money.

"It used to be that our approach to our customers was, if you build it, they will come," said Mulally, who heads the healthiest of the three firms, but is seeking $9 billion.

Chrysler is seeking $7 billion.

"Our plan also includes producing high-quality, fuel-efficient cars and trucks people want to buy while supporting our country's energy security and environmental sustainability goals," Nardelli pledged.

President George W. Bush told NBC News yesterday that "no matter how important the autos are to our economy, we don't want to put good money after bad." Any plan must ensure "long-term viability for the sake of the taxpayer."

 


CAW loses 'gentle giant'

Frank McAnally

Former Local 200 president mourned
Dalson Chen, Windsor Star

Thursday, December 04, 2008

Windsor's CAW family is mourning the loss of a "gentle giant" -- both in terms of physical presence and community impact -- in the passing of local labour leader Frank McAnally.

A CAW member for more than 40 years and past president of CAW Local 200, McAnally died on Wednesday morning of cancer. He was 63.

Ken Lewenza, CAW national president, said union members have been remembering McAnally's respectful way of dealing with others.

"He never once acted like the big man that he was. He always acted like a man that recognized and understood the opinions of others," Lewenza said.

"We lost one hell of a person in Windsor and Essex County."

A Windsor native, McAnally joined the union as a Ford worker in 1966, and was elected a union steward at the Windsor casting plant in 1971.

Over the years, he earned numerous elected positions in the union until he became president of Local 200 in 1984.

Lewenza described McAnally's presidency as one that improved thousands of lives through saving and creating Ford jobs. "He brought Local 200 through a time of despair, similar to what we're going through today," Lewenza said. "He was creative, he was innovative."

Mike Vince, Local 200's current president, described McAnally as a mentor and father figure. "It was absolutely a shock when we got the call this morning. Frank was an incredible trade unionist, but also an incredible human being.

"He sacrificed so much time away from his family to give back to the community and the country. He touched so many people, and some of them don't even recognize his assistance in certain things."

In 1995, McAnally joined the national office of the CAW. His positions included area director for British Columbia and Alberta, and then CAW national representative for all Ford members. He retired in 2003.

Outside of the union, McAnally played a key role in the building of the CAW Student Centre at the University of Windsor, and was a board member with the United Way and the Unemployed Help Centre.

Vince said McAnally will be sadly missed. "Frank was a very big man, and his heart was even bigger," he said. "His door was always open.... He had such a wonderful personality. He was able to deal with people at all different levels."

McAnally is survived by his wife Linda, his son Frank Jr., his daughter Jennifer and grandchildren.

 

Detroit 3 leaning on CAW

Auto executives listen as United Autoworkers Union President Ron Gettelfinger, right, testifies on Capitol Hill in Washington on Nov.19, 2008, before the House Financial Services Committee. From left are, GM chief executive Richard Wagoner; Chrysler CEO Robert Nardelli and Ford chief executive Alan Mulally.

Pressure builds after U.S. union agrees to revise contracts,
allow GM, Ford and Chrysler to delay major payments

 

Dec 04, 2008
Tony Van Alphen
Business Reporter

General Motors of Canada Ltd. is aggressively seeking help from the Canadian Auto Workers to reduce costs in support of efforts for a huge government aid package, the union's top leader says.

Ken Lewenza, the CAW's national president, confirmed yesterday the union has received individual overtures from the three reeling Detroit-based automakers, but GM is pressing harder for savings on the eve of submissions to the federal and Ontario governments for emergency aid.

"GM has been the most aggressive," Lewenza said in an interview yesterday. "They've told us we must be part of the solution and must be creative in reducing costs."

GM, the country's biggest automaker, has a policy of not talking publicly about talks with its union.

Lewenza's comments came after the United Auto Workers in the U.S. revealed it will revise contracts with GM, Ford and Chrysler to delay billions of dollars in payments to a union run health-care trust.

Furthermore, UAW president Ron Gettelfinger said the union would modify a jobs bank in which members on layoff receive up to 95 per cent of their pay.

The CAW does not have a similar health-care trust or jobs bank in Canada at the three automakers.

Lewenza, who represents about 30,000 workers at the three companies, said none of them had broached specific areas where the union could reduce costs.

"There are ongoing discussions in terms of the challenges we all face but there have been no proposals either way," he said.

Lewenza skirted questions about whether the union would consider concessions. "We have always shown a willingness to help and there are different ways of doing that," he said. "It doesn't mean we have to reopen contracts every time and cut wages and benefits.

In the last few years, the union has agreed to changes in local agreements at GM in Oshawa, Chrysler in Brampton and Ford in Oakville that altered work rules and pay schemes, he noted

Lewenza said that in talks with GM, the union reminded the company about the current freeze in wages for three years; suspension of a cost of living for almost two years and other cuts to benefits.

The union also negotiated a package for workers affected by the pending shutdown of GM's truck plant in Oshawa during the summer after the company agreed in May not to close it.

GM has suggested the Canadian industry needs as much as $3.5 billion in short-term loans, loan guarantees or credit lines.

The federal and provincial governments have instructed the three companies to make submissions for aid by today.

Submissions should include restructuring plans, cash positions, short-term liquidity details, future product programs, data on impact on suppliers and how the car firms will handle financing needs here, the governments said in letters to automakers last week.

The government did not ask for submissions from Honda Canada and Toyota Canada, who also have extensive operations here but don't face an immediate cash crisis.

Meanwhile, Detroit-based GM, Ford and Chrysler and the UAW worked yesterday to win support from a skeptical U.S. Congress for a $34 billion (U.S.) aid plan south of the border.

"If we have a catastrophic failure of one of these car companies, in this tender environment for the economy, it's a huge blow," Chrysler vice-chair Jim Press told the Associated Press. "It could trigger a depression.''

In submissions earlier this week, GM and Chrysler said they needed an immediate infusion of government cash until the end of the month and both noted they could drag the entire industry down if they fail. Ford wants a $9 billion ``standby line of credit" in case a competitor fails.

Chrysler said it needed $7 billion by year's end to keep operating. GM asked for an immediate $4 billion as the first installment of a $12 billion loan, plus a $6 billion line of credit to use if conditions worsen.

All three plans envision government taking a stake in the companies.


UAW plans emergency meeting today Wednesday

Union summons leaders to Detroit as firms give
survival plans to Congress.

David Shepardson / Detroit News Washington Bureau

WASHINGTON -- The United Auto Workers has called an emergency meeting in Detroit on Wednesday during which the union could consider reopening its 2007 contracts with the automakers.

Union leaders representing workers at General Motors Corp., Ford Motor Co. and Chrysler LLC plants across the country have been called to Detroit for the session, according to sources familiar with the plan.

One local UAW official who has been invited to the meeting expects the union leaders are going to be asked for their support to reopen the 2007 contracts and to agree to concessions that would help make the automakers financially viable.

The business plans GM, Ford and Chrysler have prepared for Congress include seeking additional givebacks from the UAW as one way to cut costs, according to sources with knowledge of the plans.

A person familiar with one automaker's plan said a variety of topics are being explored. Key issues include reopening the contract, eliminating the controversial jobs bank that still pays workers even when they are laid off, and how much and how quickly the automakers will contribute to a trust fund to be run by the UAW that will take over responsibility for retiree health care beginning in 2010. The health care trust was a key part of the landmark contracts negotiated last year.

UAW spokesman Roger Kerson could not be reached for comment late Monday.

Harley Shaiken, a labor expert and professor at the University of California, Berkeley, was unaware of Wednesday's meeting but was not surprised it was called.

"We truly are in uncharted waters, the stakes are enormous and when you have a situation like that, to lead effectively, you need all the local people aware of the choices and hearing directly from the top leadership what the options are."

Wednesday's meeting was first reported by Bloomberg News.

UAW President Ron Gettelfinger was criticized for the jobs bank during congressional hearings last month about giving the automakers federal aid. The number of workers in the programs has been greatly reduced under tougher time restrictions in the 2007 contract but the benefit is derided as a relic of a bygone age that erodes the automakers' ability to compete and that they can no longer afford. Gettelfinger recently said Ford has taken 40,000 workers out since 2005 and GM has removed about 47,000. About 3,500 workers are in the programs today, he said.

"The jobs bank has become the poster boy of what's gone wrong with the industry," Shaiken said. "The union knows it's the reality they have to deal with. To defend the jobs bank is just not done in the current environment."

In addition to seeking more concessions from the union, Detroit's Big Three will pledge to cut executive pay, limit corporate jet travel and take sweeping steps to return to profitability in the plans they will deliver to Congress.

The chief executives of GM, Ford and Chrysler will return to Washington later this week to make their second plea for aid before House and Senate committees and could face calls for their ouster after a leading Democrat on Monday called for their resignation in return for federal help.

"If I had my way, all three of those guys would be in the unemployment line and I think that ought to be one of the conditions for us doing this," House Majority Whip Jim Clyburn, D-S.C., told reporters in South Carolina, according to the Associated Press.

As majority whip, Clyburn would be responsible for getting the votes needed to pass a rescue plan for the automakers.

South Carolina is home to a BMW plant in Spartanburg, which is set for a $750 million expansion by 2010. Detroit's Big Three have clashed with a growing number of southern lawmakers representing districts where foreign auto companies have factories.

On Monday, the Big Three were putting the finishing touches on the plans congressional leaders required last month when they delayed a vote on $25 billion in emergency assistance.

GM's board of directors approved its plan late Monday. It will be delivered to Congress after the markets close today and will include sacrifices from executives, hourly workers and debt holders.

GM will disclose it has been discussing a proposal with holders of its debt to offer them equity in exchange, a person briefed on the plan said. GM also may announce it is putting up for sale or shuttering Saab, Saturn and Pontiac -- on top of its earlier announced plans to sell its Hummer brand -- and shrinking its dealer network.

Ford said Monday it was putting its Volvo unit up for sale and is expected to detail reductions in executive compensation and corporate travel as part of a plan the company's board approved on Monday. It will highlight its small car strategy and shift to more fuel-efficient vehicles.

Chrysler had not finalized its plan late Monday, said spokeswoman Shawn Morgan.

The companies' revamped business plans are due to Congress the same day they will report November U.S. auto sales, which are expected to be nearly as dismal as October's, when demand plummeted nearly 32 percent. All Big Three members are expected to post sales declines of more than 30 percent, according to Wall Street forecasts. GM is expected to announce more production cuts in North America along with sales.

Some analysts said sales were hurt late in the month by the intense criticism the Detroit companies faced at the congressional hearings last month and talk of a possible GM bankruptcy filing, which the company has said isn't planned.

In making their second pitch for federal aid, the automakers will try to win over a skeptical Congress with substance and symbolism.

On Monday, Ford spokesman Mike Moran said CEO Alan Mulally would drive to Washington in an as yet unidentified Ford vehicle. GM CEO Rick Wagoner also will drive, likely in a Chevrolet Malibu hybrid. Chrysler's Robert Nardelli said earlier he would not return to Washington by corporate plane, but the company hasn't said how he will travel this week.

The CEOs flew to Washington on separate corporate jets last month for the first round of hearings and drew stinging criticism from lawmakers, as did the reluctance of Mulally and Wagoner to accept new pay cuts.

All three companies' plans will disclose how much cash they have on hand and how much they need in the short term to survive. Chrysler said it had burned through $5 billion in the first nine months of the year, and was down to $6.1 billion as of Sept. 30. GM lost more than $20 billion in the first nine months of the year and burned through $6.9 billion in the third quarter. Ford ran through $7.7 billion in the third quarter. .

GM and Chrysler have warned they could run out of cash by early next year. Nardelli said last month Chrysler is in "a very fragile position."

Chrysler's plan is expected to reiterate that it is seeking additional alliances with other automakers. GM and Chrysler held merger talks this fall, but dropped them last month. Chrysler also held talks with the Renault SA-Nissan Motor Co. alliance about a possible tie-up.

Automakers face a difficult road to win approval for the loans. Even if Congress likes their plans and the hearings go well, it is not certain that both houses of Congress will agree on a plan that can be signed into law by President George W. Bush.

House Speaker Nancy Pelosi, D-Calif., and Republicans are still at an impasse over where to get the money to help the companies. Pelosi wants to tap the $700 billion Wall Street rescue package, while Republicans want to drop the fuel efficiency requirements from a $25 billion Energy Department retooling program.

"We'll see what they come up with and what the two hearings yield," said Pelosi spokesman Drew Hammill.

Sen. George Voinovich, R-Ohio, on Monday urged Pelosi and Sen. Majority Leader Harry Reid, D-Nev., to move quickly.

"The time for Congress to act is now," Voinovich, who co-chairs the Senate Auto Caucus, wrote in a letter Monday to Pelosi and Reid. "We must work swiftly to allow the domestic automotive industry to gain access to emergency assistance. The risk in doing nothing is too great."

Voinovich pointed to a study by the Center for Automotive Research in Ann Arbor, which estimated "that if even one of the domestic automakers were to fail roughly 2.5 million U.S. jobs could be lost as a result of the cascading impact that such a failure would have on auto parts suppliers and related industries such as dealers."

Voinovich and Sen. Carl Levin, D-Detroit, co-wrote a compromise bill that they had hoped would get a vote last month.

Levin said Monday he was "confident" the plans the automakers submit will be "responsive to the request of the Congress" and that "the industry will make a compelling case for bridge loans that will allow the companies to return to firm financial footing."

Detroit News Staff Writer Christine Tierney contributed to this report.

 


Ford expects to break even in 2011

Dec 02, 2008 11:18 AM

Reuters

DETROIT–Ford Motor Co said Tuesday it expects to break even or be profitable in 2011 and seeks access to up to $9 billion of government bridge loans to support its restructuring.

The news sent Ford's shares soaring about 13 per cent in morning trading.

Ford, which burned through $7.7 billion of cash in the third quarter, said it submitted a business plan to Congress and does not anticipate a liquidity crisis in 2009, barring a bankruptcy filing by one of its U.S.-based rivals, General Motors Corp or Chrysler LLC.

Ford said it expects both its overall and North American automotive business pretax results to be break-even or profitable in 2011.

Ford Chief Executive Alan Mulally, who, along with other automaker executives, drew criticism from U.S. lawmakers over their compensation and luxury travel arrangements, called the bridge loan "a critical backstop" for Ford that it may not have to access.

Ford said its CEO would take a $1 annual salary if Ford does access government funds. The automaker also said it would sell its five corporate aircraft.

GM, Ford and Chrysler have to meet a Tuesday deadline for submitting detailed plans to congressional leaders outlining restructuring efforts and their prospects for survival in order to secure $25 billion in emergency funding.

In the plan submitted to Congress, Ford said it had entered into discussions with the United Auto Workers to further reduce its cost structure and expects to continue to reduce its dealer and parts supplier base. Ford expects to have 3,790 dealers at the end of 2008.

"The Ford news has given the market a lift as it indicates that the automaker within two years will be back to profitability," said William Lefkowitz, options strategist at brokerage firm vFinance Investments in New York.

"For Ford, government loans would serve as a critical backstop or safeguard against worsening conditions, as we drive transformational change in our company," Mulally said in a statement.

Ford said Monday it could sell the luxury Swedish car brand Volvo as it scrambles to shore up cash amid a deep industry downturn.

Ford shares were up 33 cents, or 12.94 per cent, at $2.88 on the New York Stock Exchange.

 

Ford mulls sale of
Volvo to raise cash

Dec 02, 2008 04:30 AM

DEARBORN, Mich.–Ford Motor Co. is considering selling Volvo Car Corp. as the struggling U.S. automaker seeks to raise cash and weather a global automotive sales crisis.

Ford said yesterday it expects its strategic review of the Swedish luxury automaker will take several months. The move is one of several actions Ford is taking to strengthen its balance sheet.

Spinning off Volvo into a separate entity may be a possibility, as both companies have already taken steps to allow Volvo to operate on a more stand-alone basis. That effort began in 2007, after a previous strategic review of Volvo.

The Swedish government has said it has been in talks with Volvo and with General Motors Corp.'s Saab unit following reports that the U.S. parent companies were seeking aid for their Swedish car makers.

Goteborg-based Volvo Cars, which Ford bought in 1999, has been struggling against a weak U.S. dollar and declining demand.

Even with a tight credit worldwide, Ford could pull off a sale because Volvo would be attractive to automakers in emerging markets such as Tata Motors Ltd. of India, said Kevin Tynan, an analyst with New York-based Argus Research Corp.

Tata in March bought Jaguar and Land Rover from Ford for $1.7 billion (U.S.) and the Volvo brand would complement Tata's two luxury brands, Tynan said.

Associated Press

 

Auto Facts – Pension Update

Why are Pension Plans in Trouble?


• Concerns have been raised about the implications for pension benefits given the current uncertainties and instability for the auto industry. The current financial crisis has highlighted concerns about the possible implications for pensions and has subjected pension plans and their members to two related risks.

First, the viability of many employers is being put into question by deteriorating financial conditions which are affecting their credit, the demand for their products, and the credit position of their customers.

Second, the meltdown of financial markets has meant that the various assets that pension plans have been invested in, have lost significant value.

Restructuring, Creditor Protection and Bankruptcy

There has been a great deal of speculation about the possibility of various employers becoming bankrupt, and what that would mean for pension plan members.

It is extremely difficult to speculate on the possible outcomes of these situations. In Canada, usually before recourse to any possible bankruptcy proceedings, companies often go through a restructuring process under the Companies' Creditors Arrangement Act (“CCAA”). There are many possible outcomes under a CCAA process, including a sale of some or all of the business, a restructuring of part of the business, and even the continuation of the Collective Bargaining Agreement and Pension Plan.

In the event of a bankruptcy of an auto or auto parts company, and in the event that restructuring does not involve the continuation of the Pension Plan, either with a restructured company or with some new corporate entity which would continue the operations in Canada, then there would be a wind-up of the Pension Plan. Depending on the assets available to satisfy the creditors, there may be some additional assets available for the Pension Plan, but quite often in bankruptcy proceedings, there are insufficient assets left after secured creditors have been able to satisfy their liabilities.

It is important to note however, that the current assets of Pension Plans are in separate trust accounts, and those assets are only available exclusively to pay for the pension benefits of the Plan members. These pension assets are not available for any creditors
in bankruptcy proceedings, nor can they be accessed by companies prior to such proceedings. They can never be used for any other purpose than to pay the accrued liabilities of the Pension Plan, i.e. the pensions of retirees, and the future pensions of active workers.

Should any auto company or any auto parts company enter into the CCAA process, the final outcome is very difficult to predict? Few things are certain, except that the judge with jurisdiction over the CCAA proceedings has enormous discretion to fashion a restructuring or “exit” plan. There is nothing that the law requires to be included in an“exit” plan pertaining to workers’ wage, benefit and pension compensation. For example, to return to the Air Canada situation, Air Canada wanted to change its pension plan from a defined benefit plan to a defined contribution plan, and as well, reduce benefits. CAW-Canada adamantly refused to agree to such a proposal. The CCAA judge was able to direct the process so that Air Canada backed off its pension demands. The pension plan remained intact when Air Canada left CCAA proceedings.

Certainly, companies could try to use the CCAA statute to assist future restructuring initiatives. However, the union has direct input into such proceedings, and, in our view, the law does not permit the Court to amend a collective agreement or pension plan of any kind during CCAA proceedings without the union’s explicit consent.

Wind-Ups and Pension Protection

• Concerns have been raised about the funded status of many pension plans based in the auto industry. Below, we detail some of the implications of what may happen in worst case scenarios, and we also provide information about the protection which currently exists for Plan members.

• In Ontario if an employer sponsoring a defined-benefit plan becomes insolvent, and contributions to the plan cease, the plan will be subject to a wind-up, under the procedures established by the Pension benefits Act (PBA).

• In 1980 the Pension Benefits Act of Ontario was amended to establish the PBGF. Ontario became the only Canadian province to provide a system of governmental protection for the pension promises of private employers.

• In the event of a bankruptcy, if the pension fund has insufficient assets to provide the accrued pension benefits then upon wind-up those benefits would have to be adjusted to reflect the financial state of the pension fund and the application of the Ontario

Pension Benefits Guarantee Fund (PBGF).

• It is important to note that the PBGF applies not only to the benefits of those who have retired, but also to the benefits of active participants of the plan. The benefits which the PBGF guarantees are subject to certain restrictions.

• First, the PBGF guarantee only applies to the first $1,000 of monthly
pension income, (an amount that has not been increased since 1980)

• Secondly, it does not guarantee any benefit levels that have been in place
for less than 3 years prior to the date of wind-up

• In general, the first $1,000 of monthly income is fully guaranteed, while the “excess amount” above $1,000 would be paid out at the funded ratio of the Plan on wind-up.

PBGF Examples

Because there have been so many questions about what would happen to Pension Fund assets along with any entitlement from Ontario Pension Benefits Guarantee Fund (PBGF), we have prepared the following examples.

In the event of a bankruptcy, pension benefits would have to be adjusted to reflect the financial state of the pension fund and the application of the provisions of the (PBGF).

To illustrate the way the PBGF works, we will use some examples with differing wind-up ratios, that is, the amount of assets available compared to the total liabilities for all members of the pension plan, including active employees, as well as retirees and surviving spouses.

Although the calculation of how the PBGF works can be rather complex, the general rule is the first $1,000 of monthly income is fully guaranteed, while the “excess amount” above $1,000 would be paid out at various funded ratios of the Plan on wind-up.

Example: If a Big 3 production worker had retired on Oct. 1, 2005 with 30 years of service at age 65, they would be receiving a pension of $65.00 x 30 = $1,950 per month.

In this example, upon wind-up, the funded ratio is assumed to be 60%.
Of the first $1,000, the pension plan would be paying $600 and the PBGF would be paying $400, while the amount above $1,000, namely $950, would be paid by the plan at 60%, or $570.

Based on the above scenario, the retiree would be entitled to a total amount of $1,570 or 80.5% of their normal entitlement.

Example: If a Big 3 production worker had retired on Oct. 1, 2005 with 30 years of service at age 58, they would be receiving a pension of $3,335 per month until age 65 and $65.00 x 30 = $1,950 per month after age 65. In this example, upon wind-up, the funded ratio is assumed to be 75%.

Again, based on the above “worst-case scenario”, until age 65 they would be
getting $1,000 per month from a combination of the PBGF and the pension plan, plus 75% of the “excess amount”, i.e. 75% of $2,335, or $1,751 from the Plan, for a total amount of $2,751or 82.5% of their normal entitlement.
After age 65, this retiree would be receiving $1,462.50 from the Plan, plus $250 from the PBGF, for a total of $1,712.50, or 88% of their normal entitlement of $1,950.

Example: Using the same example as above, but with a wind-up ratio 90%, the retiree would be entitled to the following.

Until age 65 they would be getting 90% of $3,335, or $3,002 from the Plan and $100 per month from the PBGF, pension plan, for a total amount of $3,102 or 93% of their normal entitlement.

After age 65, this retiree would be receiving $1,755 from the Plan, plus $100 from the PBGF, for a total of $1,855, or 95% of their normal entitlement of $1,950.

Example: If an auto parts worker had retired on Oct. 1, 2005 with 30 years of service at age 65, with a benefit rate of $48 per month per year of service, they would be receiving a pension of $48.00 x 30 = $1,440 per month. In this example, upon wind-up, the funded ratio is assumed to be 70%.

Of the first $1,000, the pension plan would be paying $700 and the PBGF would be paying $300, while the amount above $1,000, namely $440, would be paid by the plan at 70%, or $308.

Based on the above scenario, the retiree would be entitled to a total amount of $1,308 or 91% of their normal entitlement

Example: Consider the surviving spouse of a retiree who had retired in 2004, and who is presently receiving a monthly pension of $1,200. If the wind-up funded ratio was 70%, then the surviving spouse would be entitled to a monthly pension of $840 from the pension plan, and an additional $300 from the PBGF. This spouse would be receiving a total $1,140 per month, or 95% of their original entitlement.

[For simplicity’s sake, in the above examples we have ignored indexing and any spousal options. Any indexing which has occurred 3 or more years prior to the wind-up date, and any such spousal options are both subject to the PBGF]

GM, Ford and Chrysler

Based on the most recently filed reports by the auto majors, the funded status of their pension plans is as follows; on a wind-up basis GM was at 57%, Ford was at 73.5%, while Chrysler was at 91%. On a going concern basis, which is based on the Plan continuing indefinitely, GM was at 81%, while Ford and Chrysler were both above 100%. Since the filing of these reports, market conditions have deteriorated, and the value of the investments in these Plans will have declined.

Non-Pension Benefits

Health Care, other insurance benefits as well as other benefits are provided on a pay as you go basis. That means that there is no fund set aside for the purpose of paying these benefits – they are paid for from the company’s general revenues, either through premiums to insurance companies or through direct payments. In a “worst case scenario”, a bankruptcy would mean that there would be no source of funding for benefits current and future retirees.


 

Here’s 29 Crucial
Things You Need
to Know About
the Auto Crisis

The Financial Crisis and the
Collapse of U.S. Sales


FACT 1: The Big Three’s U.S. sales fell 41% in
October, compared to the previous year. But they
weren’t alone. Other automakers were hit hard by
the credit freeze, including: Suzuki (down 49%) Isuzu
(down 49%) Kia (down 41%) Lexus (down 38%)
Nissan (down 36%) Hyundai (down 34%) Honda
(down 28%) Toyota (down 26%). No company is
immune from the terrible decline in auto sales
caused by the financial crisis. And European and
Asian automakers are also getting financial
assistance from their home governments to weather
the storm.

FACT 2: Canadian auto sales have actually increased
slightly in 2008, since our banking system hasn’t
experienced the same credit freeze. But 90% of the
vehicles we assemble go to the U.S. market, which
is collapsing.

FACT 3: The Big Three operate their own internal
“banks”: large internal finance divisions that lend to
car buyers and car dealers. But until now, they
haven’t been able to access the $700 billion bank
rescue package approved by the U.S. Congress.
With no loans or leases available, car sales are
collapsing, and now the automakers are on the verge
of failure.

The Importance of Auto

FACT 4: For every job in a major auto facility
(assembly or powertrain), a total of 7.5 jobs depend
on that job – including “upstream” jobs in the supply
and parts industries, and “downstream” jobs in
consumer industries and services.

FACT 5: A total of 440,000 Canadian jobs depend
directly or indirectly on the auto industry.

FACT 6: Autoworkers alone pay $2.2 billion in federal
and provincial income taxes yearly.

FACT 7: Informetrica Inc. (economic consultants)
has estimated that a 25% decline in auto exports
(resulting from the bankruptcy of just one of the Big
Three) would eliminate 155,000 Canadian jobs, and
cost governments $6 billion per year in lost
revenues.

FACT 8: Canada has already lost 35,000 auto jobs
since 2002.

One-Way Trade


FACT 9: North America imports over 4 million vehicles
from offshore per year. This year, offshore imports
will consume almost 30% of Canadian vehicle sales.
The import market share has tripled since 1996, and
this explains most of the loss of Big Three market
share in the same period.

FACT 10: In 1999 Canada generated an auto trade
surplus of $15 billion – our best ever. But with
growing imports and falling exports, that surplus has
evaporated. We slipped into deficit for the first time
in 2006. The deficit reached $7 billion in 2007, and
will double this year to over $12 billion.

FACT 11: Since 1996, Canada’s auto imports from
Japan have grown 118%. But our auto exports to
Japan have declined 69%. Our auto trade deficit with
Japan equals $6.3 billion. For every dollar we export
to Japan, we import $135.

FACT 12: Since 1996, Canada’s auto imports from
Korea have grown 710%. But our auto exports to
Korea have declined 75%. Our auto trade deficit with
Korea equals $1.7 billion. For every dollar we export
to Korea, we import $177.

Helping Banks
(and Other Companies!)


FACT 13: Since September, the federal government
and its agencies have announced financial support
for Canadian banks totaling over $100 billion. This
includes loanguarantees, emergency low-interest
loans, “swaps” of assets to free up operating cash,
and relief from regulatory requirements.

FACT 14: The federal government owns several
banks which can provide loans and other funding to
companies (like automakers) directly, without costing
taxpayers a cent. That’s not a “bailout.” These banks
include the Bank of Canada, Export Development
Canada, the Business Development Bank, and the
Canada Mortgage and Housing Corporation.

FACT 15: In 1979 the U.S. and Canadian
governments participated in a rescue package to
prevent Chrysler from going bankrupt. It involved
guaranteeing loans from private banks, in return for
certain commitments by the company. The
Canadian government received share options in
the restructured company in return for its role. Also,
Chrysler committed to build a new assembly plant
here (which became the Windsor minivan plant).
Once Chrysler recovered, the Canadian
government sold its share options for a significant
profit. The restructuring didn’t cost taxpayers a
dollar– but if Chrysler had failed, our government
would have lost billions in tax revenues.
Labour Costs in Context

FACT 16: CAW members at the Big Three make an
average of about $35 per hour – not $70 or more
as is commonly reported in the media. CAW
members in auto parts companies make less: an
average of $24 (and often much lower). The media
often reports “total labour cost” numbers as if they
were actual wages. But in fact “total labour costs”
include all labour-related charges, including
pensions, benefits, statutory rights, and even
payroll taxes (like CPP and EI) paid to
government.

FACT 17: According to the U.S. Bureau of Labor
Statistics, hourly labour costs for Canadian
autoworkers are significantly lower than in
Germany, Japan, and the U.S.

FACT 18: Workers at Toyota and Honda’s nonunion
facilities in Canada earn hourly wages, pensions,
and other benefits virtually identical to those
earned by CAW members at the Big Three.

FACT 19: In its 2008 contract with the Big Three
(now being implemented), the CAW negotiated
cost savings that will total over $300 million per
year (once fully in place).

FACT 20: Savings from the CAW 2008 contract are
larger than would result from a two-tier wage
system (especially since the auto industry is not
hiring new workers.)

FACT 21: The decline of the Canadian dollar since
July, to a normal long-term level, reduces the Big
Three’s Canadian labour costs (in $U.S. terms) by
$750 million per year.

FACT 22: CAW members in the auto parts sector
have made dramatic changes in efficiency and
contract provisions to maximize the chances for
survival of Canadian parts plants, despite the
current crisis.

FACT 23: According to Statistics Canada and
company financial reports, direct labour costs
(including management!) make up only 7 percent
of total vehicle production costs in Canada.

FACT 24: The Big Three’s losses, centred in the
U.S. market, are so large that workers in Canada
cannot possibly rescue them through wage cuts.
CAW members could agree to work all year
without wages, and the resulting savings would
offset the Big Three’s average 2008 losses for only
11 days.

Our Productivity Advantage

FACT 25: Measured in physical output (eg. vehicles
per worker, or hours per vehicle), Canadian auto
facilities are 10-15% more productive than U.S.
plants. The auto industry is one of just four
manufacturing sectors where Canada is more
productive than the U.S.

FACT 26: Even this underestimates Canada’s true
productivity advantage. Canadian auto facilities
produce a mix of higher value-added products. In
value-added terms, our productivity advantage is
even larger.

FACT 27: Companies focus on unit labour costs,
which equals labour costs divided by productivity.
At current exchange rates, Canadian autoworkers
are 10% less expensive than in the U.S., and we
have a productivity advantage of over 10%.
Therefore, it is 20% cheaper to produce a unit of
output in Canada.

Fighting Back
Makes a Difference


FACT 28: The CAW is a mature and responsible
union. We have ensured that our facilities remain
competitive with other industrialized countries for
new investment, and we will continue to do so.

FACT 29: We don’t know what the next weeks and
months will bring. But we do know this: sticking
together in our union to fight for our shared
interests will win the best deal possible, for our
families and communities.

Please use these facts when talking
to your family & friends about what
this crisis is all about!

 

 

Sweden in talks with
U.S. auto makers

Dec 01, 2008 07:50 AM

MALIN RISING
The Associated Press

STOCKHOLM, Sweden – The Swedish government confirmed Monday it is in talks with General Motors Corp. and Ford Motor Co. after a report that the U.S. auto makers are seeking support for their struggling Swedish brands Saab and Volvo Cars.

"We are obviously in talks with Saab, Volvo, GM and Ford all the time, considering the difficult situation," government spokeswoman Lisa Warn said.

Warn declined to give details on the talks, but said the European Union's tough competition regulations restrain the options for the Swedish government should it wish to support the Swedish-based car industry.

Officials at GM-owned Saab and Ford-owned Volvo weren't immediately available for comments.

Ford, General Motors and Chrysler LLC have been lobbying the U.S. Congress for financial assistance as the companies are being squeezed by falling sales amid the world economic crisis. However, the Swedes doubt U.S. lawmakers would be willing to support the companies' international operations.

"If GM gets money from the American government, then we're convinced that it will be earmarked for American interests," said Paul Akerlund, a union representative at Saab.

U.S. legislators have demanded plans from the car makers before they will schedule votes on any new federal aid. The plans are expected Tuesday and will be scrutinized at a Senate hearing Wednesday and a House hearing on Friday.

Volvo Cars has already said it will cut some 6,000 jobs worldwide, of which more than half are in Sweden. Ford was seeking buyers for Volvo last year, but the Dearborn, Michigan-based auto maker later said Volvo is no longer for sale.

 

Auto-parts firm feels the impact

Car sector's problems catching up to Magna

Nov 27, 2008 04:30 AM
Tony Van Alphen
Business Reporter

Magna International Inc., one of the world's sturdiest auto parts makers, is starting to feel the impact of the crash of the North American vehicle industry.

While rivals slid into the ditch and turned to writeoffs during the past few years, the Aurora-based parts powerhouse has avoided a lot of the damage sweeping the sector because of a solid balance sheet and strong entrepreneurial culture.

But the industry's problems have begun to catch up to Magna and legendary industrialist Frank Stronach, who built the company and remains its chair.

Magna, a growing company for more than a decade and one of the biggest auto parts makers in the world, posted its first net quarterly loss in 17 years earlier this month. It also lowered sales forecasts.

The company lost the financial muscle of its Russian partner Oleg Deripaska, who bought a big stake for $1.54 billion in Magna last year but got squeezed out by the global credit crisis. Magna wanted to use the merger to make a big foray into Russia's emerging auto market.

Magna chopped the quarterly shareholder dividend in half to 18 cents after reporting the third quarter loss of $215 million. Furthermore, the company's stock has lost more than 60 per cent of its value this year. The shares rose 62 cents yesterday to close at $32.70 in Toronto.

And yesterday, it announced two more plant closures in York Region, the hub of Magna's operations in Canada. That followed consolidation of two powertrain operations there two days earlier. In September, Magna cut a shift from its biggest plant in the country.

The job losses are piling up and analysts expect more as Magna absorbs hits from its heavy exposure to General Motors, Ford and Chrysler – the three automakers in the deepest trouble.

The Detroit Three, whose sales have dropped dramatically this year, still account for more then 50 per cent of Magna's revenue.

However, Magna has also seen increasing business from surging Japanese-based automakers in recent years.

Don Walker, Magna's co-chief executive officer, acknowledged recently the company is not immune to the industry's problems and was already focusing on running leaner and more efficient operations through the downturn.

The company's strong cash position and relatively low debt allow an opportunity to buy struggling competitors, possibly for bargain prices, to complement existing operations.

But at the same time, one or more of the Detroit Three could fail if they don't get a multibillion-dollar aid package from the U.S. and federal governments soon.

Analysts say that would throw a major monkey wrench into the Magna machine and create a managerial nightmare as the company tries to operate, consolidate and close parts plants to align production with reduced demand – and still make money.

One industry watcher, who requested anonymity, said while Magna is dealing with the current economic headwinds, it is also preparing for what the sector will look like after the storm.

"They're putting the pieces in place so they can conquer the marketplace," the analyst added.

 

Magna to shutter plants,
cut 850 jobs

Top auto-parts firm will close Exterion operation in York Region and shift production to other sites

Nov 27, 2008
Tony Van Alphen
Business Reporter

The downturn in the North American auto industry hit mighty Magna International Inc. hard yesterday as it announced the closing of two plants and the elimination of 850 jobs north of Toronto by the middle of next year.

Magna said it will gradually shut down the Exterion plants in Aurora and Newmarket, two operations that opened during the mid-1980s and currently employ many older workers.

The news came only two days after Magna announced it is consolidating two Blau Autotec and Integrated Technologies plants in Brampton and Concord into one operation at the latter site.

It is unclear how many of the 250 workers at the two powertrain operations would lose their jobs.

The move at Exterion shocked and angered workers who make front and rear bumpers, grilles and side body panels for at least a dozen models at the two plants.

However, Magna noted it will assist some workers in their search for new employment at other plants in the region.

It will also provide severance packages based on years of service by affected workers.

Sources said many workers including skilled tradespeople have more than 20 years service.

The Newmarket plant employs about 500 workers, while the Aurora operation has 350.

Magna said in a statement that it decided to wind down operations after evaluating their financial status, future business prospects and additional capacity at other operations.

"Those factors, combined with the difficult economic conditions facing the North American auto industry due to reduced domestic production and customer demands, have made the Exterion operations no longer viable," the company added.

Magna spokesperson Tracey Fuerst said she did not know where the company would transfer the parts production next year.

The two Exterion plants, which are part of Magna's Decoma division, make bumpers, grilles and side panels for numerous Chrysler models including the Chrysler 300, Sebring, Dodge Charger, Challenger, Nitro, Caliber, Durango, Jeep Grand Cherokee and Liberty.

They also produce similar parts for the Volkswagen Routan, Chevrolet Equinox, Pontiac Torrent and Acura MDX models.

Chrysler is Magna's second biggest customer. It represents about 13 per cent of the company's parts business.

Meanwhile, Blau Autotec, which will also merge its operations by next June, is facing the same problems of falling demand and less viability.

In September, Magna eliminated 400 jobs or about 25 per cent of the workforce at its Formet plant in St. Thomas.

The plant, the company's largest operation in Canada, is cutting truck frame production after pickup sales collapsed in North America this year because of soaring fuel prices.

Magna also consolidated door parts production of KTM in Concord into other operations in Newmarket and Bradford a few weeks ago.

But the move resulted in no layoffs.

In the past decade, Magna has announced few layoffs as it expanded business dramatically with several automakers.

However, the major industry downturn, worsening conditions and a big third-quarter loss have forced the company to accelerate reductions in operations.

After reporting the first quarterly loss in 17 years earlier this month, Magna co-chief executive officer Donald Walker told analysts that the company planned to continue consolidating, closing or selling plants to remove unused production capacity.

"We want a lean and efficient operation while not sacrificing our future so we're stronger when the automotive market recovers," Walker added.

But some analysts have remained cautious about Magna's exposure to GM, Ford, Chrysler and, in particular, trucks.

They also believe the company has not taken enough steps to adjust to the much lower levels of auto production in North America in recent months.

 

Why Detroit is Different

Bailing Out the Automakers

By DAVID MACARAY

Let’s put two things on the table immediately, two things which, while not exactly logical, are nonetheless meaningful.  If you’re looking for steel-trap logic or cold, bottom-line infallibility, you won’t find them here.  But if you’re willing to consider a few realistic, peripheral considerations, some of this should make sense.

First, even though we’re being bombarded on all sides with news of economic doom, let’s not delude ourselves.  The Big Three automakers aren’t just another industry, so let’s not pretend they are.  Let’s not pretend they’re a chain of coffee joints or convenience stores, or even a big-time outfit like American Express, who, reportedly, is already sniffing around for some of that government money.

Detroit is different.  Automakers are not only the largest manufacturing industry in the United States, they are, undeniably, the most glamorous, prestigious, loyal and uniquely American corporate enterprise in our history.  They’re Industrial America’s version of the Liberty Bell, the Alamo and the Lincoln Memorial, all rolled into one.  Smirk if you like, but it’s true. 

Americans shouldn’t have to be reminded of our 100-year romance with cars, or the fact that it was we, the United States, who first mass-produced automobiles and introduced them to the rest of the world.  And the world fell in love with American cars as a consequence.  Pancho Villa drove a Ford Model-T.  The Maharaja of Kapurtala (Punjab, India) drove a ’59 Chevy Impala.  

I bring this up only to establish the fact that when we talk about the auto industry, we’re talking about a legacy enterprise, a cultural icon.  And I’m saying that people who cavalierly assert that allowing one or more of the Big Three to go bankrupt don’t have the first clue as to the enormity of what they’re suggesting.

Besides the 240,000 people who work directly for Chrysler, General Motors and Ford, there are an estimated 2.7 million more who work in related industries, who supply parts, raw materials, sales and technical services.  It’s been predicted that a collapse of the auto industry could affect as many as 3 million people, a full 5% of manufacturing jobs in the U.S. 

Second, if history doesn’t matter, if this conversation isn’t about what was, but about was is—if it’s about money, and not cultural icons and such—then let’s talk money.  Indeed, if it’s their hard-earned money that American taxpayers are concerned about, then fine, let’s talk about that.  Let’s talk about how we spend it.

We’ve already blown close to a trillion dollars on an unwinnable war (not to mention the loss of life and destruction of a country), and continue to pour an additional $14 billion a month down that same bottomless rathole.  On a dollar for dollar basis, this has been a monumental debacle, arguably, the greatest foreign policy blunder in our history.

Still, from what we’re hearing, American taxpayers and their representatives are having a problem with giving $25 billion worth of economic relief to the struggling Big Three.  They are objecting to this relief on the grounds that [drum roll] “it doesn’t make good business sense.”   Please.

Not only have we had, literally, billions of dollars stolen from us by corrupt Iraqi officials and their political stooges, we’ve paid billions of dollars to Halliburton, Blackwater and scores of lesser known but equally greedy private contractors, all in the name of “patriotism.”

Yet, given this record of pissing away money like drunken sailors, American taxpayers are now suggesting that it’s time to get all stingy and wise and fiscally conservative, drawing the line at bailing out America’s most hallowed industry—all in the name of “tightening their belt.”  If that’s what’s happening here, give me a goddamn break, people.

On the other hand, if this is about assurances or guarantees, that’s a whole other deal.  That’s an eminently reasonable request, one we should pursue.  Instead of giving away billions of dollars with no strings attached (as we’re doing in Iraq), let’s attach some economic and environmental requirements.  Insisting that Detroit develop a car that gets 85 mph, with drastically reduced carbon emissions, would be a good start. 

Let take this opportunity to reinvent the car business, but this time in the image we want.  For crying out loud, we’re the country that put a man on the moon and invented the reusable condom.  Surely, we have the technical expertise and creativity to make a radically fuel-efficient automobile.

But it’s also time we finally acknowledged the elephant in the room.  That elephant is health care.  The U.S. auto industry, which spends upwards of 30% of its payroll on employee health insurance (including premiums and administrative costs), competes with companies whose governments underwrite employee health care. 

Even though labor costs account for, roughly, 8%-10% of the price of a new car, health insurance is killing the industry.  Right out of the chute, before anything’s been bought or sold, the Big Three is already thirty cents on the dollar in the hole.  Given that crippling discrepancy, it’s fairly amazing that Detroit has managed as well as it has.

Of course, the Republicans in congress—the same faux-patriots who prevented us from joining the rest of the industrialized world in obtaining national health care by waving the hysterical banner of “socialized medicine”—don’t want to blame health insurance for contributing to the problem.  Instead, they want to blame labor unions. 

Instead of blaming Big Pharma and Big Insurance, they’re blaming the UAW; they blaming working people—people who are making $48,000 a year, hanging on to their middle-class identity by their fingernails, trying to make a living. 

By bailing out the automakers (albeit with stringent conditions) we’ll be saving one of America’s truly valuable institutions.  We’ll be giving it a second chance.  Twenty-five billion dollars is less than we spend in two months on this war.  Doesn’t Detroit deserve a small fraction of the generosity we’re showing the Iraqis? 

David Macaray, a Los Angeles playwright and writer, was a former labor union rep. 

He can be reached at dmacaray@earthlink.net 

 

 

Auto job losses to accelerate

A Ford employee works under the hood of a Flex at the Oakville assembly plant Nov. 20, 2008. Canadian jobs are in peril as U.S. demand for autos stalls.

Canadian car makers to dump 15,000 people by end of 2009: report

Nov 26, 2008 04:30 AM
Tony Van Alphen
Business Reporter

Beleaguered automakers in Canada will wipe out at least 15,000 jobs and post staggering losses of more than $3.1 billion this year and through 2009 before starting a recovery in 2010, according to the Conference Board of Canada.

The slowdown in the U.S. auto market, a shift to more fuel-efficient vehicles not built in Canada and a strong dollar will continue to pummel automakers here for another year, the board said yesterday in its latest outlook for the sector.

"Canada's automotive sector has been battered by an unrelenting barrage of structural and macroeconomic developments over the last two years, a trend that is unlikely to subside as 2009 approaches," board economist Sabrina Browarski said in the outlook report.

"Once a stalwart of the post-NAFTA (North American Free Trade Agreement) Canadian economy, the automotive sector will shrink for its fourth consecutive year in 2009."

Browarski said in an interview that employment in the assembly of cars, light and heavy trucks in Canada will drop by 10,700 jobs this year to a workforce of 62,600.

The sector will lose another 4,300 jobs in 2009, which means employment will be down 20 per cent in two years, she added.

The board, an Ottawa-based, non-profit research agency, relies on announcements by the companies and other data to establish employment levels, but Browarski said the job losses could still surpass the figure for next year.

The losses do not include the reeling Canadian parts sector, which supplies components to assembly plants here and in the United States.

At its peak, it employed more than 100,000 workers, but that level has slid to fewer than 80,000 in recent years. Analysts forecast more losses in 2009 as the impact of the economic downturn in the U.S. deepens.

The board's report forecasts financial losses for auto manufacturers that will soar from $262 million in 2007 to almost $1.7 billion this year.

In 2009, red ink will hit $1.43 billion before the industry posts a profit of $288 million in 2010 and $743 million in 2011, the board said.

The report does not break out losses, revenues and costs for each automaker.

Revenues for the automakers will plunge almost $12 billion to $48.7 billion this year and drop again to $47.5 billion in 2009 before climbing to $50.2 billion in 2010, the board said.

The board uses corporate tax filings and a variety of economic factors to generate profit and loss forecasts.

The agency bases revenues on its own price and production outlook, and costs for wages and materials, investments and depreciation.

In her report, Browarski said the number of large vehicles that General Motors Corp., Ford Motor Co. and Chrysler LLC export to the slumping U.S. market has "exacerbated the industry's challenges" in Canada because of public concerns over fuel costs and environmental issues.

The industry in Canada also faces stiff competition in its major U.S. market and could cede its position as the world's biggest supplier of vehicles to south of the border to Japan as early as this year, she noted.

Browarski said automakers in Canada will struggle with profitability until 2010, despite major cost savings on wages and materials.

Profit Chart

 

Ford and Volvo top safe car list

November 25, 2008

KEN THOMAS
The Associated Press

WASHINGTON–The insurance industry named dozens of new cars and trucks, led by Ford Motor Co. and its Volvo subsidiary, to its annual list of the safest vehicles Tuesday, helped by the increased use of anti-rollover technology.

Ford and Volvo had 16 vehicles in the 2009 model year on the Insurance Institute for Highway Safety's list of the safest new cars, followed by Honda Motor Co. with 13 vehicles.

Seventy-two cars, trucks and SUVs received the top safety pick designation for 2009, more than double the number of vehicles in the 2008 model year and three times the number in 2007.

"The sheer number of this year's winners indicates that automakers have made huge strides to improve crash protection,'' said Institute president Adrian Lund.

The selected vehicles are the best in protecting people in front, side and rear crash tests based on institute evaluations during the year. The vehicles are required to have electronic stability control, or ESC, to qualify for the award.

IIHS said electronic stability control is now standard equipment on virtually all new SUVs and three-quarters of passenger cars for the 2009 model year. ESC is standard on more than one-third of 2009 pickups.

Ford was led by the Ford Fusion and Mercury Milan midsize cars with optional ESC; the Ford F-150 pickup, Ford Edge and Ford Flex midsize sport utility vehicles; and the Ford Escape and Mercury Mariner small SUVs. The list also included the Mazda Tribute, which has the same underpinnings as the Escape and Mariner.

Ford CEO Alan Mulally argued last week in Washington that the automaker had made safety strides when he testified along with other Big Three executives seeking massive government aid.

"Every year, we're going to improve the quality, we're going to improve the fuel efficiency, we're going to improve the safety, and we're going to keep improving the productivity so we can offer the consumer the very best value," Mulally told a House committee.

Honda and its Acura unit had vehicles in nearly every category, including top-sellers such as the Honda Accord; the Honda Civic 4-door with optional ESC; and the Acura MDX and RDX midsize SUVs; and the Honda Fit with optional ESC. The Fit is the first mini-car to earn the safety award.

Volkswagen AG and its Audi brand had nine vehicles on the list, including the Volkswagen Jetta and Passat and the Audi A3, A4 and A6.

General Motors Corp. and Toyota Motor Corp. both had eight vehicles on the list. GM's included the Cadillac CTS and the Buick Enclave, Chevrolet Traverse, GMC Acadia and Saturn Outlook large SUVs.

Toyota's top performers were the Toyota Corolla with optional ESC, Toyota RAV4, Toyota Tacoma, Toyota Tundra and Scion xB.

Using the awards, consumers can compare vehicles without having to review results from multiple tests. Automakers pay close attention to the institute's findings and frequently note positive ratings in television commercials.

The institute has advocated for an early adoption of anti-rollover technology such as ESC ahead of a government requirement for the systems by the 2012 model year.

Electronic stability control senses when a driver may lose control and automatically applies brakes to individual wheels to keep the vehicle stable and avoid a rollover. It helps motorists avoid skidding across icy or slick roads or keep control when swerving to avoid an unexpected object in the road.

IIHS said Chrysler LLC was the only major automaker that did not receive a single award. They said Chrysler could have picked up five awards if the head restraints had been improved in the Dodge Avenger and Chrysler Sebring, the Sebring convertible and the Dodge Grand Caravan and Chrysler Town and Country.

Chrysler spokesman Cole Quinnell said he could not comment on whether the head restraints might be upgraded in the future. He said Chrysler vehicles are equipped with a variety of safety features and the institute's results "are just one of the sources of information about a vehicle's crash performance.''

 

No plan, no bailout,
U.S. automakers told

Listen

General Motors CEO Richard Wagoner, Chrysler chair and CEO Robert Nardelli and Ford president and CEO Alan Mulally testify at a hearing held by the House Financial Services Committee, Nov. 19, 2008.

Nov 20, 2008 07:10 PM

KEN THOMAS, JULIE HIRSCHFELD DAVIS
The Associated Press

WASHINGTON – The $25 billion rescue plan for the auto industry, desperately sought by the beleaguered Detroit Three, collapsed as U.S. Congress drew the line at one more bailout and Democrats said they wouldn't even consider it until the companies produced a convincing plan for rebuilding their once-mighty industry.

The demise of the rescue – at least for now – left fate uncertain for General Motors Corp., Ford Motor Co. and Chrysler LLC, and sent Wall Street spiralling to its lowest level in years. The Dow Jones industrials dropped 445 points, the second straight plunge of more than 400, and hit the lowest point in nearly six years.

The carmakers have been clobbered by lackluster sales and choked credit, and are battling to stay afloat through year's end. Failure of one or more of the Detroit Three would be a severe further blow to the floundering economy – and to many Americans' view of the nation's industrial strength – and throw a million or more additional workers off the job.

Just today, the government reported that laid-off workers' new claims for jobless aid had reached a 16-year high and the number of Americans searching for work had soared past 10 million. Congress approved a measure to extend jobless benefits through the holidays, and the White House said President George W. Bush would quickly sign it.

But Democratic leaders scrapped votes on the auto rescue, postponing until next month a politically tricky decision on whether to approve yet another unpopular bailout at a time of economic peril, or risk being blamed for the implosion of an industry that employs millions and has broad reach into all aspects of the U.S. economy.

"Until they show us the plan, we cannot show them the money," Speaker Nancy Pelosi said at a hastily called news conference in the Capitol.

GM and Ford quickly issued statements promising to submit the blueprint the Democrats demanded.

Pelosi and Senate Majority Leader Harry Reid said Congress might return to work in early December for a vote on aid to the carmakers – but only if they show Congress they could use the funds to transform their struggling industry into a viable one.

For now, however, the Democrats said the aid plan lacked the support to pass Congress and be signed by Bush.

Bush and congressional Republicans had balked at Democrats' suggestion to draw emergency auto industry loans from the $700 billion Wall Street rescue fund. And most Democrats were unwilling to go along with a separate, bipartisan effort backed by the White House to temporarily divert an existing program to help carmakers produce vehicles that burn less gasoline to cover the companies' immediate financial needs.

But with GM warning it could go under before year's end, Democratic leaders were unwilling to close up shop for the year and turn a deaf ear to the industry. They called for a Detroit Three viability plan by Dec. 2, scheduled hearings that week on the report, and said a vote on a bailout could come the week of Dec. 8.

"Yes, we're kicking the can down the road, because that will give us the opportunity to do something positive," Reid said. "But that will only happen if they get their act together."

The White House criticized the delay, saying the plan to let the automakers tap the fuel-efficiency loans for their short-term cash needs should be considered.

"If there are lawmakers who want to help the automakers, and they have a path to do so, why are they going to kick the can down the road?" said Dana Perino, the White House press secretary.

The chief executives of the Detroit Three automakers appealed personally to lawmakers for the loans this week, saying their problem was the economic meltdown that has walloped their industry – not that they were manufacturing unappealing cars.

But whatever support they found sagged when it became known that each of them had flown into Washington aboard multimillion-dollar corporate jets. Reid observed that was "difficult to explain" to taxpayers in his hometown of Searchlight, Nev.

Pelosi said she had little patience left for excuses from the carmakers on why they haven't turned their businesses around.

Beyond the auto industry, lawmakers said the public has little appetite for anything else that smacks of a bailout, following the backlash against the $700 billion financial rescue.

"There is a sense that we did not do a good enough job of safeguarding the use of those funds, or providing prevention against abuse. And you could not get, I believe, through either house of Congress today what some people might think was a repeat. That's why we need to take time," said Rep. Barney Frank.

Even if lawmakers return to vote, they are likely to insist on numerous conditions on any loans. Democrats and Republicans alike want the government to get a chance to share in future profits by the auto companies, require them to limit executives' pay packages and prohibit use of the funds for lobbying or paying shareholders dividends.

In scrapping plans for a vote this week, the Democratic leaders sidetracked a bipartisan agreement to temporarily divert the fuel-efficiency funds to cover the auto companies' operations.

Sen. Carl Levin said that plan had a "reasonable chance" of passing, and that the leaders' decision to delay it was "risky and unnecessary."

"We need speed. This is a very, very important moment," Levin said.

Indeed, the Democratic Congress – having just expanded its majorities in this month's elections – was under immense pressure to show it could govern in a difficult situation.

"I can't imagine a scenario where they wouldn't come back, unless the answer is that they just don't care. And if that's the case, then the American people ought to know that," Perino said.

The leaders of the Detroit Three automakers have painted a grim picture of their financial position. They burned through nearly $18 billion in cash reserves during the last quarter – about $7 billion at GM, almost $8 billion at Ford and $3 billion at Chrysler. GM and Chrysler have said they could collapse in weeks.

The stakes are high. The Detroit automakers employ nearly a quarter-million workers, and more than 730,000 other workers produce car-related materials and parts. About 1 million more people work in dealerships nationwide. If just one of the automakers declared bankruptcy, some estimates put U.S. job losses next year as high as 2.5 million.

 

Big 3's bankruptcy could cost Ontario 'billions'

If car companies fail, Ontario could be on hook to help retirees

Nov 20, 2008

Tanya Talaga
James Daw
Staff reporters

Ontario Finance Minister Dwight Duncan says it could cost the province "billions" if the Detroit Three automakers go bankrupt and cannot make full pension payments to retirees.

There are 49,000 retired auto workers, thousands more retired salaried staff and thousands still working at General Motors, Ford and Chrysler in Canada who stand to see pension benefits cut if the companies go under.

"What people need to realize is that there are very real costs with the demise of one or all or any of the Detroit Three," Duncan told reporters yesterday. "Those range from pension costs and tax revenues to government."

GM is the only remaining employer that takes advantage of a 1992 agreement brokered by then-Ontario premier Bob Rae that relieved a handful of large companies deemed "too big to fail" from fully funding their pension plans against the possibility they would go out of business.

Instead, General Motors pays $5 million yearly into the provincial Pension Benefits Guarantee Fund, which promises to cover any shortfall from the first $1,000 a month of an employee's pension. The fund had a $102 million deficit as of the end of March.

"The valuations could change literally on a daily basis," said Duncan, who added he has not seen the company's recent actuarial report.

There is no law that obliges the province to cover a shortfall in the guarantee fund. However, earlier governments lent money to the fund – interest free – after the bankruptcies of Massey Combines and Algoma Steel.

Of the Detroit Three companies, it would be most costly for the government to top up pensions for GM retirees because of the size of its workforce and the poor state of its pension plan.

As the Toronto Star reported Saturday, GM's actuaries estimated the pension plan for hourly workers would have been short $4.9 billion if the company had gone out of business at the end of November, 2007. But because the pension fund is heavily invested in stocks, the recent fall in stock markets would have left the fund short another $1.5 billion, assuming no other changes in the meantime.

Paul Duxbury, an actuary who has advised GM pensioners in the past, said yesterday that such a shortfall would cost Ontario's guarantee fund as much as $3 billion, if the province provided the money.

Duxbury said it could cost the fund another $1 billion to cover shortfalls for Ford and Chrysler's hourly pension plans.

"This is one of the very real costs associated with GM not able to continue viable operations," Duncan said.

Progressive Conservative MPP Bob Runciman said taxpayers could be resentful for bailing out a pension plan – especially when many people don't have pensions.

"People who have saved for RRSPs over the years and seen the value decline precipitously over the past couple of months, they don't have that fixed (benefit)," he said.

Sym Gill, director of the pension and benefits department with the CAW, does not think the Canadian and U.S. governments will allow the carmakers to fail.

"I don't think the situation is one where there is going to be a bankruptcy," he said.

"Theoretically, in the event of a bankruptcy there would be significant shortfalls in terms of pension assets being available to fulfill all the pension liabilities. That would hit the guaranteed fund to a significant extent. I don't have any numbers for you but it would be in the many hundreds of millions of dollars, at least."

 

GM Canada beset by pension crisis
Massive pension deficit presents a quandary for governments that would be on the hook in the event of bankruptcy

REG KEENAN AND MURRAY CAMPBELL

Globe and Mail

November 19, 2008 at 1:00 AM EST

TORONTO — The General Motors of Canada Ltd. pension funds had a shortfall of $4.5-billion as of last November – before the stock market collapse – creating a massive financial headache for the Ontario government and pension cuts for retired employees if the company falls into bankruptcy protection.

Senior GM officials revealed the shortfall between the assets in the company's unionized and salaried plans and their liabilities in a meeting yesterday with the editorial board of The Globe and Mail. The shortfalls are measured on a solvency deficiency basis, which would apply if the plans have to be wound up in the event of bankruptcy.

“That's another good reason why we want to continue to operate,” David Paterson, GM Canada's vice-president of corporate and environmental affairs, said as he joined chief financial officer John Stapleton in outlining the reasons for the request for financial help from Ontario and Ottawa to help it survive a cash crunch.

Backstopping GM's pension fund would further complicate any Canadian moves to support the struggling sector in tandem with a broader U.S.-led bailout of the Detroit Three auto makers. As Ontario and the federal government grapple with their options, GM CEO Rick Wagoner led a parade of industry executives and politicians in making impassioned pleas for aid to Congress in Washington.

Mr. Wagoner focused on the dire economic impact of a failure of the industry, warning a Senate panel that personal income in the U.S. would fall by $150-billion (U.S.) and governments would face tax losses of $156-billion over three years.

“Such a level of economic devastation would far exceed the government support that our industry needs. This is about much more than just Detroit. It's about saving the U.S. economy from a catastrophic collapse.”

In Canada, the auto maker is in compliance with all legal requirements and has a smaller shortfall when the pension funds are measured on a going-concern basis, which essentially amounts to pay-as-you-go.

GM is the only company in Ontario that is permitted to make annual payments into the province's Pension Benefits Guarantee Fund instead of being required to finance its pensions on a solvency basis.

GM became eligible to do that in the early 1990s when the Canadian units of the Detroit Three and steel makers Algoma Steel Inc. and Stelco Inc. were granted relief from onerous pension payments in part because the government agreed they were too big to fail.

A senior Ontario government official said the province is aware of GM's pension shortfall and it will be taken into account in negotiations over providing assistance to the auto industry. The government has not yet seen the auto maker's books.

“The ramifications are enormous,” the official said.

The government would have to determine not just the impact on individuals of the collapse of GM's pension, but also the cost to the treasury of providing assistance. He noted that the government added money to the pension fund at Stelco as part of a 2006 rescue package and “that's what you'd be looking at, some way of solidifying it.”

The official emphasized that Ontario is in the early stages of examining GM's financial situation, although he promised the company's books would be scoured as part of the talks with the auto industry.

“We're going to engage some pretty smart people to help us with these kind of negotiations,” the official said.

The GM plans have a target of 69-per-cent equities and 31-per-cent fixed-income instruments, Mr. Stapleton said.

That kind of ratio almost certainly means the assets in the plans have plunged, pension industry sources and others said yesterday, based on the crash of North American equity markets and studies showing that the value of assets held by pension plans in publicly traded companies has fallen by between 15 and 20 per cent.

“One would suspect” the value of assets has fallen, said Sym Gill, director of pensions and benefits for the Canadian Auto Workers union, which represents tens of thousands of GM retirees and active workers.

The unionized plan for Ford Motor Co. of Canada Ltd. employees had a solvency deficiency of about $900-million as of this January, Mr. Gill said. The Chrysler Canada Inc. plan was fully funded as of May, 2007, which was the most recent data for that company, he said.

Retirees would take a hit in a GM bankruptcy because the provincial fund covers only a portion of the monthly payments up to the first $1,000.

If, for example, a pension plan held assets equal to 80 per cent of liabilities when it was wound up, a retiree receiving $3,000 a month before the wind-up would get $800 of the first $1,000 a month, financed by the assets in the plan. The Ontario fund would make up another $200.

But the remaining $2,000 a month would be reduced to $1,600 a month – based again on that 80-per-cent figure – leaving a shortfall of $400 a month because of the $1,000 cap on the fund.


 

Rough Ride for Big Three
The heads of America's ailing auto companies testify before a Senate hearing Nov. 18, 2008 on Capitol Hill. They warned of "catastrophic" fallout to the U.S. economy if they are allowed to fail.

Automakers' pleas to Congress for $25 billion
in aid fall on unsympathetic ears

Nov 19, 2008 04:30 AM


WASHINGTON–The men who run The Big Three looked distinctly tiny in a congressional hearing room yesterday, a trio of auto industry paupers pleading for money and carrying a common message:

It's not our fault.

The Diminished Three – Richard Wagoner of General Motors, Alan Mulally of Ford and Robert Nardelli of Chrysler – all used the same apocalyptic language to describe the national economic fallout if any one of them went under, one-time cutthroat competitors uniting in front of a bevy of skeptical senators.

If one went under, the other two would surely be dragged down as well, they said.

"What would it mean if the domestic industry were allowed to fail?'' Wagoner told the Senate banking committee.

"The societal costs would be catastrophic – 3 million jobs lost within the first year, U.S. personal income reduced by $150 billion and a government tax loss of more than $156 billion over three years."

Richard Shelby, the Alabama Republican who has been a critic of the industry, said he believes if taxpayers fork over $25 billion today, the industry will be back soon looking for more.

"You've burned billions and billions and billions of dollars trying to turn around your business," Shelby said.

"Are we here in the Senate being asked to facilitate a stronger, more competitive auto manufacturing sector or to perpetuate a market failure?"

It was surely the most closely watched loan application in recent history – the committee chair joked he should have held the hearing in a downtown sports stadium – as the three men, joined by United Auto Workers union president Ron Gettelfinger and an industry critic from academia, explained why they needed $25 billion immediately to stay afloat.

That would come on top of another $25 billion for plant retooling, already approved by Congress, earmarked for the production of fuel-efficient vehicles.

Their prospects of receiving this bailout request, at least before Barack Obama becomes president in January, are extremely slim.

Democrats sympathetic to their plight want the money to come from the $750 billion financial bailout package passed by Congress earlier this autumn, but Republicans are adamant in resisting that call.

The automakers are also running up against serious bailout fatigue, even among Democrats, who felt they had a gun placed at their head in order to pass the Wall Street bailout less than two months ago.

Banking committee chair Christopher Dodd, a Connecticut Democrat, said all three men run companies that have shown no vision and he asked them if they had made mistakes.

Nardelli was the only one of the three to directly answer the question.

He said the auto market got caught up in the general U.S. economic exuberance, catering to people who dined out on faux real estate wealth, seeking bigger and bigger gas guzzlers.

"The mistake Chrysler probably made during that period is that we were responding to the customer who wanted bigger, more expansive, higher horsepower vehicles to go with their second homes, their boats, their trailers, and we chased that consumer demand up," he said.

They all called their request a "bridge loan," promised to pay it back with interest and abide by strong government oversight.

All ticked off a series of tough restructuring moves already undertaken, salaries and bonuses wiped off the books and all extolled their hybrid and fuel-efficient models.

The three agreed they were making progress until the economy went off the cliff.

They were victims of the global credit crisis, they said.

People who want to buy their cars can't get loans, they said.

GM's Wagoner had previously warned that his company cannot wait much longer for help and is danger of running out of cash.

Nardelli joined him yesterday, saying Chrysler was in the same situation, adding bankruptcy was not an option.

"We cannot be confident that we will able to successfully emerge from bankruptcy,'' he said.

Chrysler is a private company and does not have to make its finances public, but Nardelli told senators that at the end of the third quarter, it had $6.1 billion in cash. During that July-September period, however, it spent $3 billion more than it took in, Nardelli said.

Mulally said if Ford can get through this, it will come through on the other side of this crisis "like a turbo."

Dodd said the injuries in the auto industry have been self-inflicted.

Auto industry leaders have approached 21st-century challenges with a decidedly 20th-century mindset, and they're now paying the price for it, Dodd said.

"They have been content ... to not only satisfy, but in too many respects drive, the demand for inefficient, gas-powered vehicles that Americans have been going broke to gas up," he said.

The leaders of the industry no more deserve government help than did the financial titans who created the subprime housing crisis, Dodd said, but, he added Washington must act to avoid an economic implosion.

But Jon Tester, a Montana Democrat, said everyone is in trouble these days, and pointed to the timber and mining industry laying off workers in his home state.

He also warned the trio that if they received any taxpayers' help, they better make sure they spend it in this country.

"If Canada wants a dollar spent up there, go see the Canadian taxpayers," he said. "But if we're putting American taxpayer money on the line, it ought to be spent here."

All three said the money would stay in the U.S.

Peter Morici, a University of Maryland business professor, told the senators the auto industry "sooner or later" has to go through the painful restructuring that gets their costs in line with foreign competitors.

"America is over-carred, just as it is over-housed," said Morici.

But Debbie Stabenow, a Michigan Democrat, said her state has been restructuring for a decade and it has cost Michigan 400,000 jobs.

"We need this industry as a basic part of the fabric of our economy," she said.

"Somebody has to make something in America."

 

 

The Big 3: Myths & Their Realities

The debate over aid to the Detroit-based automakers is awash with half-truths and misrepresentations that are endlessly repeated by everyone from members of Congress to journalists. Here are six myths about the companies and their vehicles, and the reality in each case.

Myth No. 1
Nobody buys their vehicles.
Reality
General Motors Corp., Ford Motor Co. and Chrysler LLC sold 8.5 million vehicles in the United States last year and millions more around the world. GM outsold Toyota by about 1.2 million vehicles in the United States last year and holds a U.S. lead over Toyota of about 560,000 so far this year. Globally, GM in 2007 remained the world's largest automaker, selling 9,369,524 vehicles worldwide -- about 3,000 more than Toyota.
Ford outsold Honda by about 850,000 and Nissan by more than 1.3 million vehicles in the United States last year.
Chrysler sold more vehicles here than Nissan and Hyundai combined in 2007 and so far this year.

Myth No. 2

They build unreliable junk.
Reality
The creaky, leaky vehicles of the 1980s and '90s are long gone. Consumer Reports recently found that "Ford's reliability is now on par with good Japanese automakers." The independent J.D. Power Initial Quality Study scored Buick, Cadillac, Chevrolet, Ford, GMC, Mercury, Pontiac and Lincoln brands' overall quality as high or higher than that of Acura, Audi, BMW, Honda, Nissan, Scion, Volkswagen and Volvo.
Power rated the Chevrolet Malibu the highest-quality midsize sedan. Both the Malibu and Ford Fusion scored better than the Honda Accord and Toyota Camry.

Myth No. 3
They build gas-guzzlers.
Reality
All of the Detroit Three build midsize sedans the Environmental Protection Agency rates at 29-33 miles per gallon on the highway. The most fuel-efficient Chevrolet Malibu gets 33 m.p.g. on the highway, 2 m.p.g. better than the best Honda Accord. The most fuel-efficient Ford Focus has the same highway fuel economy ratings as the most efficient Toyota Corolla. The most fuel-efficient Chevrolet Cobalt has the same city fuel economy and better highway fuel economy than the most efficient non-hybrid Honda Civic. A recent study by Edmunds.com found that the Chevrolet Aveo subcompact is the least expensive car to buy and operate.

Myth No. 4
They already got a $25-billion bailout.
Reality
None of that money has been lent out and may not be for more than a year. In addition, it can, by law, be used only to invest in future vehicles and technology, so it has no effect on the shortage of operating cash the companies face because of the economic slowdown that's killing them now.

Myth No. 5
GM, Ford and Chrysler are idiots for investing in pickups and SUVs.
Reality
The domestic companies' lineup has been truck-heavy, but Toyota, Nissan, Mercedes-Benz and BMW have all spent billions of dollars on pickups and SUVs because trucks are a large and historically profitable part of the auto industry. The most fuel-efficient full-size pickups from GM, Ford and Chrysler all have higher EPA fuel economy ratings than Toyota and Nissan's full-size pickups.

Myth No. 6

They don't build hybrids.
Reality
The Detroit Three got into the hybrid business late, but Ford and GM each now offers more hybrid models than Honda or Nissan, with several more due to hit the road in early 2009.

 

 

Nash back at CAW after poll defeat

Peggy Nash lost the federal riding of Parkdale-High Park to Liberal Gerard Kennedy Oct. 14, 2008.
Former Parkdale-High Park MP opts not to run
for Ontario NDP leadership, saying timing not right

Nov 18, 2008 04:30 AM
Tony Van Alphen
Business Reporter

Peggy Nash, who was defeated in the Oct. 14 federal election, has returned to a top post with the Canadian Auto Workers union.

Nash, 57, elected for the New Democrats in 2006 in Toronto's Parkdale-High Park riding, resumed her $135,000 job yesterday as one of five assistants to CAW president Ken Lewenza after deciding not to seek the job of Ontario NDP leader.

"Many people have approached me about it," Nash said in an interview. "It certainly was something I considered, but the timing was never good. Other candidates had been at this for some time."

Nash lost her riding to Liberal Gerard Kennedy last month, prompting speculation among party insiders that she would be a candidate for the party's top Ontario job.

Howard Hampton is leaving as NDP leader in March, after 13 years. MPPs Michael Prue (Beaches-East York), Peter Tabuns (Toronto-Danforth), Gilles Bisson (Timmins-James Bay) and Andrea Horwath (Hamilton Centre) have declared their candidacy.

New Democrat officials consider Nash a major talent, and it's felt she only lost because of the high profile Kennedy had in the riding as a former Ontario cabinet minister.

In her return, Nash will be responsible for CAW members in airlines, post-secondary institutions and technical professionals in offices. She will also head CAW campaigns and act as the union's liaison to the Canadian Labour Congress.

Nash was a ticket agent and union activist when the Canadian Airline Employees Association merged with the CAW in 1985. She became an assistant to national president Bob White in 1990 and had several key assignments including bargaining at Ford in 2005.

She took a leave of absence to run in the 2006 election.


 

Ottawa, Ontario share
auto bailout concerns
AARON LYNETT/TORONTO STAR FILE PHOTO

Bryant to join Clement on fact-finding trip in U.S.
as both countries study bailout packages

Nov 18, 2008 04:30 AM
Richard Brennan
in Ottawa
Robert Benzie
in Toronto

OTTAWA–Ontario will team up with Ottawa on a visit to Washington to get the "lay of the land" regarding a U.S. bailout of the auto industry.

The federal and provincial governments are on the same page when it comes to salvaging the battered sector, Ontario Economic Development Minister Michael Bryant said yesterday. But the Ontario minister appears to want a decision on financial assistance sooner than does federal Industry Minister Tony Clement, who is leading the trip.

"We, in Ontario, continue to be of the view that Canada ought to be moving prior to any U.S. package, if that is at all possible, so as to avoid being either a minority shareholder in setting the terms and also to ensure that we are not locked into a proportion that is unrealistic for Canada," Bryant told reporters at Queen's Park.

Bryant said the federal and provincial governments should "obtain security, obtain a high position on the balance sheet in the hopefully unlikely event of a bankruptcy filing, obtain warrants to avoid a situation where companies down the line might be able to profit from these investments" and ensure factories remain in Ontario.

Noting the expected $25 billion bailout in the U.S. is "unlikely" this week, Bryant emphasized that Canada does not want "to be a position where we are playing a `me, too' role."

Ontario officials said the fact-finding trip, which may include Detroit, could begin as early as tomorrow.

"Obviously part of the information-gathering is to canvass whether what we are doing is consistent with what is going on there and to what extent there are differences," Clement told the Toronto Star yesterday, noting that Ottawa has not even decided yet whether to inject cash into the struggling industry.

"I want to make the right decision rather than the quickest decision. I understand there is some pressure on us, but the last thing I want to do is make a wrong quick decision," Clement said, adding that part of his fact-finding mission is to determine what is needed short- and long-term to keep the industry viable. "It's premature to say that we will do one-tenth of whatever the Americans do, or jump to those conclusions just yet."

Clement said Prime Minister Stephen Harper, Ontario Premier Dalton McGuinty and U.S. President-elect Barack Obama have agreed that "just getting a big shovel and dumping money over the side without any long-term objective or plan is not the appropriate way to handle taxpayers' money."

Most Canadians would agree to financial assistance if the industry starts making fuel-efficient vehicles that consumers want to buy, he added.

Clement agreed "we don't have the luxury of waiting forever" to let the Big Three know what Ottawa is prepared to do and what conditions will be attached.

The minister also wants to know what the CAW and the UAW are prepared to do to see that the industry survives but he wouldn't be specific on what he expects from the Canadian and U.S. auto workers' unions.

Prior to a conference call yesterday with Harper and the other provincial and territorial leaders, McGuinty vowed that Queen's Park would work together with Ottawa.

"We are going to find a way to address the crisis faced by our automotive sector, suppliers included, but the best way for us to do that is together with the federal government," McGuinty told the Legislature.

Progressive Conservative MPP Tim Hudak (Niagara West-Glanbrook) said he was encouraged that the provincial Liberals have put aside their partisan wrangling with the federal Tories.

Still, he warned that there should be "job guarantees for more money to flow," adding that even though the province has spent $1 billion in incentives to the auto industry, 30,000 jobs have been lost in the last three years.

Federal NDP Leader Jack Layton said if Ottawa doesn't take a proactive approach to the auto sector "the troubles we are having in our economy are going to become dramatically more severe."

"I think what we have here is a golden opportunity to have a government that steps in, helps to transform the industry using some of the best and most productive workers in the world to produce the car that Canadian increasingly want to buy: ones that use less fuel and create less pollution and cost them less to operate," Layton told reporters.


 

CAW's Mike Vince Receives Award

CAW Local 200 president Mike Vince is the 2008 recipient of the Charles E. Brooks Labour Community Service Award.

Grace Macaluso, The Windsor Star

November 17, 2008

CAW Local 200 president Mike Vince never met Charlie Brooks.

He got to know the legendary union leader only by reputation, by the stories recounted by his labour buddies, like CAW national president Ken Lewenza and Gary Parent, president of the Windsor and District Labour Council.

Brooks "was a person ahead of his time," says Vince. "He was a real visionary with his focus on social and community values."

For the 49-year-old Vince, it is "an honour and humbling" to be this year's recipient of the Charles E. Brooks Labour Community Service Award.

Though cited for his 29-year commitment to the local labour movement, Vince was chosen in part for his contribution to community service, Sheila Wisdom, executive director of the United Way, Windsor-Essex County, said Thursday.

"Mike has been a longtime volunteer with the United Way, including many positions in the annual fundraising campaign as well as a longtime member of the board of directors," Wisdom said. "As the Ford Nemak site co-chair in 2000, he led a team raising $3,250,710 -- the highest total ever at this site."

Vince, who started his career at Ford in 1983, will mark his sixth year next January as president of CAW Local 200. During his tenure, he has faced "incredible" challenges with continuing closures and layoffs.

His local has had to endure the loss of hundreds of jobs from Ford operations in the city.

However, a silver lining emerged just prior to the federal election, when the Conservative government came through with an $80 million investment to retool the shuttered Essex Engine plant.  

About 300 workers are expected to start work in the third quarter of next year at the plant, which will produce a new, fuel-efficient engine for the 2010 Ford Mustang model, said Vince.

That Ford appears to be proceeding as planned is about the only good piece of news amid  the turmoil gripping the Detroit Three automakers as concerns mount over whether Chrysler, General Motors and Ford will survive the current economic crisis.

"Everyone's on pins and needles as to what exactly is going to happen," says Vince. "Our priority is to do the best we can to entice new investment and to give some stability to our members and our community."

Vince was recognized last Friday at an awards presentation at the Caboto Club. While awards and recognition are appreciated, "I'd trade them in for jobs in a heartbeat," he says.

 

        GM Canada's pension plan
      troubled before market collapse
 


Nov 15, 2008 04:30 AM
James Daw

General Motors pensioners in Canada are seeking advice from a leading pension lawyer as the embattled automaker holds out its hand for help from the American and Canadian governments.

Mark Zigler of Koskie Minsky LLP, whose firm has represented everyone from pensioned hockey stars to Eaton's store clerks, has agreed to speak at an autoworkers' union hall in Oshawa Dec. 1.

His topic: What happens to pensioners when a company fails and its pension fund is seriously short of money?

The pensioner who helped get Zigler to attend the pensioners' meeting has vowed to grill him on what he thinks he and his contemporaries should expect from the provincial government.

"I think it's the province that is at fault (for allowing the GM pension plan to fall so far behind in its funding)," said Karl Zimmerman, of Oakwood, Ont.
He fears the health of the plan will only get worse next year, as losses in stock markets spread to Canadian real estate.

At the moment, the pensioners' concerns are hypothetical, but their anxiety and suspicions are real. GM of Canada's spokesmen are refusing to talk about the pension plan in light of recent stock market losses and the parent company's dwindling cash reserves.

"We will not respond to the wild and inaccurate speculation of the Star regarding GM's future," spokesman Stewart Low replied in an email message yesterday.

GM had representation at a meeting yesterday with Premier Dalton McGuinty, whose province is home to most of General Motors of Canada's more than 30,000 blue-collar retirees – and which collects tax revenue on average pensions of $16,376 a year. (GM has announced it will have fewer than 9,000 factory workers by 2010.)

Ontario is also the only province with a Pension Benefits Guaranty Fund and a record of making loans to that fund when it is short of money, as it is today. That precedent, and the potential for a lawsuit over the province's failure to require GM to meet certain funding rules, makes Ontario a cheerleader for GM getting help from Washington.

GM's pension plan for current and former factory workers was in depressingly sick shape a year ago, with potential liabilities of $11.5 billion and a shortfall of $4.9 billion if it were to wind up without further contributions from GM.

The fund would be in much worse shape today if investments managers maintained their investing target of 69 per cent of the fund in stocks.
David Burke, a retirement practice director with Watson Wyatt Worldwide, said a pension plan with 96 per cent of the funds required to pay all earned benefits without further contributions a year ago would have had about 72 per cent funding by the end of October, and less today.

For those companies required to make up that shortfall within five years, "this will present a significant challenge."

Burke cannot comment on GM, which is a client. But GM is the only Ontario company not required to eliminate its funding shortfall, and its fund will be harder hit by falling stock prices than most.

A more typical weighting in stocks is 60 per cent and GM's U.S. pension fund has less than 30 per cent. The Canadian fund would have lost $1.4 billion or 32 per cent of its holding in stocks since the end of last November if it performed no better or worse than major market indices. Of course, the fund may have avoided the market mayhem if it sold off much of its equity holdings.

But if it stuck to its target this could leave the fund with as little as 55 per cent of the assets needed to pay all benefits.

This could result in a heavy claim on the Ontario guarantee fund, which is supposed to cover losses on the first $12,000 of an annual pension.

 

PM, premier warn Big Three

No financial assistance unless firms build more
eco-friendly autos Harper, McGuinty say

Reid Bigland, president of Chrysler Canada, after meeting with Premier Dalton McGuinty Nov. 14, 2008. Bigland joined the heads of GM, Ford, Honda and Toyota to discuss financial support for the flailing industry.

Nov 15, 2008 04:30 AM
Robert Benzie
in Toronto
Bruce Campion-Smith
In Winnipeg

Listen

Ottawa and Queen's Park warn there will be no unconditional "bailouts" for the sputtering North American automakers seeking government help.

While Prime Minister Stephen Harper and Premier Dalton McGuinty agree they want the vital domestic auto industry kept afloat, they signalled they are not prepared to invest public money unless General Motors, Ford and Chrysler change their ways.

McGuinty met for 55 minutes in his office late yesterday with the presidents of the five major auto companies in Ontario – Detroit's Big Three as well as Toyota and Honda – and lectured the U.S.-based automakers on their past short-sightedness.

"If we are going to come to the table ... with additional financial support they're going to have to demonstrate to us that that somehow serves the greater public interest," the premier said before the closed-door session.

"It can't be just some short-term ... maintenance of the status quo," he said, adding GM, Ford and Chrysler better start "producing products that are highly sought after and that are friendlier to the environment" instead of gas-guzzling trucks, SUVs and sedans.

After the meeting – where no specific financial aid requests were made by the struggling three automakers – Economic Development Minister Michael Bryant was more pointed.

"The premier made it very clear that taxpayers are not going to tolerate any bailouts of the auto industry," Bryant told reporters.

GM Canada president and CEO Arturo Elias and Charles Bilyeu, president of Ford Credit Canada Ltd., refused to speak with the media before or after the meeting.

But Chrysler Canada president and CEO Reid Bigland summed up the case for bailing out Ontario's most important industry, which employs 400,000 people and generates $28 billion of economic activity.

"It's a significant impact on the Canadian economy as well as the Ontario economy," said Bigland, whose company is the most vulnerable of the three North American manufacturers.

In Winnipeg, federal Industry Minister Tony Clement said consensus is emerging among Ottawa, Queen's Park and the incoming U.S. administration led by President-elect Barack Obama that any aid cannot simply prop up companies with no hope of success.

Clement, who is watching developments in Washington "with great interest" as American lawmakers weigh a $25 billion auto rescue package, said assistance "has to be about long-term solutions and not short-term cash infusions."

"Our obligation is the long-term viability of the auto sector. That is the balancing act that we play with the auto sector and with taxpayers' money," he said.

 

Ottawa holding auto talks with U.S.

Any deal on aid must be co-ordinated between countries, Flaherty says

Nov 14, 2008 04:30 AM
Bruce Campion-Smith
tonda maccharles
rob Ferguson
staff reporters

WINNIPEG–The federal government is holding informal talks with Washington to co-ordinate financial aid for struggling Big Three automakers, Finance Minister Jim Flaherty says.

But he's warning that any infusion of federal cash will be contingent on automakers changing their product lines to produce fuel-efficient vehicles, including hybrids, that appeal to consumers bruised by gas prices.

Flaherty said yesterday it's vital Ottawa talk to the U.S. administration about help for the auto sector since the two markets are deeply integrated and auto manufacturing straddles the border.

"We need to talk to each other. Of course we do because this is an integrated production system," he said. He characterized the discussions so far with U.S. officials as "informal" and suggested that Industry Minister Tony Clement was spearheading the effort. Flaherty also cautioned that there are still questions about the aid package Congress may ultimately provide for the American auto firms.

"The bridge has to be towards vehicles that will be technologically sophisticated, hybrids, fuel-efficient, that Canadians are going to want to buy and Americans are going to want to buy because 90 per cent of our vehicle production goes to the United States," Flaherty said.

While Flaherty has appeared publicly cool to the idea of a government bailout for the car makers, it's apparent that intense work is going on behind the scenes involving Queen's Park, executives from General Motors, Ford and Chrysler and U.S. officials to hammer out a package that is acceptable to all.

Premier Dalton McGuinty will meet today with executives for the struggling Detroit Three, as well as Honda and Toyota. But a senior provincial government source said the automakers shouldn't expect to walk away from the talk with cheques in hand. "It's a listening meeting and, while it comes at a time of turmoil, it's part of an ongoing dialogue between the government and the industry."

The automakers need cash to help get them through the hard times when loans are difficult to get from other sources because of the global credit crunch, said Mark Nantais, president of the Canadian Vehicle Manufacturers Association.

"We need affordable credit," he said, declining to set a dollar figure because the companies have their own individual needs. "That's the message we need to get across."

McGuinty, whose government is grappling with a $500 million deficit, sounded cautious as he prepared for the meeting.

Characterizing the late-afternoon confab as a "listening opportunity," the premier said he will have a blunt message for the automakers, as they press for financial help.

"Tell me exactly why we should do this, what are we going to get out of this," said McGuinty, whose government's previous aid includes a $175 million, 50-year loan to GM, which is closing its Oshawa pickup truck plant next year.

"We've provided support in the past and experienced job losses nonetheless. What assurance can you provide us with respect to your long-term viability; why is this a good thing for the public to do?" he said.

Meanwhile, federal Liberal leadership candidate Michael Ignatieff said it's time to put the money on the table for the Big Three and not the time to demonize them, as he suggests the Conservative government is doing.

The industry is far too important to the country and Ontario to let it drift into bankruptcy, which would throw tens of thousands of people out of work, Ignatieff said.

 

Flaherty, CAW spar over
bailout for automakers

November 12, 2008
Tamsyn Burgmann

Clint Thomas
THE CANADIAN PRESS

Federal Finance Minister Jim Flaherty says the issue of whether the government should bail out struggling auto manufacturers is controversial, and people in his own Ontario riding – the Canadian home of General Motors – are telling him not to do it.

"There are many people saying we should do something with respect to the auto sector," Flaherty said today at a conference of economists.

"But I can tell you even in my own riding, where I was yesterday, in Whitby-Oshawa ... there are lots of people who say, `Don't do anything. Don't use my tax money to bail out an enterprise that may not survive."'

"These are not highfalutin' rich people that are saying this to me – these are people on the street."

Automakers have said they need more than $1 billion in loan guarantees to help tide over the sector until demand in the U.S. recovers for North American-produced vehicles.

The three U.S.-based automakers have been pressing for an additional $50 billion in loans from Congress to help them survive the tough economy and pay for health-care obligations for retirees. That's on top of a previously approved $25-billion government loan package for new technology.

On Friday, GM reported a $2.5-billion loss in the third quarter and warned that its cash levels could fall below what's needed to run its business by the end of the year if the U.S. economy doesn't turn around and it doesn't get government aid.

The federal Conservatives have long rejected direct intervention in the auto sector.

But Flaherty suggested for the first time Sunday that Ottawa may be willing to help, with the proviso that aid is targeted at auto plants with viable prospects.

He confirmed today that discussions with Canada's Big Three auto manufacturers are in progress, and reiterated there is money to be spent under certain conditions.

"We have been having discussions with the Detroit Three here in Canada," Flaherty said.

"We have money available for innovation – transformational money, if I may call it that. Because at the end of the day, we need car makers who are making cars people want to buy."

Flaherty stressed the government must ensure any bailout would be tied to the "sustainability" of the sector, or the government risks a taxpayer backlash.

"We need to find a way, if we are going to be able to do something, find a way to ensure sustainability, survivability," he said.

"That has to be the goal, otherwise ... there's a backlash to governments using taxpayers' money in what is perceived to be a bailout of a failing business."

Chris Buckley, president of CAW Local 222 in Oshawa, said it's "absolutely disgusting" that Flaherty says he's only monitoring the situation when immediate action is required.

Buckley said Canada can't wait for the United States and president-elect Barack Obama to take office in January, saying he's worried GM in Canada could be gone by then.

"We're asking Flaherty and (Prime Minister Stephen) Harper to react immediately and not wait for the U.S. to take some kind of action," Buckley said in a phone interview.

"This is not just about autoworkers – this is about good-paying Canadian jobs, and as they evaporate, what it does to our community."

He said it would "be absolutely devastating" if the Harper Conservatives decide against financial help for automakers.

Any money for the auto industry should not be viewed as a bailout but an investment in the Canadian economy, said CAW national president Ken Lewenza.

"It can't be just giving...cash," Lewenza said, noting any solution should also address the growth of vehicles imported into Canada while North American automakers can't sell equal numbers into foreign markets.

In a meeting with Harper today ahead of next week's throne speech, NDP Leader Jack Layton called on the prime minister to match a bailout proposal for the auto sector being floated in the United States.

Federal Industry Minister Tony Clement said later today the government does have a plan for the auto sector, but he didn't say whether the industry has made a formal request for financial aid.

"Certainly they've given me a real good sense on the ground as to what they're facing," Clement said. "We're examining our options."

However, Clement said the situation changes day by day, and Ottawa will act in the long-term interests of the industry.

"There's no point making a decision that affects cash flow in the industry for three or four months and then is of no further use or help," he said.

"We believe in the long-term viability of this industry in Canada."

Ontario Premier Dalton McGuinty is planning to meet with auto industry representatives, but the date hasn't been decided, government officials said.

Progressive Conservative Leader John Tory said Ontario should look at appointing an "auto czar," an idea floated by Obama for the U.S.

Tory said it would be ideal to appoint "someone who is a person who understands the automobile industry and that could sit down with all the people involved ... and say, `What could we do and how could we do it most effectively?"'

While the government has avoided direct help for the auto sector, it again came to the aid of Canadian banks today, announcing it will buy another $50 billion in residential mortgages to ease the credit crunch, tripling the amount of insured mortgages Ottawa can buy from banks by the end of the fiscal year.

 

Ford cash burn hits $7.7 billion

Struggling automaker posts $129 million loss in
third quarter, plans cuts to jobs, production

Nov 08, 2008 04:30 AM

Tom Krisher
James Prichard
Associated Press

DEARBORN, Mich.–Ford Motor Co. lost $129 million (U.S.) in the third quarter as the struggling automaker burned through $7.7 billion in cash and set plans for more job cuts.

Ford said yesterday it will eliminate the jobs of another 2,260 white-collar employees in North America as it battles weak demand, the credit crisis and the worst economic downturn in decades.

"We remain absolutely convinced that we have the right plan and are taking the right actions to weather this difficult period and emerge as a lean, globally integrated company poised for long-term profitable growth," CEO Alan Mulally told analysts during a teleconference.

Ford said it lost 6 cents a share for the quarter, compared with a loss of $380 million, or 19 cents a share, last year.

The company posted a pretax loss of $2.7 billion from continuing operations, but it was offset partly by a $2 billion gain as Ford shifted retiree health-care liabilities to a trust run by the United Auto Workers.

Ford's global automotive operations had a pretax loss of $2.98 billion for the quarter, compared with a pretax loss of $362 million a year earlier.

Sales fell 22 per cent to $32.1 billion from $41.1 billion due to lower volume and the sale of Jaguar and Land Rover.

Excluding special items, Ford lost $1.31 a share, worse than Wall Street had expected. Analysts surveyed by Thomson Reuters predicted a loss of 94 cents a share on sales of $28 billion.

Dearborn-based Ford reported its worst three-month performance on record in the second quarter, when it lost nearly $8.7 billion.

The cash burn – in which a company spends more money than it takes in – was about 3 1/2 times higher than the $2.1 billion Ford used up in the second quarter.

Ford said the cash burn primarily reflected pretax automotive losses, changes in working capital and payments to its credit arm to reduce interest rates for buyers. It was exacerbated by sales drops and production cuts of 500,000 fewer vehicles from second-quarter levels, resulting in $3 billion less in incoming cash for the quarter.

Chief financial officer Lewis Booth would not say if he expects the cash-burn rate to continue at present levels, but said he was confident the company can make it through 2009.

Industry analysts say if the economy doesn't improve, Ford could run out of money sometime after 2010.

 

Ford stands alone

While GM and Chrysler continue their flirtation - with Renault-Nissan watching from afar - the No. 2 automaker remains a wallflower.

By Alex Taylor, senior writer

NEW YORK (Fortune) -- With the U.S. auto industry sinking faster than a wildebeest in quicksand, the headlines have belonged to General Motors and Chrysler as they continue to work on a deal that might save the failing companies. Ford, meanwhile, has stayed above the fray, in the apparent belief that is has enough resources to survive the downturn - and a sufficiently robust plan to come out the other side when it does.

Ford's inaction isn't for lack of opportunities. It was courted by both of the other Detroit companies over the summer.

According to a knowledgeable source, GM chairman and CEO Rick Wagoner approached Ford executive chairman Bill Ford about a merger. Ford listened politely to the pitch from Wagoner but turned him down.
Chrysler chairman and CEO Bob Nardelli also approached Bill Ford about combining forces - this time in a three-way merger that included GM. Sensing desperation in Nardelli's approach, Ford said no again.

The source of Bill Ford's determination to remain independent, besides a desire to maintain control of his family's company, is a strong balance sheet.
At the end of the second quarter, Ford had $26.8 billion of cash on hand - likely enough to fund its operations into 2010. Ford also has some saleable assets in Volvo and in its 33.9% stake in Mazda - assuming it can find buyers with enough cash or a strong enough credit rating to execute a transaction. Ford also expects to get a share of some $25 billion in government loans that Congress has approved to help automakers convert to more fuel-efficient vehicles, which will also ease the cash crunch.

Frayed nerves


Ford's liquidity position hasn't prevented hand wringing by Ford dealers, however. At a regional dealer council meeting in Florida last week, one dealer announced that Ford would not be able to continue as manufacturer by the end of next year, and added that he expected government assistance to kick in if the company should falter. The automaker quickly moved to distance itself from the unauthorized comments.

The dealers' confidence was likely not enhanced by investor Kirk Kerkorian's decision, made public Tuesday, to perhaps sell his entire 6% stake in the company at a significant loss. Kerkorian paid up to $8.50 a share for Ford stock earlier in the year that he is now selling for $2 and change. Kerkorian said he's shifting his investment focus to other sectors of the economy.

The prospect of financial Armageddon hasn't put an end to the palace intrigue in Dearborn. The latest victim is chief financial officer Don LeClair. Other executives, complaining that LeClair was secretive and difficult to work with, threatened to quit if he wasn't moved aside, according to two people with knowledge of the situation.

LeClair was responsible for arranging $23.5 billion in financing two years ago that has helped keep Ford afloat - and that would be impossible to arrange today. He was close to CEO Alan Mulally, but Bill Ford concluded a change was necessary after hearing from the dissidents. LeClair was described as "shell-shocked" when he learned of the decision at a board meeting. The company declined to discuss what it called "rumours" or to make LeClair available for comment.

Last week, two outside directors also decided to leave, due to, they said, the press of other business. Sir John Bond, a former HSBC chairman who gave the board some substantial financial muscle, will be missed. Nokia chairman Jorma Ollila was a less vigorous presence.

How long Ford can remain on the sidelines is anyone's guess. Its recovery plan looks a little skimpy. According to a dealer, the Lincoln-Mercury franchise will shrink to eight vehicles by 2010 - three for Mercury and five for Lincoln-- from 11 today.

What could push Ford into the fray? Now that its stock-market capitalization has collapsed to $4.5 billion, some members of the Ford family, who control 40% of the shareholder vote, may be looking to cash out.

Furthermore, there's at least one more global player stalking the Detroit Three in search of a deal: Renault-Nissan. The Franco-Japanese company is supposed to be looking over Chrysler, but a smarter play might be to leave GM to sort out Chrysler's problems - and go after healthier Ford. Though CEO Carlos Ghosn has been repulsed before, the current times are sufficiently harrowing that any offer deserves a closer look. Even at Ford.

 

 

How economic meltdown
& Ford crashed one family

By MARIANNE MEED WARD

2nd November 2008

A few months ago, Maurice Bastien was in an enviable position. He lived mortgage-free in a six-bedroom home near Windsor with his wife Wanda and four of his six children -- Elijah, 7, Natalie, 6, and two of four sons from a previous marriage.

But Maurice, a skilled trade worker for 31 years, had been unemployed for four years.

Then a phone call came that promised to change that -- and instead delivered a nightmare. Ford in Oakville was offering Maurice a job on the midnight shift.

"We had 48 hours to make a decision," recalls Maurice. "The wife and I decided we had to go for it."

Wanda quit her job at a local Christian school, and the family bought a house in St. George, just north of Brantford -- the closest they could afford to live to Oakville. The move came with a hefty price: a $150,000 mortgage after they sold for $167,000 and bought for $300,000.

But the move was worth it, they thought, for the promise of steady work. Then the bottom fell out the first day.

"We were all gravied up in the morning," Maurice recalls. "Everyone telling us we couldn't go wrong, 'you got it made,' 'you made the right choice,' 'you'll get lots of overtime.'"

After lunch, everything changed.

"We were watching a training video and they came in and turned it off and said our shift was cancelled. We were floored. We moved our families, sold our houses -- you couldn't see that coming?!" Maurice recalls.

"We're in more debt now than in our whole lives. For the first time in my life, I might not be able to make payments and we might lose our house. We were getting set up to retire, and now we could lose everything. It's devastating."

Maurice is not alone. The layoff statistics and lost manufacturing jobs mask a human toll that is mounting, with no foreseeable end.

My neighbour Gary Beck, president of Local 707 of the Canadian Auto Workers union, which covers the Oakville Ford plant, knows the stories well.

One family moved from Calgary, only to have a promised job at Ford disappear days before the start date.

Beck's own nephew quit his job and rearranged daycare to take a Ford job that disappeared. He got his old job back, but not his daycare, and had to move his kids to an unfamiliar setting.

Other workers who left jobs for Ford can't get their old jobs back.

"We've had people come to our office with their spouses and little kids, crying, saying 'What am I going to do?'" said Beck. "This is the worst I've seen in 25 years. Even in the '80s when we went to one shift, we could see the light at the end of the tunnel. Now it's hard to see."

At its peak, Ford had 17,000 workers nationwide. That's shrunk to 5,000. The Oakville plant has lost 1,850 people in the last four years. But in July, when Maurice got the call, everything still looked rosy.

"Ford was calling Oakville the crown jewel," recalls Beck.

There were plans to build close to 300,000 vehicles. Then the market bottomed out and the build was cut to 130,000. Ford's stock dropped below $2 a share.

Beck recalls being in a convenience store with CAW President Kenny Lewenza and seeing the price on a Twinkie: $1.98.

"I turned to Kenny and said 'That twinkie is worth more than Ford stock. Which do you think I should buy?' Lewenza says, 'Judging by your waistline, I know what you're buying.'"

Beck smiles at the memory, but it's a brief drop of levity in a sea of human misery.

NO EXPLANATION

Why didn't the automaker see the downturn earlier, before people uprooted their lives? It's a question that may never be answered, and Ford wasn't returning calls for an interview.

Some displaced workers have launched a lawsuit against Ford. Others, like Maurice, though grateful for the unemployment payments he gets, just want a job.

"I believe in earning your stars everyday. I stand on working hard," said Bastien. "But they've got to be held accountable.

"(Ford) can't do that to people. It's absolute insanity."


 

 

Rough Ride for Big Three
The heads of America's ailing auto companies testify before a Senate hearing Nov. 18, 2008 on Capitol Hill. They warned of "catastrophic" fallout to the U.S. economy if they are allowed to fail.

Automakers' pleas to Congress for $25 billion
in aid fall on unsympathetic ears

Nov 19, 2008 04:30 AM


WASHINGTON–The men who run The Big Three looked distinctly tiny in a congressional hearing room yesterday, a trio of auto industry paupers pleading for money and carrying a common message:

It's not our fault.

The Diminished Three – Richard Wagoner of General Motors, Alan Mulally of Ford and Robert Nardelli of Chrysler – all used the same apocalyptic language to describe the national economic fallout if any one of them went under, one-time cutthroat competitors uniting in front of a bevy of skeptical senators.

If one went under, the other two would surely be dragged down as well, they said.

"What would it mean if the domestic industry were allowed to fail?'' Wagoner told the Senate banking committee.

"The societal costs would be catastrophic – 3 million jobs lost within the first year, U.S. personal income reduced by $150 billion and a government tax loss of more than $156 billion over three years."

Richard Shelby, the Alabama Republican who has been a critic of the industry, said he believes if taxpayers fork over $25 billion today, the industry will be back soon looking for more.

"You've burned billions and billions and billions of dollars trying to turn around your business," Shelby said.

"Are we here in the Senate being asked to facilitate a stronger, more competitive auto manufacturing sector or to perpetuate a market failure?"

It was surely the most closely watched loan application in recent history – the committee chair joked he should have held the hearing in a downtown sports stadium – as the three men, joined by United Auto Workers union president Ron Gettelfinger and an industry critic from academia, explained why they needed $25 billion immediately to stay afloat.

That would come on top of another $25 billion for plant retooling, already approved by Congress, earmarked for the production of fuel-efficient vehicles.

Their prospects of receiving this bailout request, at least before Barack Obama becomes president in January, are extremely slim.

Democrats sympathetic to their plight want the money to come from the $750 billion financial bailout package passed by Congress earlier this autumn, but Republicans are adamant in resisting that call.

The automakers are also running up against serious bailout fatigue, even among Democrats, who felt they had a gun placed at their head in order to pass the Wall Street bailout less than two months ago.

Banking committee chair Christopher Dodd, a Connecticut Democrat, said all three men run companies that have shown no vision and he asked them if they had made mistakes.

Nardelli was the only one of the three to directly answer the question.

He said the auto market got caught up in the general U.S. economic exuberance, catering to people who dined out on faux real estate wealth, seeking bigger and bigger gas guzzlers.

"The mistake Chrysler probably made during that period is that we were responding to the customer who wanted bigger, more expansive, higher horsepower vehicles to go with their second homes, their boats, their trailers, and we chased that consumer demand up," he said.

They all called their request a "bridge loan," promised to pay it back with interest and abide by strong government oversight.

All ticked off a series of tough restructuring moves already undertaken, salaries and bonuses wiped off the books and all extolled their hybrid and fuel-efficient models.

The three agreed they were making progress until the economy went off the cliff.

They were victims of the global credit crisis, they said.

People who want to buy their cars can't get loans, they said.

GM's Wagoner had previously warned that his company cannot wait much longer for help and is danger of running out of cash.

Nardelli joined him yesterday, saying Chrysler was in the same situation, adding bankruptcy was not an option.

"We cannot be confident that we will able to successfully emerge from bankruptcy,'' he said.

Chrysler is a private company and does not have to make its finances public, but Nardelli told senators that at the end of the third quarter, it had $6.1 billion in cash. During that July-September period, however, it spent $3 billion more than it took in, Nardelli said.

Mulally said if Ford can get through this, it will come through on the other side of this crisis "like a turbo."

Dodd said the injuries in the auto industry have been self-inflicted.

Auto industry leaders have approached 21st-century challenges with a decidedly 20th-century mindset, and they're now paying the price for it, Dodd said.

"They have been content ... to not only satisfy, but in too many respects drive, the demand for inefficient, gas-powered vehicles that Americans have been going broke to gas up," he said.

The leaders of the industry no more deserve government help than did the financial titans who created the subprime housing crisis, Dodd said, but, he added Washington must act to avoid an economic implosion.

But Jon Tester, a Montana Democrat, said everyone is in trouble these days, and pointed to the timber and mining industry laying off workers in his home state.

He also warned the trio that if they received any taxpayers' help, they better make sure they spend it in this country.

"If Canada wants a dollar spent up there, go see the Canadian taxpayers," he said. "But if we're putting American taxpayer money on the line, it ought to be spent here."

All three said the money would stay in the U.S.

Peter Morici, a University of Maryland business professor, told the senators the auto industry "sooner or later" has to go through the painful restructuring that gets their costs in line with foreign competitors.

"America is over-carred, just as it is over-housed," said Morici.

But Debbie Stabenow, a Michigan Democrat, said her state has been restructuring for a decade and it has cost Michigan 400,000 jobs.

"We need this industry as a basic part of the fabric of our economy," she said.

"Somebody has to make something in America."

 

 

The Big 3: Myths & Their Realities

The debate over aid to the Detroit-based automakers is awash with half-truths and misrepresentations that are endlessly repeated by everyone from members of Congress to journalists. Here are six myths about the companies and their vehicles, and the reality in each case.

Myth No. 1
Nobody buys their vehicles.
Reality
General Motors Corp., Ford Motor Co. and Chrysler LLC sold 8.5 million vehicles in the United States last year and millions more around the world. GM outsold Toyota by about 1.2 million vehicles in the United States last year and holds a U.S. lead over Toyota of about 560,000 so far this year. Globally, GM in 2007 remained the world's largest automaker, selling 9,369,524 vehicles worldwide -- about 3,000 more than Toyota.
Ford outsold Honda by about 850,000 and Nissan by more than 1.3 million vehicles in the United States last year.
Chrysler sold more vehicles here than Nissan and Hyundai combined in 2007 and so far this year.

Myth No. 2

They build unreliable junk.
Reality
The creaky, leaky vehicles of the 1980s and '90s are long gone. Consumer Reports recently found that "Ford's reliability is now on par with good Japanese automakers." The independent J.D. Power Initial Quality Study scored Buick, Cadillac, Chevrolet, Ford, GMC, Mercury, Pontiac and Lincoln brands' overall quality as high or higher than that of Acura, Audi, BMW, Honda, Nissan, Scion, Volkswagen and Volvo.
Power rated the Chevrolet Malibu the highest-quality midsize sedan. Both the Malibu and Ford Fusion scored better than the Honda Accord and Toyota Camry.

Myth No. 3
They build gas-guzzlers.
Reality
All of the Detroit Three build midsize sedans the Environmental Protection Agency rates at 29-33 miles per gallon on the highway. The most fuel-efficient Chevrolet Malibu gets 33 m.p.g. on the highway, 2 m.p.g. better than the best Honda Accord. The most fuel-efficient Ford Focus has the same highway fuel economy ratings as the most efficient Toyota Corolla. The most fuel-efficient Chevrolet Cobalt has the same city fuel economy and better highway fuel economy than the most efficient non-hybrid Honda Civic. A recent study by Edmunds.com found that the Chevrolet Aveo subcompact is the least expensive car to buy and operate.

Myth No. 4
They already got a $25-billion bailout.
Reality
None of that money has been lent out and may not be for more than a year. In addition, it can, by law, be used only to invest in future vehicles and technology, so it has no effect on the shortage of operating cash the companies face because of the economic slowdown that's killing them now.

Myth No. 5
GM, Ford and Chrysler are idiots for investing in pickups and SUVs.
Reality
The domestic companies' lineup has been truck-heavy, but Toyota, Nissan, Mercedes-Benz and BMW have all spent billions of dollars on pickups and SUVs because trucks are a large and historically profitable part of the auto industry. The most fuel-efficient full-size pickups from GM, Ford and Chrysler all have higher EPA fuel economy ratings than Toyota and Nissan's full-size pickups.

Myth No. 6

They don't build hybrids.
Reality
The Detroit Three got into the hybrid business late, but Ford and GM each now offers more hybrid models than Honda or Nissan, with several more due to hit the road in early 2009.

 

 

Nash back at CAW after poll defeat

Peggy Nash lost the federal riding of Parkdale-High Park to Liberal Gerard Kennedy Oct. 14, 2008.
Former Parkdale-High Park MP opts not to run
for Ontario NDP leadership, saying timing not right

Nov 18, 2008 04:30 AM
Tony Van Alphen
Business Reporter

Peggy Nash, who was defeated in the Oct. 14 federal election, has returned to a top post with the Canadian Auto Workers union.

Nash, 57, elected for the New Democrats in 2006 in Toronto's Parkdale-High Park riding, resumed her $135,000 job yesterday as one of five assistants to CAW president Ken Lewenza after deciding not to seek the job of Ontario NDP leader.

"Many people have approached me about it," Nash said in an interview. "It certainly was something I considered, but the timing was never good. Other candidates had been at this for some time."

Nash lost her riding to Liberal Gerard Kennedy last month, prompting speculation among party insiders that she would be a candidate for the party's top Ontario job.

Howard Hampton is leaving as NDP leader in March, after 13 years. MPPs Michael Prue (Beaches-East York), Peter Tabuns (Toronto-Danforth), Gilles Bisson (Timmins-James Bay) and Andrea Horwath (Hamilton Centre) have declared their candidacy.

New Democrat officials consider Nash a major talent, and it's felt she only lost because of the high profile Kennedy had in the riding as a former Ontario cabinet minister.

In her return, Nash will be responsible for CAW members in airlines, post-secondary institutions and technical professionals in offices. She will also head CAW campaigns and act as the union's liaison to the Canadian Labour Congress.

Nash was a ticket agent and union activist when the Canadian Airline Employees Association merged with the CAW in 1985. She became an assistant to national president Bob White in 1990 and had several key assignments including bargaining at Ford in 2005.

She took a leave of absence to run in the 2006 election.


 

Ottawa, Ontario share
auto bailout concerns
AARON LYNETT/TORONTO STAR FILE PHOTO

Bryant to join Clement on fact-finding trip in U.S.
as both countries study bailout packages

Nov 18, 2008 04:30 AM
Richard Brennan
in Ottawa
Robert Benzie
in Toronto

OTTAWA–Ontario will team up with Ottawa on a visit to Washington to get the "lay of the land" regarding a U.S. bailout of the auto industry.

The federal and provincial governments are on the same page when it comes to salvaging the battered sector, Ontario Economic Development Minister Michael Bryant said yesterday. But the Ontario minister appears to want a decision on financial assistance sooner than does federal Industry Minister Tony Clement, who is leading the trip.

"We, in Ontario, continue to be of the view that Canada ought to be moving prior to any U.S. package, if that is at all possible, so as to avoid being either a minority shareholder in setting the terms and also to ensure that we are not locked into a proportion that is unrealistic for Canada," Bryant told reporters at Queen's Park.

Bryant said the federal and provincial governments should "obtain security, obtain a high position on the balance sheet in the hopefully unlikely event of a bankruptcy filing, obtain warrants to avoid a situation where companies down the line might be able to profit from these investments" and ensure factories remain in Ontario.

Noting the expected $25 billion bailout in the U.S. is "unlikely" this week, Bryant emphasized that Canada does not want "to be a position where we are playing a `me, too' role."

Ontario officials said the fact-finding trip, which may include Detroit, could begin as early as tomorrow.

"Obviously part of the information-gathering is to canvass whether what we are doing is consistent with what is going on there and to what extent there are differences," Clement told the Toronto Star yesterday, noting that Ottawa has not even decided yet whether to inject cash into the struggling industry.

"I want to make the right decision rather than the quickest decision. I understand there is some pressure on us, but the last thing I want to do is make a wrong quick decision," Clement said, adding that part of his fact-finding mission is to determine what is needed short- and long-term to keep the industry viable. "It's premature to say that we will do one-tenth of whatever the Americans do, or jump to those conclusions just yet."

Clement said Prime Minister Stephen Harper, Ontario Premier Dalton McGuinty and U.S. President-elect Barack Obama have agreed that "just getting a big shovel and dumping money over the side without any long-term objective or plan is not the appropriate way to handle taxpayers' money."

Most Canadians would agree to financial assistance if the industry starts making fuel-efficient vehicles that consumers want to buy, he added.

Clement agreed "we don't have the luxury of waiting forever" to let the Big Three know what Ottawa is prepared to do and what conditions will be attached.

The minister also wants to know what the CAW and the UAW are prepared to do to see that the industry survives but he wouldn't be specific on what he expects from the Canadian and U.S. auto workers' unions.

Prior to a conference call yesterday with Harper and the other provincial and territorial leaders, McGuinty vowed that Queen's Park would work together with Ottawa.

"We are going to find a way to address the crisis faced by our automotive sector, suppliers included, but the best way for us to do that is together with the federal government," McGuinty told the Legislature.

Progressive Conservative MPP Tim Hudak (Niagara West-Glanbrook) said he was encouraged that the provincial Liberals have put aside their partisan wrangling with the federal Tories.

Still, he warned that there should be "job guarantees for more money to flow," adding that even though the province has spent $1 billion in incentives to the auto industry, 30,000 jobs have been lost in the last three years.

Federal NDP Leader Jack Layton said if Ottawa doesn't take a proactive approach to the auto sector "the troubles we are having in our economy are going to become dramatically more severe."

"I think what we have here is a golden opportunity to have a government that steps in, helps to transform the industry using some of the best and most productive workers in the world to produce the car that Canadian increasingly want to buy: ones that use less fuel and create less pollution and cost them less to operate," Layton told reporters.


 

CAW's Mike Vince Receives Award

CAW Local 200 president Mike Vince is the 2008 recipient of the Charles E. Brooks Labour Community Service Award.

Grace Macaluso, The Windsor Star

November 17, 2008

CAW Local 200 president Mike Vince never met Charlie Brooks.

He got to know the legendary union leader only by reputation, by the stories recounted by his labour buddies, like CAW national president Ken Lewenza and Gary Parent, president of the Windsor and District Labour Council.

Brooks "was a person ahead of his time," says Vince. "He was a real visionary with his focus on social and community values."

For the 49-year-old Vince, it is "an honour and humbling" to be this year's recipient of the Charles E. Brooks Labour Community Service Award.

Though cited for his 29-year commitment to the local labour movement, Vince was chosen in part for his contribution to community service, Sheila Wisdom, executive director of the United Way, Windsor-Essex County, said Thursday.

"Mike has been a longtime volunteer with the United Way, including many positions in the annual fundraising campaign as well as a longtime member of the board of directors," Wisdom said. "As the Ford Nemak site co-chair in 2000, he led a team raising $3,250,710 -- the highest total ever at this site."

Vince, who started his career at Ford in 1983, will mark his sixth year next January as president of CAW Local 200. During his tenure, he has faced "incredible" challenges with continuing closures and layoffs.

His local has had to endure the loss of hundreds of jobs from Ford operations in the city.

However, a silver lining emerged just prior to the federal election, when the Conservative government came through with an $80 million investment to retool the shuttered Essex Engine plant.  

About 300 workers are expected to start work in the third quarter of next year at the plant, which will produce a new, fuel-efficient engine for the 2010 Ford Mustang model, said Vince.

That Ford appears to be proceeding as planned is about the only good piece of news amid  the turmoil gripping the Detroit Three automakers as concerns mount over whether Chrysler, General Motors and Ford will survive the current economic crisis.

"Everyone's on pins and needles as to what exactly is going to happen," says Vince. "Our priority is to do the best we can to entice new investment and to give some stability to our members and our community."

Vince was recognized last Friday at an awards presentation at the Caboto Club. While awards and recognition are appreciated, "I'd trade them in for jobs in a heartbeat," he says.

 

        GM Canada's pension plan
      troubled before market collapse
 


Nov 15, 2008 04:30 AM
James Daw

General Motors pensioners in Canada are seeking advice from a leading pension lawyer as the embattled automaker holds out its hand for help from the American and Canadian governments.

Mark Zigler of Koskie Minsky LLP, whose firm has represented everyone from pensioned hockey stars to Eaton's store clerks, has agreed to speak at an autoworkers' union hall in Oshawa Dec. 1.

His topic: What happens to pensioners when a company fails and its pension fund is seriously short of money?

The pensioner who helped get Zigler to attend the pensioners' meeting has vowed to grill him on what he thinks he and his contemporaries should expect from the provincial government.

"I think it's the province that is at fault (for allowing the GM pension plan to fall so far behind in its funding)," said Karl Zimmerman, of Oakwood, Ont.
He fears the health of the plan will only get worse next year, as losses in stock markets spread to Canadian real estate.

At the moment, the pensioners' concerns are hypothetical, but their anxiety and suspicions are real. GM of Canada's spokesmen are refusing to talk about the pension plan in light of recent stock market losses and the parent company's dwindling cash reserves.

"We will not respond to the wild and inaccurate speculation of the Star regarding GM's future," spokesman Stewart Low replied in an email message yesterday.

GM had representation at a meeting yesterday with Premier Dalton McGuinty, whose province is home to most of General Motors of Canada's more than 30,000 blue-collar retirees – and which collects tax revenue on average pensions of $16,376 a year. (GM has announced it will have fewer than 9,000 factory workers by 2010.)

Ontario is also the only province with a Pension Benefits Guaranty Fund and a record of making loans to that fund when it is short of money, as it is today. That precedent, and the potential for a lawsuit over the province's failure to require GM to meet certain funding rules, makes Ontario a cheerleader for GM getting help from Washington.

GM's pension plan for current and former factory workers was in depressingly sick shape a year ago, with potential liabilities of $11.5 billion and a shortfall of $4.9 billion if it were to wind up without further contributions from GM.

The fund would be in much worse shape today if investments managers maintained their investing target of 69 per cent of the fund in stocks.
David Burke, a retirement practice director with Watson Wyatt Worldwide, said a pension plan with 96 per cent of the funds required to pay all earned benefits without further contributions a year ago would have had about 72 per cent funding by the end of October, and less today.

For those companies required to make up that shortfall within five years, "this will present a significant challenge."

Burke cannot comment on GM, which is a client. But GM is the only Ontario company not required to eliminate its funding shortfall, and its fund will be harder hit by falling stock prices than most.

A more typical weighting in stocks is 60 per cent and GM's U.S. pension fund has less than 30 per cent. The Canadian fund would have lost $1.4 billion or 32 per cent of its holding in stocks since the end of last November if it performed no better or worse than major market indices. Of course, the fund may have avoided the market mayhem if it sold off much of its equity holdings.

But if it stuck to its target this could leave the fund with as little as 55 per cent of the assets needed to pay all benefits.

This could result in a heavy claim on the Ontario guarantee fund, which is supposed to cover losses on the first $12,000 of an annual pension.

 

PM, premier warn Big Three

No financial assistance unless firms build more
eco-friendly autos Harper, McGuinty say

Reid Bigland, president of Chrysler Canada, after meeting with Premier Dalton McGuinty Nov. 14, 2008. Bigland joined the heads of GM, Ford, Honda and Toyota to discuss financial support for the flailing industry.

Nov 15, 2008 04:30 AM
Robert Benzie
in Toronto
Bruce Campion-Smith
In Winnipeg

Listen

Ottawa and Queen's Park warn there will be no unconditional "bailouts" for the sputtering North American automakers seeking government help.

While Prime Minister Stephen Harper and Premier Dalton McGuinty agree they want the vital domestic auto industry kept afloat, they signalled they are not prepared to invest public money unless General Motors, Ford and Chrysler change their ways.

McGuinty met for 55 minutes in his office late yesterday with the presidents of the five major auto companies in Ontario – Detroit's Big Three as well as Toyota and Honda – and lectured the U.S.-based automakers on their past short-sightedness.

"If we are going to come to the table ... with additional financial support they're going to have to demonstrate to us that that somehow serves the greater public interest," the premier said before the closed-door session.

"It can't be just some short-term ... maintenance of the status quo," he said, adding GM, Ford and Chrysler better start "producing products that are highly sought after and that are friendlier to the environment" instead of gas-guzzling trucks, SUVs and sedans.

After the meeting – where no specific financial aid requests were made by the struggling three automakers – Economic Development Minister Michael Bryant was more pointed.

"The premier made it very clear that taxpayers are not going to tolerate any bailouts of the auto industry," Bryant told reporters.

GM Canada president and CEO Arturo Elias and Charles Bilyeu, president of Ford Credit Canada Ltd., refused to speak with the media before or after the meeting.

But Chrysler Canada president and CEO Reid Bigland summed up the case for bailing out Ontario's most important industry, which employs 400,000 people and generates $28 billion of economic activity.

"It's a significant impact on the Canadian economy as well as the Ontario economy," said Bigland, whose company is the most vulnerable of the three North American manufacturers.

In Winnipeg, federal Industry Minister Tony Clement said consensus is emerging among Ottawa, Queen's Park and the incoming U.S. administration led by President-elect Barack Obama that any aid cannot simply prop up companies with no hope of success.

Clement, who is watching developments in Washington "with great interest" as American lawmakers weigh a $25 billion auto rescue package, said assistance "has to be about long-term solutions and not short-term cash infusions."

"Our obligation is the long-term viability of the auto sector. That is the balancing act that we play with the auto sector and with taxpayers' money," he said.

 

Ottawa holding auto talks with U.S.

Any deal on aid must be co-ordinated between countries, Flaherty says

Nov 14, 2008 04:30 AM
Bruce Campion-Smith
tonda maccharles
rob Ferguson
staff reporters

WINNIPEG–The federal government is holding informal talks with Washington to co-ordinate financial aid for struggling Big Three automakers, Finance Minister Jim Flaherty says.

But he's warning that any infusion of federal cash will be contingent on automakers changing their product lines to produce fuel-efficient vehicles, including hybrids, that appeal to consumers bruised by gas prices.

Flaherty said yesterday it's vital Ottawa talk to the U.S. administration about help for the auto sector since the two markets are deeply integrated and auto manufacturing straddles the border.

"We need to talk to each other. Of course we do because this is an integrated production system," he said. He characterized the discussions so far with U.S. officials as "informal" and suggested that Industry Minister Tony Clement was spearheading the effort. Flaherty also cautioned that there are still questions about the aid package Congress may ultimately provide for the American auto firms.

"The bridge has to be towards vehicles that will be technologically sophisticated, hybrids, fuel-efficient, that Canadians are going to want to buy and Americans are going to want to buy because 90 per cent of our vehicle production goes to the United States," Flaherty said.

While Flaherty has appeared publicly cool to the idea of a government bailout for the car makers, it's apparent that intense work is going on behind the scenes involving Queen's Park, executives from General Motors, Ford and Chrysler and U.S. officials to hammer out a package that is acceptable to all.

Premier Dalton McGuinty will meet today with executives for the struggling Detroit Three, as well as Honda and Toyota. But a senior provincial government source said the automakers shouldn't expect to walk away from the talk with cheques in hand. "It's a listening meeting and, while it comes at a time of turmoil, it's part of an ongoing dialogue between the government and the industry."

The automakers need cash to help get them through the hard times when loans are difficult to get from other sources because of the global credit crunch, said Mark Nantais, president of the Canadian Vehicle Manufacturers Association.

"We need affordable credit," he said, declining to set a dollar figure because the companies have their own individual needs. "That's the message we need to get across."

McGuinty, whose government is grappling with a $500 million deficit, sounded cautious as he prepared for the meeting.

Characterizing the late-afternoon confab as a "listening opportunity," the premier said he will have a blunt message for the automakers, as they press for financial help.

"Tell me exactly why we should do this, what are we going to get out of this," said McGuinty, whose government's previous aid includes a $175 million, 50-year loan to GM, which is closing its Oshawa pickup truck plant next year.

"We've provided support in the past and experienced job losses nonetheless. What assurance can you provide us with respect to your long-term viability; why is this a good thing for the public to do?" he said.

Meanwhile, federal Liberal leadership candidate Michael Ignatieff said it's time to put the money on the table for the Big Three and not the time to demonize them, as he suggests the Conservative government is doing.

The industry is far too important to the country and Ontario to let it drift into bankruptcy, which would throw tens of thousands of people out of work, Ignatieff said.

 

Flaherty, CAW spar over
bailout for automakers

November 12, 2008
Tamsyn Burgmann

Clint Thomas
THE CANADIAN PRESS

Federal Finance Minister Jim Flaherty says the issue of whether the government should bail out struggling auto manufacturers is controversial, and people in his own Ontario riding – the Canadian home of General Motors – are telling him not to do it.

"There are many people saying we should do something with respect to the auto sector," Flaherty said today at a conference of economists.

"But I can tell you even in my own riding, where I was yesterday, in Whitby-Oshawa ... there are lots of people who say, `Don't do anything. Don't use my tax money to bail out an enterprise that may not survive."'

"These are not highfalutin' rich people that are saying this to me – these are people on the street."

Automakers have said they need more than $1 billion in loan guarantees to help tide over the sector until demand in the U.S. recovers for North American-produced vehicles.

The three U.S.-based automakers have been pressing for an additional $50 billion in loans from Congress to help them survive the tough economy and pay for health-care obligations for retirees. That's on top of a previously approved $25-billion government loan package for new technology.

On Friday, GM reported a $2.5-billion loss in the third quarter and warned that its cash levels could fall below what's needed to run its business by the end of the year if the U.S. economy doesn't turn around and it doesn't get government aid.

The federal Conservatives have long rejected direct intervention in the auto sector.

But Flaherty suggested for the first time Sunday that Ottawa may be willing to help, with the proviso that aid is targeted at auto plants with viable prospects.

He confirmed today that discussions with Canada's Big Three auto manufacturers are in progress, and reiterated there is money to be spent under certain conditions.

"We have been having discussions with the Detroit Three here in Canada," Flaherty said.

"We have money available for innovation – transformational money, if I may call it that. Because at the end of the day, we need car makers who are making cars people want to buy."

Flaherty stressed the government must ensure any bailout would be tied to the "sustainability" of the sector, or the government risks a taxpayer backlash.

"We need to find a way, if we are going to be able to do something, find a way to ensure sustainability, survivability," he said.

"That has to be the goal, otherwise ... there's a backlash to governments using taxpayers' money in what is perceived to be a bailout of a failing business."

Chris Buckley, president of CAW Local 222 in Oshawa, said it's "absolutely disgusting" that Flaherty says he's only monitoring the situation when immediate action is required.

Buckley said Canada can't wait for the United States and president-elect Barack Obama to take office in January, saying he's worried GM in Canada could be gone by then.

"We're asking Flaherty and (Prime Minister Stephen) Harper to react immediately and not wait for the U.S. to take some kind of action," Buckley said in a phone interview.

"This is not just about autoworkers – this is about good-paying Canadian jobs, and as they evaporate, what it does to our community."

He said it would "be absolutely devastating" if the Harper Conservatives decide against financial help for automakers.

Any money for the auto industry should not be viewed as a bailout but an investment in the Canadian economy, said CAW national president Ken Lewenza.

"It can't be just giving...cash," Lewenza said, noting any solution should also address the growth of vehicles imported into Canada while North American automakers can't sell equal numbers into foreign markets.

In a meeting with Harper today ahead of next week's throne speech, NDP Leader Jack Layton called on the prime minister to match a bailout proposal for the auto sector being floated in the United States.

Federal Industry Minister Tony Clement said later today the government does have a plan for the auto sector, but he didn't say whether the industry has made a formal request for financial aid.

"Certainly they've given me a real good sense on the ground as to what they're facing," Clement said. "We're examining our options."

However, Clement said the situation changes day by day, and Ottawa will act in the long-term interests of the industry.

"There's no point making a decision that affects cash flow in the industry for three or four months and then is of no further use or help," he said.

"We believe in the long-term viability of this industry in Canada."

Ontario Premier Dalton McGuinty is planning to meet with auto industry representatives, but the date hasn't been decided, government officials said.

Progressive Conservative Leader John Tory said Ontario should look at appointing an "auto czar," an idea floated by Obama for the U.S.

Tory said it would be ideal to appoint "someone who is a person who understands the automobile industry and that could sit down with all the people involved ... and say, `What could we do and how could we do it most effectively?"'

While the government has avoided direct help for the auto sector, it again came to the aid of Canadian banks today, announcing it will buy another $50 billion in residential mortgages to ease the credit crunch, tripling the amount of insured mortgages Ottawa can buy from banks by the end of the fiscal year.

 

Ford cash burn hits $7.7 billion

Struggling automaker posts $129 million loss in
third quarter, plans cuts to jobs, production

Nov 08, 2008 04:30 AM

Tom Krisher
James Prichard
Associated Press

DEARBORN, Mich.–Ford Motor Co. lost $129 million (U.S.) in the third quarter as the struggling automaker burned through $7.7 billion in cash and set plans for more job cuts.

Ford said yesterday it will eliminate the jobs of another 2,260 white-collar employees in North America as it battles weak demand, the credit crisis and the worst economic downturn in decades.

"We remain absolutely convinced that we have the right plan and are taking the right actions to weather this difficult period and emerge as a lean, globally integrated company poised for long-term profitable growth," CEO Alan Mulally told analysts during a teleconference.

Ford said it lost 6 cents a share for the quarter, compared with a loss of $380 million, or 19 cents a share, last year.

The company posted a pretax loss of $2.7 billion from continuing operations, but it was offset partly by a $2 billion gain as Ford shifted retiree health-care liabilities to a trust run by the United Auto Workers.

Ford's global automotive operations had a pretax loss of $2.98 billion for the quarter, compared with a pretax loss of $362 million a year earlier.

Sales fell 22 per cent to $32.1 billion from $41.1 billion due to lower volume and the sale of Jaguar and Land Rover.

Excluding special items, Ford lost $1.31 a share, worse than Wall Street had expected. Analysts surveyed by Thomson Reuters predicted a loss of 94 cents a share on sales of $28 billion.

Dearborn-based Ford reported its worst three-month performance on record in the second quarter, when it lost nearly $8.7 billion.

The cash burn – in which a company spends more money than it takes in – was about 3 1/2 times higher than the $2.1 billion Ford used up in the second quarter.

Ford said the cash burn primarily reflected pretax automotive losses, changes in working capital and payments to its credit arm to reduce interest rates for buyers. It was exacerbated by sales drops and production cuts of 500,000 fewer vehicles from second-quarter levels, resulting in $3 billion less in incoming cash for the quarter.

Chief financial officer Lewis Booth would not say if he expects the cash-burn rate to continue at present levels, but said he was confident the company can make it through 2009.

Industry analysts say if the economy doesn't improve, Ford could run out of money sometime after 2010.

 

Ford stands alone

While GM and Chrysler continue their flirtation - with Renault-Nissan watching from afar - the No. 2 automaker remains a wallflower.

By Alex Taylor, senior writer

NEW YORK (Fortune) -- With the U.S. auto industry sinking faster than a wildebeest in quicksand, the headlines have belonged to General Motors and Chrysler as they continue to work on a deal that might save the failing companies. Ford, meanwhile, has stayed above the fray, in the apparent belief that is has enough resources to survive the downturn - and a sufficiently robust plan to come out the other side when it does.

Ford's inaction isn't for lack of opportunities. It was courted by both of the other Detroit companies over the summer.

According to a knowledgeable source, GM chairman and CEO Rick Wagoner approached Ford executive chairman Bill Ford about a merger. Ford listened politely to the pitch from Wagoner but turned him down.
Chrysler chairman and CEO Bob Nardelli also approached Bill Ford about combining forces - this time in a three-way merger that included GM. Sensing desperation in Nardelli's approach, Ford said no again.

The source of Bill Ford's determination to remain independent, besides a desire to maintain control of his family's company, is a strong balance sheet.
At the end of the second quarter, Ford had $26.8 billion of cash on hand - likely enough to fund its operations into 2010. Ford also has some saleable assets in Volvo and in its 33.9% stake in Mazda - assuming it can find buyers with enough cash or a strong enough credit rating to execute a transaction. Ford also expects to get a share of some $25 billion in government loans that Congress has approved to help automakers convert to more fuel-efficient vehicles, which will also ease the cash crunch.

Frayed nerves


Ford's liquidity position hasn't prevented hand wringing by Ford dealers, however. At a regional dealer council meeting in Florida last week, one dealer announced that Ford would not be able to continue as manufacturer by the end of next year, and added that he expected government assistance to kick in if the company should falter. The automaker quickly moved to distance itself from the unauthorized comments.

The dealers' confidence was likely not enhanced by investor Kirk Kerkorian's decision, made public Tuesday, to perhaps sell his entire 6% stake in the company at a significant loss. Kerkorian paid up to $8.50 a share for Ford stock earlier in the year that he is now selling for $2 and change. Kerkorian said he's shifting his investment focus to other sectors of the economy.

The prospect of financial Armageddon hasn't put an end to the palace intrigue in Dearborn. The latest victim is chief financial officer Don LeClair. Other executives, complaining that LeClair was secretive and difficult to work with, threatened to quit if he wasn't moved aside, according to two people with knowledge of the situation.

LeClair was responsible for arranging $23.5 billion in financing two years ago that has helped keep Ford afloat - and that would be impossible to arrange today. He was close to CEO Alan Mulally, but Bill Ford concluded a change was necessary after hearing from the dissidents. LeClair was described as "shell-shocked" when he learned of the decision at a board meeting. The company declined to discuss what it called "rumours" or to make LeClair available for comment.

Last week, two outside directors also decided to leave, due to, they said, the press of other business. Sir John Bond, a former HSBC chairman who gave the board some substantial financial muscle, will be missed. Nokia chairman Jorma Ollila was a less vigorous presence.

How long Ford can remain on the sidelines is anyone's guess. Its recovery plan looks a little skimpy. According to a dealer, the Lincoln-Mercury franchise will shrink to eight vehicles by 2010 - three for Mercury and five for Lincoln-- from 11 today.

What could push Ford into the fray? Now that its stock-market capitalization has collapsed to $4.5 billion, some members of the Ford family, who control 40% of the shareholder vote, may be looking to cash out.

Furthermore, there's at least one more global player stalking the Detroit Three in search of a deal: Renault-Nissan. The Franco-Japanese company is supposed to be looking over Chrysler, but a smarter play might be to leave GM to sort out Chrysler's problems - and go after healthier Ford. Though CEO Carlos Ghosn has been repulsed before, the current times are sufficiently harrowing that any offer deserves a closer look. Even at Ford.

 

 

Ford posts loss, warns of job cuts

Ford said Friday Nov. 7, 2008 that it lost $129 million (U.S.) in the third quarter as the stuggling automaker burned up $7.7 billion in cash.

Nov 07, 2008

DEARBORN, Mich–Ford Motor Co. says it lost $129 million in the third quarter as the struggling automaker burned through $7.7 billion in cash.

The automaker also said Friday it will cut about 2,260 more white-collar employees in North America as it tries to weather the worst economic downturn in decades.

Ford says it lost 6 cents per share for the quarter, compared with a loss of $380 million, or 19 cents per share, a year ago.

The company posted a pretax loss of $2.7 billion from continuing operations. But it was offset partly by a $2 billion gain as the company shifted retiree health care liabilities to a trust run by the United Auto Workers.

Sales fell 22 per cent to $32.1 billion from $41.1 billion due to lower volume and the sale of Jaguar and Land Rover.

Excluding special items, Ford lost $1.31 per share, worse than Wall Street expected. Analysts surveyed by Thomson Reuters predicted a loss of 94 cents per share on sales of $28 billion.

Dearborn-based Ford reported its worst three-month performance ever in the second quarter, when it lost nearly $8.7 billion.

The cash burn – in which a company spends more money than it takes in – was far higher than the $2.1 billion it burned through in the second quarter.

Ford said the cash burn primarily reflected pretax automotive losses, changes in working capital and payments to its credit arm to reduce interest rates for buyers. It was exacerbated by sales drops and production cuts of 500,000 fewer vehicles from second-quarter levels, resulting in $3 billion less in incoming cash for the quarter.

Chief Financial Officer Lewis Booth would not say if he expects the cash burn rate will continue at the present levels.

"With our present assumptions, we are comfortable with our liquidity position," Booth told reporters Friday morning. "I think it goes without saying, forecasting the future at the moment is extremely difficult. Trying to find out just exactly what is happening with the consumer is really tough.''

Industry analysts say that if the economy doesn't improve, Ford could run out of money sometime after 2010.

U.S. automakers have approached the U.S. government for low-interest loans as they try to weather the global economic slowdown.

Ford is among automakers that are talking with the European Commission for a 40 billion euro low-interest loan. It also is talking to other governments.

Ford said it will cut North American production in the fourth quarter by 40,000 units more than what was announced in September, primarily with shift reductions and temporary plant shutdowns. In September, the company announced a fourth-quarter production cut of 171,000 units over the fourth quarter of last year, mainly in trucks.

The salaried cuts, Ford said, equate to about 10 per cent of its North American salaried work force of 22,600.

It also said that it has no plans to offer more buyout or early retirement packages to blue-collar workers.

Ford announced that some of its vehicle programs will be deferred, although the company described the moves as minor timing changes.

 

 

U.S. rejects GM's aid request

Barack Obama, who is expected to be the next U.S. president, has said in recent days that he supports increasing aid to the troubled Detroit automakers.

Funding for Detroit to focus on fuel-efficient vehicles rather than helping merger with Chrysler
Bill Vlasic and Micheline Maynard

New York Times

Nov 03, 2008

DETROIT–The Treasury Department has rejected a request by General Motors for up to $10 billion U.S. to help finance the automaker's possible merger with Chrysler, according to people close to the talks.

Instead of providing new assistance, the Treasury Department told GM on Friday, the Bush administration will shift its focus to speeding up the $25 billion loan program for fuel-efficient vehicles approved by Congress in September and administered by the Energy Department.

Treasury officials were said to be reluctant to broaden the $700 billion financial rescue program to include industrial companies or to play a part in a GM-Chrysler merger that could cost tens of thousands of people their jobs.

But it remained unclear whether the officials were also seeking to avoid making any decision that would conflict with the goals of a new presidential administration.

The Democratic candidate, Barack Obama, has said in recent days that he supports increasing aid to the troubled automakers. Republican candidate John McCain has not said whether he would support aid beyond the $25 billion.

While GM and Chrysler continue to talk, no deal is expected until the government clarifies its role, if any. Potential investors in the deal have been hesitant to back the merger without federal assistance.

GM chair Rick Wagoner had lobbied Treasury secretary Henry Paulson to provide aid to the automakers under the bailout program to stabilize the financial firms.

The Bush administration is still considering a range of options to aid the Detroit automakers, which are losing billions of dollars and rapidly depleting their cash reserves, said auto industry and administration officials, who did not want to be identified because of the sensitive nature of the discussions.

The first step is to get the Energy Department to expedite the release of the $25 billion in low-interest loans for GM, Chrysler and the Ford Motor Co.

Beyond that, the administration is also bringing the Commerce Department into discussions about channelling additional aid to the automakers. With auto sales deteriorating to their lowest level in 15 years, the Detroit Three are struggling to stay solvent.

The deepening troubles led GM into merger talks in September with Chrysler's majority owner, the private equity firm Cerberus Capital Management, and the request for Treasury Department aid.

Auto industry executives and analysts said over the weekend that the loan program is essential to retooling plants and developing vehicles that meet more stringent government fuel-economy mandates.

Getting the loans will allow GM, Ford and Chrysler to redirect money already budgeted for cleaner cars to other capital needs.

"The auto companies are clearly running out of cash, and badly in need of more liquidity," said David Cole, chair of the Center for Automotive Research in Ann Arbor, Mich. "Releasing the $25 billion in loans is a necessary first step.''

Cerberus has had discussions with the Japanese automaker Nissan Motor and its French partner, Renault, about bringing Chrysler into their international alliance. But people familiar with the discussions said Cerberus is now focused solely on a potential GM deal.

The depth of Detroit's problems will become more evident this week with the release of October sales figures and third-quarter earnings of GM and Ford.

Sales fell 26.6 per cent in September, but October's totals could be worse. Auto research website Edmunds.com forecasts sales of new vehicles during the month will drop nearly 30 per cent from the same period last year.

 

How economic meltdown
& Ford crashed one family

By MARIANNE MEED WARD

2nd November 2008

A few months ago, Maurice Bastien was in an enviable position. He lived mortgage-free in a six-bedroom home near Windsor with his wife Wanda and four of his six children -- Elijah, 7, Natalie, 6, and two of four sons from a previous marriage.

But Maurice, a skilled trade worker for 31 years, had been unemployed for four years.

Then a phone call came that promised to change that -- and instead delivered a nightmare. Ford in Oakville was offering Maurice a job on the midnight shift.

"We had 48 hours to make a decision," recalls Maurice. "The wife and I decided we had to go for it."

Wanda quit her job at a local Christian school, and the family bought a house in St. George, just north of Brantford -- the closest they could afford to live to Oakville. The move came with a hefty price: a $150,000 mortgage after they sold for $167,000 and bought for $300,000.

But the move was worth it, they thought, for the promise of steady work. Then the bottom fell out the first day.

"We were all gravied up in the morning," Maurice recalls. "Everyone telling us we couldn't go wrong, 'you got it made,' 'you made the right choice,' 'you'll get lots of overtime.'"

After lunch, everything changed.

"We were watching a training video and they came in and turned it off and said our shift was cancelled. We were floored. We moved our families, sold our houses -- you couldn't see that coming?!" Maurice recalls.

"We're in more debt now than in our whole lives. For the first time in my life, I might not be able to make payments and we might lose our house. We were getting set up to retire, and now we could lose everything. It's devastating."

Maurice is not alone. The layoff statistics and lost manufacturing jobs mask a human toll that is mounting, with no foreseeable end.

My neighbour Gary Beck, president of Local 707 of the Canadian Auto Workers union, which covers the Oakville Ford plant, knows the stories well.

One family moved from Calgary, only to have a promised job at Ford disappear days before the start date.

Beck's own nephew quit his job and rearranged daycare to take a Ford job that disappeared. He got his old job back, but not his daycare, and had to move his kids to an unfamiliar setting.

Other workers who left jobs for Ford can't get their old jobs back.

"We've had people come to our office with their spouses and little kids, crying, saying 'What am I going to do?'" said Beck. "This is the worst I've seen in 25 years. Even in the '80s when we went to one shift, we could see the light at the end of the tunnel. Now it's hard to see."

At its peak, Ford had 17,000 workers nationwide. That's shrunk to 5,000. The Oakville plant has lost 1,850 people in the last four years. But in July, when Maurice got the call, everything still looked rosy.

"Ford was calling Oakville the crown jewel," recalls Beck.

There were plans to build close to 300,000 vehicles. Then the market bottomed out and the build was cut to 130,000. Ford's stock dropped below $2 a share.

Beck recalls being in a convenience store with CAW President Kenny Lewenza and seeing the price on a Twinkie: $1.98.

"I turned to Kenny and said 'That twinkie is worth more than Ford stock. Which do you think I should buy?' Lewenza says, 'Judging by your waistline, I know what you're buying.'"

Beck smiles at the memory, but it's a brief drop of levity in a sea of human misery.

NO EXPLANATION

Why didn't the automaker see the downturn earlier, before people uprooted their lives? It's a question that may never be answered, and Ford wasn't returning calls for an interview.

Some displaced workers have launched a lawsuit against Ford. Others, like Maurice, though grateful for the unemployment payments he gets, just want a job.

"I believe in earning your stars everyday. I stand on working hard," said Bastien. "But they've got to be held accountable.

"(Ford) can't do that to people. It's absolute insanity."



Pension crisis looming

Companies brace for shortfalls exacerbated by deflated stock prices

Oct 30, 2008 04:30 AM
Ann Perry
Brett Popplewell
Business Reporters

The end of December represents a massive, looming crisis for some Canadian companies this year.

The companies must submit their employee pension plans to a valuation process every three years, although federally regulated pension plans are forced to revalue annually if they have a shortfall.

Companies due to have new valuations at the end of this year are at risk of having to fund their pension plans based on severely deflated stock prices, triggering large cash contributions at a time of tight credit, even if markets recover in 2009, industry analysts say.

Paul Forestell, leader of the Canadian retirement professional group at benefits consulting firm Mercer, said many pension plans will see "a significant increase" this year in their unfunded pension liability.

"If the company's not doing well and the pension plan (has) double or triple the contribution requirements, then I think that will be a major problem for companies," Forestell said.

The scope of the problem is difficult to pin down. The latest data from the Office of the Superintendent of Financial Institutions (OSFI) – which oversees about 1,400 pension plans in federally regulated industries such as airlines, banks, telecommunications and transportation – is from June, predating the market crash by several months.

It shows that some 70 per cent of the 400 defined benefit plans under its jurisdiction – plans in which the company guarantees retirement benefits and assumes investment risks – were less than fully funded at that time, and on average the shortfall was less than 10 per cent.

But the numbers do not take into account the turmoil of the past few months.

The Financial Services Commission of Ontario, the provincial pension regulator, also does not yet have numbers that reflect the recent market upheaval.

In early October, Mercer estimated that a pension fund that had been fully funded a decade ago would have only 72 per cent of the assets needed to meet all its pension promises.

But Forestell argues that, in the current economic climate, there is a need for governments to look at pension funding rules – a move Finance Minister Jim Flaherty said yesterday Ottawa is considering.

One option would be to give companies more time to fund pension shortfalls. Under current rules, they generally have five years. Some companies want that to be increased to 10 or 15 years. This solution assumes stock markets will recover over that longer time frame.

Another option would be to let companies put off revaluing their pension liabilities and assets, which determine funding requirements.

The status of the pension plans of some large companies is known.

As of January this year, Air Canada's various employee plans were underfunded by nearly $1.2 billion, according to filings with regulators.

BCE had a deficit of $449 million on obligations of $15.7 billion, and Nortel Networks Corp. a deficit of $1.1 billion on $9.3 billion of pension promises.

The federal government has already shown some willingness to change the rules to help companies withstand current economic conditions. OSFI said this week it will allow insurance companies to set aside less capital to back segregated funds. There appeared little doubt yesterday that pension plans also need help.

Air Canada officials would not say yesterday if the company had approached the government for pension help, but spokesperson Peter Fitzpatrick said it's no secret the company would welcome relief from its funding obligations.

A spokesperson for Ford of Canada told the Star: "We have not asked for any funding exceptions – our pension plans meet legal and regulatory funding requirements."



Pension relief in works

Ottawa reviewing rules for company plans
hit by market crisis, finance minister says

Oct 30, 2008 04:30 AM

Ann Perry
Brett Popplewell
Business Reporters

The company pension plans of millions of Canadians, battered and bloodied by weeks of stock market turmoil, will likely receive some form of relief from the federal government, federal Finance Minister Jim Flaherty indicated yesterday.

Flaherty said the government is considering easing rules that require companies to top up plans that fall below levels required to meet pension commitments.

"We're reviewing (the rules) now in the Department of Finance with a view to seeing what can be done to help the pension funds at this particular time given the global circumstance."

He hinted that one of the options on the table may include extending the five-year time period companies have to make up shortfalls.

Pension consultants Mercer Human Resource Consulting told the Star in late September that the stock market slide to that point had sliced about $10 billion from the pension assets of the 125 major employers it tracks. Since then, things have worsened dramatically and Toronto's S&P/TSX composite index has lost 31 per cent of its value from the beginning of the year.

Industry insiders say a number of large Canadian companies began organizing recently to lobby the federal finance department to extend the window to make up shortfalls to 10 or 15 years.

The situation is most difficult for firms facing a year-end assessment of pension fund assets to determine their funding requirements. Some firms could be forced to divert cash into pension funds rather than operations, insiders say.



Why Ford Needs The
GM-Chrysler Deal Done

 Joann Muller, 10.28.08

DETROIT - In the talks between General Motors and Chrysler, no one has more at stake than Ford Motor.

The entire U.S. auto industry is teetering, and it wouldn't take much to push Ford over the edge. A bankruptcy filing by GM would surely do so, since it would give GM an opportunity to toss out costly labor agreements and supplier contracts, leaving Ford at a competitive disadvantage. Ford wouldn't be able to survive very long paying higher costs for labor and parts than GM.

But if GM and Chrysler do merge--potentially with assistance from the federal government--Ford stands to gain the most. Credit Executive Chairman William C. Ford Jr. for that. His decision to dial back Ford's ambitions in recent years left the company in a fundamentally stronger position than either of its Detroit rivals.

That doesn't mean Ford is healthy. The automaker lost $8.6 billion so far this year. Expect poor third-quarter results on Nov. 7. Despite massive cost-cutting, Ford is burning cash at a rate of $1 billion per month. Through September, Ford sales are down 17%, and analysts predict October sales will be even worse.

But under Bill Ford and his successor as chief executive, Alan Mulally, Ford's done a good job lately of getting its house in order, and if it's not dragged down by a GM bankruptcy in the next year or two, Ford will be in good shape to take advantage of an economic rebound when it comes.

One reason: a fairly comfortable cash cushion. As of June 30, Ford had $26.6 billion in cash (probably down to $23 billion in the third quarter). That's because shortly after Mulally's hiring in fall 2006, Ford mortgaged virtually all of its assets to obtain a $23 billion line of credit that would ensure it had adequate liquidity to restructure.

The move was considered risky at the time, but in retrospect, it looks smart. Ford was able to access the credit markets before the door slammed shut for automakers. If GM had taken similar action, it probably wouldn't be seeking capital now by trying to buy Chrysler from private equity firm Cerberus Capital Management (and the $11.7 billion on Chrysler's balance sheet).

Aside from its balance sheet, Ford's relative strength during the current crisis is due mostly to Bill Ford's "back-to-basics" directive earlier this decade and to Mulally's grip on reality during his two years in charge.
After a disastrous expansion under former Chief Executive Jacques Nasser in the late 1990s, Bill Ford wrested control of the company and sold off non-core operations. He forced out the head of Ford Motor Credit, too, tightening lending terms five years ago and resisting the temptation to get into the mortgage business that had been so lucrative for GM's former captive finance company, GMAC.

That conservatism meant Ford Credit probably missed out on the chance to reap its share of the housing boom three or four years ago, but it also avoided the ugly mortgage meltdown that followed.

Now Ford Credit is a key to Ford Motor's survival. Unlike GM, which sold a 51% interest in GMAC to Cerberus in 2006, Ford steadfastly refused to sell its finance company, which it considers a strategic asset.
An automaker's finance arm is more than just a bank that lends money to consumers and dealers, says Andrew Shapiro, managing partner at Casesa Shapiro Group. "At the end of the day, it's a marketing tool" that can be used to help manage inventory, he says.

GM lost that opportunity when it ceded control of GMAC to Cerberus. It paid the price recently when Cerberus--likely seeking to pressure GM into a deal for Chrysler--announced GMAC would no longer provide loans to consumers with credit scores below 700. That choked off sales at GM dealerships, forcing the automaker to spend precious millions on a national advertising campaign to reassure consumers that credit was still available (through other lenders) for GM vehicles.

The moral of this story is don't lose control of your captive finance company. When sales of a certain model turn soft, for instance, Ford can turn to Ford Credit for subsidized incentives to woo buyers and make way for better-selling models.

Though Ford has clung tightly to Ford Credit, it sold weak brands like Jaguar, Land Rover and Aston Martin. It would sell Volvo tomorrow if it could find a buyer, and it is considering selling part of its controlling stake in Mazda.

Operationally, Ford is getting better, too. Its quality ratings are now among the world's best, and under Mulally's vision of "one Ford" worldwide, it is working hard to combine product development efforts around the world, which will lower costs and boost manufacturing efficiency.

It's all left Ford in better shape than General Motors. And if GM gets a bailout from the federal government, or new concessions from the United Auto Workers union, you can bet Ford will insist on equal treatment. That will only strengthen Ford as it comes out of the current downturn.
The next year or two will be extremely difficult for Ford, but if it can skirt the present danger, its stock (currently at $2 a share) may be worth holding down the road.

 

GM, Cerberus ask
Uncle Sam for $10B

Unprecedented rescue package would help carmakers merge, sources say

Oct 28, 2008 04:30 AM

Jui Chakravorty Das
Reuters News Agency
Kevin Krolicki
Reuters news AGency

General Motors Corp. and Cerberus Capital Management have asked the U.S. government for roughly $10 billion (U.S.) in an unprecedented rescue package to support a merger between GM and Chrysler LLC, two sources with direct knowledge of the talks said yesterday.

The government funding would include roughly $3 billion in exchange for preferred stock in the merged automaker, according to one of the sources, who was not authorized to discuss the matter publicly.

The U.S. Treasury Department is considering a request for direct aid to facilitate the merger and a decision could come this week, sources familiar with the still-developing government response said earlier yesterday.

An injection of $3 billion in equity to support a GM acquisition of Chrysler would be roughly equivalent to the current, depressed value of the top U.S. automaker.

It would also give U.S. taxpayers a large stake in the turnaround of a struggling auto industry that employs more than 350,000 American workers and is credited with supporting employment for another 4.5 million in related fields.

Analysts see GM, Chrysler and rival Ford Motor Co. as having been driven to the brink of failure by a combination of management missteps, slowing global growth and problems in credit markets.

In addition to its equity stake, the U.S. government is also being asked to provide support for the GM-Chrysler merger by taking over some $3 billion in pension obligations under the terms of a proposal now before the government for review, the first source said.

The final component of the proposed support package would be a credit line that could include U.S. government purchases of commercial paper issued by GM to relieve short-term pressure on liquidity, the source said.

A combined GM-Chrysler would control roughly a third of the U.S. auto market by sales and would face immediate pressure to cut costs stemming from excess capacity in almost every facet of its business. Those would include a stable of 11 brands, roughly 10,000 dealers and some 97,000 union-represented factory workers, analysts have said.

 

Asian brands dominate
Consumer Reports rankings

(Ford being the best out of the big 3)


By David Bailey and Poornima Gupta

DETROIT, Oct 23 (Reuters) - Asian auto brands dominated Consumer Reports' influential study of the most reliable new vehicles with Ford Motor Co's Lincoln and Mercury ranking as the only U.S. brands in the top 15.
Toyota Motor Corp's Scion was the top-ranked brand followed by fellow Japanese Honda Motor Co's Acura and Honda nameplates. Toyota's flagship brand placed fourth, followed by the Toyota luxury brand Lexus in fifth place.

The annual study is influential with American car shoppers and watched by major automakers as an indicator of their performance in improving and maintaining vehicle quality.

Japanese vehicles were the most reliable overall, leading 15 of 16 categories in its ratings, the study said.

The Scion xD had the best score of all new cars, with about 80 percent fewer problems than the average model, according to the nonprofit magazine, which does not accept advertising.

Other Asian carmakers that finished above the U.S. companies were South Korea's Hyndai Motor and Kia Motors Corp .

Among the U.S.-based automakers, Ford's three nameplates -- Lincoln, Mercury and Ford -- led the pack in 11th, 15th and 17th place, respectively.
General Motors Corp brands ranged from an 18th place ranking for Buick to No. 33 for Saturn, second from last. Chrysler LLC ratings slipped further under the ownership of Cerberus Capital Management.
GM has been in talks to acquire Chrysler from Cerberus, people familiar with those talks have said. Analysts have viewed the possibility of that combination with scepticism since both automakers are struggling with many of the same problems, including weak brand images.
The Consumer Reports study showed a combined GM/Chrysler would own 7 of the 10 lowest-rated auto brands for reliability, including Saturn, Chrysler and Cadillac.

Excluding some truck-based models, Ford's reliability is on a par with good Japanese automakers, Consumer Reports said.
"The last five years, we have seen Ford generally get better and better incrementally," said David Champion, senior director of Consumer Reports' auto test center. "The systematic structural changes we have seen within Ford produces very reliable vehicles."

CHRYSLER RELIABILITY DECLINES
"We feel good about the results, but we know we still have work to do so we are continuing to do that," Ford vice president of quality Bennie Fowler said.
Champion said the result for GM was mixed.

"I think General Motors has a very good model portfolio at the moment," Champion said. "They have a lot of good products there, they just need to get the reliability right."

GM spokeswoman Janine Fruehan said the results were somewhat disappointing, but not a surprise. "We know what areas we have to improve in and the areas where our strengths lie and we are working to close the gap," Fruehan said.

Chrysler's Jeep brand ranked 28th, Dodge 30th and the Chrysler namesake brand 32nd on the list -- with interiors, electrical systems and other issues of concern.

"Their biggest issue is trying to hold the vehicle together inside -- squeaks, rattles, pieces of trim dropping off, just annoying features for the customer," Champion said.

Chrysler had sought to address interiors shortcomings early in 2008 by investing $150 million on upgrades to over 260 vehicle features.
"We are not satisfied with our performance, with the report that came out," Chrysler spokeswoman Beverly Thacker said. "We do continue to work aggressively to improve every aspect of customer satisfaction with our vehicles."

British luxury brand Land Rover, owned by Tata Motors , was the least reliable brand, according to the survey.

Consumer Reports is published by the nonprofit Consumers Union. The publication's "predicted reliability" study for new model vehicles is based on an average of consumer ratings of the same model in the recent years.
The magazine surveys readers and visitors to its web site about their experience with the cars and trucks they own.

 

Chrysler may be sold in pieces

Cerberus said talking to GM, Nissan and Renault

Oct 23, 2008 04:30 AM
Tom Krisher
Associated Press

DETROIT–Chrysler LLC could be sold in pieces to other companies as majority owner Cerberus Capital Management LP seeks to exit the auto business, according to a person briefed on the discussions.

The New York private equity firm has been shopping the beleaguered automaker to General Motors Corp., the combined Nissan Motor Co. and Renault SA and other companies.

Many combinations are being discussed, said the source who asked not to be identified.

Chrysler spokesperson Shawn Morgan and Cerberus spokesperson Peter Duda declined to comment.

Cerberus's efforts to quit the automobile industry have been widely reported and speculation has swirled over what shape a deal might take.

One proposal being discussed reportedly calls for Cerberus to hand over Chrysler to General Motors in exchange for GM's 49 per cent stake in GMAC Financial Services.

GM sold a 51 per cent interest in its finance arm to Cerberus in 2006. Cerberus also would get an equity stake in GM, hoping for a good return should GM recover when U.S. sales recover from a serious slump.

GM is said to be interested in Chrysler for its cash. Chrysler, whose sales have dropped 25 per cent during the first nine months of the year, reportedly has about $11 billion (U.S.) available.

It also has debt, but the amount hasn't been disclosed because Chrysler is a private company. Cerberus bought 80.1 per cent of Chrysler from Germany's Daimler AG in a $7.4 billion deal last year.

 

Kerkorian takes loss
in sale of Ford stake

Activist investor Kirk Kerkorian's investment firm may lose more than half a billion dollars on the sale of 7.3 million Ford Motor shares.

Now sees value in gambling, hotels, oil and gas

Oct 22, 2008 04:30 AM

Bree Fowler
Associated Press

NEW YORK–Kirk Kerkorian's investment firm has sold 7.3 million of its shares in Ford Motor Co. and plans to further cut what is now a 6.1 per cent stake, for a potential loss of more than half a billion dollars on the investment.

Tracinda Corp. sold the shares at an average price of $2.43 (U.S.) per share and said it may sell its remaining 133.5 million shares depending on market conditions.

Kerkorian has tried to leave his mark on the Detroit-based automakers over the past decade. But Tracinda said that in light of current economic conditions it now sees "unique value" in other industries such as gambling, hotels, and oil and gas, so it's moving its resources.

Tracinda, which is named after Kerkorian's daughters, Tracy and Linda, has the majority stake in the casino and hotel operator MGM Mirage Inc.

The sale comes just four months after Tracinda purchased 20 million of the Dearborn, Mich.-based automaker's shares at market rates to boost his stake to 6.49 per cent. Those purchases were announced two days after Kerkorian met with Ford chief executive Alan Mulally and executive chair Bill Ford to discuss the company's turnaround plan.

A week earlier, Kerkorian had acquired another 20 million shares through a tender offer for about $170 million, or $8.50 per share. Based on that share price, Kerkorian lost about $44.3 million in Tuesday's sale.

At the time the tender offer was announced, Tracinda said it owned 100 million Ford shares at an average cost of $6.91 per share. If the firm sold those shares at Monday's closing price of $2.33 apiece, it would translate to a loss of about $458 million.

Ford shares fell 16 cents to $2.17 yesterday.

In announcing the June tender offer, Tracinda said it believed that Ford was starting to make progress on its restructuring plan, adding that it expected the automaker to post continued improvements.

Ford shares are down 63 per cent since the tender offer was announced. On Oct. 10, they fell to $1.88. Kerkorian has a mixed track record with the other U.S. automakers. He made an unsuccessful $4.5 billion cash offer for Chrysler last year and pushed for General Motors Corp. to form an alliance with Nissan Motor Co. and Renault SA in 2006 after acquiring nearly 10 per cent of GM.

Kerkorian sold his stake in the Detroit-based automaker after the proposed alliance was scrapped.

 

CAW pleas fail to move
Daimler on shutdown

CAW's Ken Lewenza says Daimler rejected plea to retool truck plant.

Oct 22, 2008

WINDSOR–Canadian Auto Workers president Ken Lewenza says Daimler Trucks officials have told him that "no money in the world" could change the fate of a plant the company plans to shut down in St. Thomas next year.

The CAW leader was in Windsor yesterday to plead for Daimler to idle the Sterling truck factory instead of shutting it down.

Federal and provincial politicians who represent the area have said there could be government funds made available to retool the plant.

But Lewenza said Chris Patterson, president and CEO of Daimler Trucks North America, wouldn't bite.

"Mr. Patterson was pretty clear that all the investment in the world at this particular time can't produce a truck that would sell in this market," Lewenza said.

"They don't have anything today that would increase market share. Therefore, the investment today is basically irrelevant regardless of what the provincial and federal government would do."

But Lewenza said the federal government needs to be more aggressive in keeping manufacturing jobs in Canada.

"We're going to still demand that the federal government step in and say, `If you want to sell in Canada, then you have to manufacture in Canada.' You've got to give a commitment to the Canadian economy and to Canadian workers," he said.

The union is now looking to change the terminology in the close-out agreement so the plant could be reopened if the market improves. Lewenza said Daimler told him it would consider this.

Lewenza said he will also be contacting Daimler AG chair Dieter Zetsche in the next few days to secure a meeting in Germany to discuss future truck opportunities in Canada.

Daimler has said it will close the factory next March, eliminating almost 2,000 jobs, including workers previously laid off.

The Canadian Press

 

Nash touted to energize
NDP leadership race

Peggy Nash lost the federal riding of Parkdale-High Park to Liberal Gerard Kennedy Oct. 14, 2008.

Ex-MP denies interest in replacing Hampton

Oct 19, 2008 04:30 AM
Robert Benzie
Queen's Park Bureau Chief
Francine Kopun
Feature Writer

She's telling friends she's not interested, but Peggy Nash, who lost Parkdale-High Park to Liberal Gerard Kennedy in Tuesday's federal election, is being touted as a contender for the leadership of the provincial NDP.

Senior New Democrats at Queen's Park have confided that Nash's entry into the race to replace Howard Hampton would energize an otherwise lacklustre campaign.

"She would be a terrific candidate," said a high-ranking party official, who has been part of an effort to encourage Nash to run. "Peggy could bring some excitement to our leadership race. Let's face it, leadership contests are supposed to generate excitement, not put people to sleep, and ours is putting people to sleep," said the insider.

Nash declined requests from the Star for an interview. Her friend and colleague, MPP Cheri DiNovo, said Nash told her Thursday she is absolutely not interested in pursuing leadership of the provincial NDP, a point she has made before.

"First and foremost, she was interested in federal politics, it was her gift and her joy. The other thing, of course, is she doesn't have a seat provincially and we've all seen how difficult it is to be a leader without a seat," said DiNovo, referring to provincial Progressive Conservative Leader John Tory and Green Leader Elizabeth May.

So far MPPs Gilles Bisson (Timmins-James Bay), Michael Prue (Beaches-East York), and Peter Tabuns (Toronto-Danforth) have registered as leadership candidates. MPP Andrea Horwath (Hamilton Centre) is expected to announce her candidacy soon. Hampton's successor will be chosen in March.

Nash, widely regarded as an excellent MP, lost to Kennedy by 2,301 votes. Kennedy, a former Ontario cabinet minister, previously represented the riding provincially.

Defeated candidates are seldom so quickly courted for other elected posts, but NDP sources say Nash is too good a talent to lose. They believe Kennedy's personal popularity – not Nash's performance as an MP – cost her the election.

"Peggy Nash is a major talent in our party," said the senior New Democrat. "We could use someone like her at (Queen's) Park."

DiNovo says Nash, who speaks French and Spanish, is "fascinated with all things international."

Although her long experience with the Canadian Auto Workers led to her appointment as NDP industry critic after her election in 2006, Nash had previously travelled to South Africa and Ukraine as a Canadian election monitor. She went to Lebanon in 2006 on a parliamentary fact-finding mission and to Israel and the West Bank as a member of a parliamentary delegation earlier this year.

Former union leader Buzz Hargrove, who worked with Nash for 20 years at the CAW, where she headed collective bargaining, said she would be an excellent leader. "I think she left only because – and I say this with a little trepidation – she didn't see an opportunity for a woman to be able to lead the union," said Hargrove.

 

Ford to sell Mazda shares to insurers, others - media


TOKYO, Oct 17 (Reuters) - Ford Motor Co is finalising plans to sell shares in Mazda Motor Co to about 20 Japanese firms, including insurers, and will likely outline the deal by next month, local media reported on Friday.
Ford is considering selling some of its 33.4 percent stake in Mazda as it struggles with weakening sales and the global credit crunch, according to a person familiar with the matter.

Media have said that Ford is looking to sell 20 percent and that Mazda will also buy back some of the shares.

Ford has approached five nonlife insurers: Tokio Marine Holdings , Mitsui Sumitomo Insurance Group Holdings , Sompo Japan Insurance , Nipponkoa Insurance , Aioi Insurance, the Nikkei business daily said.

Besides the insurers, companies including trading houses Sumitomo Corp and Itochu Corp , parts maker Denso Corp , and steel makers are likely buyers of Mazda shares, the Mainichi daily reported.

Each company is to buy about 1 percent in Mazda, the equivalent of about $40 million based on Mazda's market value on Thursday, and Ford is expected to raise some 100 billion yen ($1 billion), media said.

Ford does not want to sell Mazda shares to rival automakers because the two companies intend to continue their business partnership that include operations of jointly owned factories in Thailand, China, and the United States, the Mainichi said.

Both Ford and Mazda have declined to comment on reports.
Mazda shares were up 6.5 percent at 297 yen as of 0021 GMT. The Nikkei average was up 3.2 percent.

 

 

Risk seen in GM-Chrysler talk

Massive consolidation and massive job losses' feared, CAW chief says

Oct 15, 2008 04:30 AM
Kevin Krolicki
Reuters News Agency

DETROIT–The Canadian Auto Workers union has asked General Motors Corp. and Chrysler LLC to clarify whether they were considering a merger, since any such transaction would risk "massive consolidation and massive job losses," union president Ken Lewenza said yesterday.

"We have already tried to contact the companies. We're waiting for calls back," Lewenza said from Toronto. "The workers are going into the plant today with the same unease based on all of the speculation and weekend news reports."

Lewenza said the reported merger talks, which came just five months after the conclusion of a bargaining round with the automakers, reinforced the union's long-held position that concessions on wages and benefits cannot bring job security for auto workers.

"Even with the incredible compromises of UAW and CAW workers, that hasn't secured one single job on either side of the border."

Lewenza said Chrysler's owner, Cerberus Capital Management, had told the union that it has enough cash to ride out the downturn in auto sales, although the union was not privy to the private company's financial information.

"In our latest meeting, they said they had enough cash flow to get them through this troubled period. But you don't have to be a rocket scientist and you don't have to be loaded up with data to see that the market loss of Chrysler is significant," he said.

Lewenza said the CAW supported the quick implementation of a $25 billion (U.S.) loan program approved last month for the auto industry by the U.S. government, provided that funding was tied directly to preserving hourly production jobs.

Without government aid, one or more of the U.S. automakers was in danger of failing, he added.

"Now I never like to be that negative. I never like to be that direct. But when one takes a look at the market share decline, takes a look at this perfect economic storm, you've got to ask yourself how these companies that were already in trouble are going to be able to pull it off."

People familiar with the talks said over the weekend that Cerberus had approached GM about a merger with Chrysler. Cerberus has also shopped Chrysler around to other potential bidders without immediate success, sources have said.

Chrysler chief executive Bob Nardelli said Monday the company was talking to a number of parties about business tie-ups, but declined to comment directly on the reports of the GM talks.

GM, Ford Motor Co. and Chrysler have all said their focus is on restructuring to get back to profitability and have ruled out bankruptcy.

U.S. auto sales have hit 15-year lows and could dip further in 2009. Markets in Asia and Europe have also begun to slow because of the turmoil in global financial markets, analysts say.

 

Ford plans to sell most of stake in Mazda

TOKYO, Oct (Reuters) - Ford Motor Co plans to sell most of its stake in Japan's Mazda Motor Co, Japanese public broadcaster NHK said on Saturday.

The U.S. automaker, which has 33.4 percent of Mazda, plans to sell about 20 percent and has already approached Japanese companies on the sale, NHK said

 

Ford not interested in GM tie-up

Bryce G. Hoffman / The Detroit News

General Motors Corp. approached Ford Motor Co. about a possible merger prior to contacting Chrysler LLC, according people close to the situation.
Though there were direct communications between GM CEO Rick Wagoner and Ford CEO Alan Mulally, those talks never evolved into actual negotiations.

"There were never in-depth, substantive discussions that went on," said one of those sources, who spoke to The Detroit News on the condition of anonymity. " "It was more an expression of interest, as in, 'Do you want to talk?'

Ford said no.

The Dearborn automaker would not officially comment on the reports, but sources familiar with Mulally's thinking on the topic told The News that such a tie-up would be contrary to his plan for saving Ford.

Mulally wants to simplify Ford's own operations and better integrate them on global scale. He wants fewer brands and fewer dealers. And he is jealously guarding Ford's cash reserves, which have so far insulated the Dearborn automaker from the bankruptcy speculation swirling around GM.
Adding more brands, more factories and more dealers just does not make sense in this environment, those sources said.

Mulally has repeatedly pointed to rival Toyota Motor Corp. as his model for success, noting that Japan's largest automaker competes successfully around the world with just one major brand and closely integrated global operations.

Reports that GM had contacted Ford first surfaced in the New York Times earlier today.

Ford contacted GM two years ago to discuss the idea of merging some elements of their operations, such as purchasing and information technology, but those talks never panned out.

As The News first reported in August, GM contacted Ford this summer to discuss possible collaborations on powertrains, vehicle architectures and other areas. The two companies have had several meetings to discuss the joint development of engine technologies, but have so far nor reached any concrete agreement.

 

Fly solo, crash together - Big 3

BY ROB COX AND ANTONY CURRIE

Detroit on the brink: In the airline industry, bankruptcies follow like dominoes ­ one after the other. The reason is pretty straightforward. In a highly competitive industry, a Chapter 11 filing gives the guy under protection from creditors a leg up on his rivals. The car industry is different from airlines in many respects, but could easily fall prey to the same dynamic. That's just one reason investors, politicians and consumers should brace for a three-car crash from Detroit.

General Motors, Ford Motor and Chrysler insist they aren't considering pressing the reboot button by filing for bankruptcy. That looks like wishful thinking, especially for GM, which seems to have run out of options to finance its business. The ones it put on the table a few months ago, ranging from secured loans to raising equity, look unachievable given the extraordinary shift in debt and stock markets.

With GM incinerating something like $1bn in cash a month, the steward of Chevy, Pontiac, GMC, Buick, Saab, Hummer and other brands would not see the end of 2009 as a solvent corporation. Actually, given the recent acceleration of car sales declines in the US, it's hard to see how GM would make it to next summer in solvent condition.

Ford should have more leeway. It has a bigger pile of cash, smaller operations and could hold a firesale of its Volvo division. Chrysler's backers at private equity firm Cerberus could always dig into their pockets. But the possibility of a GM bankruptcy might be enough to dissuade either from pulling the trigger on these potentially last-ditch options.

Under the protection of Chapter 11, GM could do what the airlines have done again and again: rescind promises to workers and retirees, even jettison some of these liabilities to the government through the Pension Benefit Guarantee Corp. GM could also slash ties to its 7,000-strong army of
dealerships: a bankruptcy court would be less likely to offer compensation, especially to aggrieved dealers of brands like Pontiac and Buick, which must be euthanized.

By focusing on fewer, stronger brands, GM would save significant production and marketing costs, which could be deployed against rivals Chrysler and Ford. That's how it has worked in the skies. Historically, when one carrier filed for bankruptcy, and thus slashed staff and other costs, it undercut pricing on competitive routes, sending rivals scrambling for their own restart buttons.

Costs aren't the only finger pushing the domino over, though. A chapter 11 filing by any of the Big Three would put the squeeze on car parts suppliers they all rely on. The bankrupt car maker would try to slash the prices it pays for parts, while suppliers may have to take their place in line for payment of any unpaid debts with other unsecured creditors. In fact, the fallout on suppliers could even infect healthier carmakers in the US like Toyota.

Sure, the guys still standing could use a rival's financial woes and filing as a marketing tool. If GM sought protection, Ford could try to drum up fears that GM wouldn't honour warranties or skimp on quality. But if that didn't work in the airline business ­ where one would think safety issues are paramount ­ it's hard to see how that would work on the roads.

rob.cox@breakingviews.com ,antony.currie@breakingviews.com

 

Risk of bankruptcies
at automakers: S&P
Listen

Warning comes amid reports GM set to slash output, idle more plants

Oct 11, 2008 04:30 AM

From the Star's wire services

General Motors Corp., Ford Motor Co. and Chrysler LLC may be forced into bankruptcy by slowing economies and dwindling U.S. auto sales, Standard & Poor's analyst Robert Schulz said yesterday.

The companies said they have no plans to seek bankruptcy protection.

But the assessment underscored the pressure on the industry as the worsening credit crisis makes it harder for buyers to get loans and dealers to finance their operations. U.S. industry-wide sales tumbled 27 per cent in September, the most in 17 years.

S&P said yesterday that it may further trim credit ratings for GM and Ford on forecasts for 2009 auto demand to fall to its lowest level since 1992.

"Macro factors could overwhelm them at some point" even with the three biggest U.S. automakers committed to turnarounds, said Schulz, S&P's lead automotive credit analyst.

GM, which has said it will idle assembly factories in Oshawa, Janesville, Wis., and Toluca, Mexico, by 2010, is likely to announce further production cuts and possible plant closures as early as next week as it deals with the sales slump and a collapse in its stock price, sources told Associated Press.

A source said the cuts likely will hit engine, transmission and stamping operations.

With all three companies working to boost cash, any bankruptcy filing would be a last resort, not a "strategic" decision, said Schulz.

He said the "trigger" for a forced restructuring under bankruptcy protection would be based on the automakers' ability to preserve liquidity as sales decline.

GM shares will fall further, Barclays Capital analyst Brian Johnson said in a report yesterday, reducing his stock price for the Detroit-based automaker to $4 (U.S.)

"With auto sales stalled in the U.S. and beginning to contract in the rest of the world, we believe GM's cash needs are increasing," wrote Johnson.

GM and Dearborn, Mich.-based Ford lost a combined $24.1 billion last quarter. GM last posted an annual profit in 2004, while Ford hasn't had a full-year profit since 2005.

 

General Motors and Chrysler have held merger talks, reports say

 

General Motors Corp. and Chrysler LLC have held preliminary talks about a merger or an acquisition of Chrysler by GM, according to published reports Saturday.

The Wall Street Journal, citing people it described as familiar with the discussions, said Cerberus Capital Management, the private equity firm that owns 80.1 per cent of Chrysler and 51 per cent of GMAC Financial Services, proposed trading Chrysler's automotive operations to GM.

The Journal said Cerberus would receive GM's remaining 49 per cent stake in GMAC.

The New York Times, also citing people familiar with the talks, said the automakers were discussing a merger. The Times did not mention GMAC, a traditional auto lender hit hard by the housing market downturn.

The talks have stalled because of the recent turmoil in the financial markets, according to the Journal. Its sources said negotiations could resume if markets stabilize because both GM and Cerberus want to quickly divest the assets under discussion.

The negotiations between 100-year-old GM and 83-year-old Chrysler began more than a month ago, according to the Times. Its sources said the chances of a merger were "50-50" as of Friday and likely would take weeks to complete.

Both newspapers posted their stories on their websites late Friday.

"Without referencing this specific rumor, as we've often said, GM officials routinely discuss issues of mutual interest with other automakers," GM spokesman Tony Cervone said.

"The company is looking at a number of potential global partnerships as it explores growth opportunities around the world," Chrysler spokeswoman Lori McTavish said.

"Beyond those partnerships already announced however, Chrysler has not formed any new agreements and has no further announcements to make at this time."

 

 

CAW puts the boots to Flaherty
Hundreds of Canadian Auto Worker Union members gathered to present Finance Minister Jim Flaherty with thousands of old work boots collected from laid off workers from across Ontario. The CAW left the boots at Flaherty's Whitby-Oshawa riding office Oct. 6.

Oct 7, 2008

Tamara King

THE CANADIAN PRESS

WHITBY – Hundreds of angry autoworkers descended on Finance Minister Jim Flaherty's campaign office Monday to unload a mound of used workboots in a call for the minister's removal, but the sharpest rebukes were saved for Prime Minister Stephen Harper.

A heap of discarded footwear more than a metre high was dumped in front of Flaherty's office door for the political stunt dubbed "Give Flaherty the Boot," organized by the Canadian Auto Workers.

The manufacturing sector in Ontario has been hammered by an economic downturn, and the union had called on workers in several cities to donate their footwear.

The event attracted hundreds of people – many carrying signs and waving union flags – to Flaherty's headquarters in Whitby.

In addition to piling the boots in front of the office, laid-off autoworkers shared their stories about how their families have been affected by cutbacks in the industry.

For Heather Hall, 47, who used to work at the Ford plant in Windsor, Ont., the job losses have hit her family hard. She's out of work and trying to support two children on her own, and said she can't find a decent-paying job.

"I don't think I'm entitled to a $30-an-hour job," Hall told the crowd. "I can work for less money."

She's considered going back to school, but feels she's at a disadvantage because of her age.

"I'll be competing with (people) my son's age for a job," she said, as some in the crowd yelled "shame."

The union said it targeted Flaherty because he holds the purse strings of government, but it was his boss's name that was continually raised among the speakers.

Mary Beth Boeyen, 51, a laid-off auto worker, said she will never collect a pension. Although she's been in the auto industry for 30 years, Boeyen said she has been forced to find a new job every few years.

"(Prime Minister Stephen) Harper says, 'We're creating jobs.' Yeah, they're minimum wage. I think Mr. Harper's wage should be minimum wage – see if he likes that," Boeyen said, her voice shaking with emotion.

Like Boeyen, others at the rally took aim squarely at the prime minister.

"Since his government took over two-and-a-half years ago, 200,000 jobs lost," said CAW president Ken Lewenza.

Lewenza went to lengths to attack Harper's political beliefs as ``anti-labour, anti-union, anti-collective bargaining rights, anti-human rights, anti-working class."

"This is the Preston Manning Reform Party, the Stockwell Day Alliance Party," Lewenza said.

Flaherty did not make an appearance at the rally. His spokesperson Dan Miles said Flaherty was campaigning with other Conservative candidates in southwestern Ontario.

Miles said the footwear will be donated to the Salvation Army.

 

Canada braces as auto sales crash
The Canadian auto industry continues to slump.

Industry facing `substantial layoffs' as crucial U.S. market for vehicles and parts skids out of control

Oct 02, 2008 04:30 AM
Tony Van Alphen
Business Reporter

Canada's sputtering auto industry faces more serious trouble as sales in its key U.S. market continue plunging.

"If conditions don't change, there will be a lot of blood on the floor here very soon," Gerald Fedchun, president of the Automotive Parts Manufacturers' Association, warned last night after seeing the latest gloomy U.S. sales numbers.

Canada exports more than 80 per cent of its vehicle production and 60 per cent of parts output to the United States, where sales declines are worsening each month.

In September, U.S. auto sales crashed 27 per cent, or more than 350,000 vehicles, to 965,160 from the same month last year.

Sales south of the border are down almost 13 per cent in the first three quarters of the year.

The steep declines overshadowed an improvement in the Canadian market, where sales climbed 1.7 per cent, or about 2,300, to 134,131 vehicles last month.

Toyota led the gainers with record sales for September while General Motors and Ford posted declines.

But in the U.S., their losses were far worse.

Ford's sales tumbled 34 per cent last month; Chrysler's volumes fell 33 per cent; Toyota's deliveries slid 32.3 per cent; Honda's business dropped 24 per cent and GM's sales were down 15.6 per cent. All five automakers operate major assembly plants in Canada.

"When there are no customers and no production, substantial layoffs have to come," said Fedchun.

Ken Lewenza, president of the Canadian Auto Workers union, agreed the drop in U.S. sales will undoubtedly trigger more layoffs here.

"You can't have this much of a decline in sales without more down time coming and increased insecurity for everyone in the long term," said Lewenza.

Scores of parts-makers in southern Ontario have already closed plants and eliminated thousands of manufacturing jobs in the past year because of a high Canadian dollar, increasing energy and commodity costs, stiff offshore competition and lower auto demand, particularly south of the border.

GM and Chrysler plan thousands of job cuts in Canada over the next two years at assembly and parts operations.

That will mean less business for other suppliers and service providers, and more job losses.

Tighter credit terms tied to the U.S. subprime loan crisis are making borrowing even more difficult for many auto companies operating on the edge.

Credit restrictions have turned into a bigger obstacle for consumers buying vehicles than the impact of soaring gasoline prices, noted industry analyst Carlos Gomes.

The persistent sales decline in the U.S., and an abrupt shift in the market to smaller fuel-efficient vehicles has prompted Toyota and Ford to cancel plans for new shifts and output at assembly plants in Woodstock and Oakville, respectively, during the past few months.

In Canada, auto production has fallen about 20 per cent in the first eight months of the year and analysts don't see a recovery soon.

Gomes, an economist at Scotiabank who specializes in the auto industry, said deteriorating conditions have caused his firm to lower its U.S. sales forecast to 13.7 million autos this year and 13.5 million for 2009.

That's a steep decline from U.S. sales of 16.1 million in 2007.

Some industry watchers are forecasting overall production will remain flat in Canada, despite additional output at Toyota's new plant in Woodstock and GM's car complex in Oshawa.

"It certainly suggests declining production elsewhere in Canada and job cuts will have to come at other plants here," Gomes said.

Industry officials say Chrysler's minivan operations in Windsor could be vulnerable to losing one of three shifts because of continuing lower demand in that segment of the market.

"It's a three-shift operation so there is a concern," acknowledged Lewenza.

"First, they (the company) cuts overtime. Then they go to more downtime, and then they decide if the direction of sales is permanent and take a shift out.

"We've already got some time scheduled there in January."

Meanwhile, Grant Thornton LLP, a major consulting firm, said in a forecast that the sharp decline in U.S. sales could cause the closing by next year of up to 3,800 dealerships, or 18 per cent of the auto retailers south of the border, because of higher costs and the credit crunch.

Bill Heard Enterprises Inc., the largest chain of Chevrolet dealerships in the U.S., this week filed for bankruptcy protection against a "perfect storm" of woes including soaring gasoline prices, declining demand for big vehicles and the nationwide credit crunch.

CarMax, America's biggest used-auto retailer, also revealed yesterday that it is laying off 600 service employees because of the industry turmoil.

 

Bush approves $25 bln
loan package for auto makers

Tue Sep 30, 2008 8:59pm EDT

WASHINGTON, Sept 30 (Reuters) - President George W. Bush on Tuesday signed into law a mammoth spending bill to keep the government running until early March 2009 that includes a $25 billion loan package for troubled automakers.

The action came after the Senate over the weekend gave final congressional approval to the more than $630 billion spending bill that was was needed to finance defence, education, farm, health, foreign aid and other government programs after the current fiscal year expired on Sept. 30.

The spending legislation allows a ban on offshore drilling to expire on Sept. 30. Democrats had hoped to extend the ban, but did not have the votes to overcome strong opposition from Republicans.

Bush, in a statement announcing that he had signed the legislation, said the measures to lift the ban on offshore drilling "will allow us to reduce our dependence on foreign oil."

The bill sets aside $7.5 billion in taxpayer funds needed to guarantee $25 billion in low-interest loans to help General Motors Corp, Ford Motor Co and Chrysler LLC produce more fuel-efficient cars and trucks.
U.S. automakers have said the taxpayer-backed loan package would give them access to capital at a time when credit markets are shut and they are being driven to invest in new technologies to meet tough new federal fuel economy standards.

The $25 billion loan package, the biggest federal subsidy for the auto industry since the 1980 bailout of Chrysler, cleared Congress last weekend when the focus was on the debate over the $700 billion financial rescue package.

GM, Ford and Chrysler had said they could manage without the federal loans but also suggested that without the federal subsidy thousands more industry jobs could be at risk.

Both presidential candidates, Democrat Barack Obama and Republican John McCain, backed the auto loan package, which had strong support in battleground election states like Michigan and Ohio.

U.S. auto sales have been slumping for three consecutive years, forcing Detroit automakers to slash jobs and cap new investment. Through August, U.S. sales were down 11 percent and on track to hit the lowest level in 15 years.

The loan package was authorized -- but not funded -- in a 2007 energy law that requires automakers to improve the fuel efficiency of their vehicles by 40 percent by 2020.

Major automakers have said that will require up to $100 billion in combined new investment to retool factories and invest in new technology, including next-generation battery-packs for electric vehicles.

Industry executives, including GM Chief Executive Rick Wagoner and Chrysler Chief Executive Bob Nardelli, said they would press for liberal federal guidelines once the law was sent to regulators in order to use the funds to offset the cost of a wide range of investment.

Japanese automakers Toyota Motor Corp and Honda Motor Co could be eligible for the low-cost federal funding but have said they have no intention of applying for the loans.

Congress passed the massive spending bill before the new fiscal year began Oct. 1 because lawmakers failed to approve any of the 12 spending bills needed every year to fund government operations.

 

CAW head urges members
to vote against Tories

Sep 30, 2008 08:37 PM

THE CANADIAN PRESS

WINDSOR, Ont.–The new national president of the Canadian Auto Workers is calling on members to vote strategically, but makes it clear his union's support doesn't belong to one party.

Ken Lewenza is asking members nationwide to vote for the candidate most likely to beat the Conservative candidate in their riding.

Lewenza told CAW members in Windsor, Ont., on Tuesday if they normally vote Liberal, to hold their nose and vote NDP if that candidate stands a better chance at beating the Tory in the riding.

Lewenza says this election is about a choice between ideology – individualism versus collectivism.

He quoted former prime minister Brian Mulroney by saying "you won't recognize this country" if the Harper government gets a majority.

 

 

 

This financial hurricane will hit Canadian shores
JIM STANFORD

September 28, 2008

In two incredible weeks, the United States has been turned upside-down, both economically and politically. Washington is suddenly nationalizing big swaths of the financial industry, at massive cost to taxpayers. Regulations are being rewritten so quickly that the financial rulebook now resembles a gigantic dry-erase board. From one trading day to the next, the markets alternate between partying and panicking. And in the political realm, John McCain is “wearing” the mess (quite rightly, given his personal role in deregulating the financial system) while Barack Obama has surged ahead in the polls.

From our perch not so far away, we Canadians watch this stunning drama with growing unease. How is it all going to affect us? Here, too, that question has both economic and political dimensions.

Economists have been wondering for months if we can avoid following the U.S. economy into recession. But it turns out that we had the question backward: In fact, we may be leading the United States into recession, not the other way around. Despite the more dire financial news south of the border, the U.S. economy still managed to grow (at a 2 per cent annual rate) in the first half of this year - while Canada 's GDP shrank. Our national productivity (output per hour of work) has declined dismally, and is now lower than at the beginning of 2006. Fewer Canadians were working in August than six months earlier. Among the G7 industrial economies, only Italy is forecast to grow more slowly than Canada this year.

Shrugging off the negative indicators, Prime Minister Stephen Harper and Finance Minister Jim Flaherty insist we're safe in their hands. Mr. Flaherty keeps reaffirming his faith in Canada 's economic fundamentals: “as solid as the Rock of Gibraltar,” he once put it.

Well, the Rock of Gibraltar doesn't need emergency injections of liquidity to stay above the waves, but our banking system apparently does. Since Sept. 18, the Bank of Canada has announced $12-billion in new low-interest loans to Canadian banks and other financial institutions. It has arranged for $10-billion worth of U.S.-dollar reserves to be thrown into the brew as well, if necessary. And it has even started accepting asset-backed commercial paper (ABCP) from financiers as collateral for these loans. (Too bad mom-and-pop investors can't convert their frozen ABCP assets into cash so easily.)

True, most Canadian financial institutions didn't jump into subprime lending and other dangerous waters nearly as deeply as their U.S. counterparts. That was thanks more to their inherent conservatism, rather than stronger regulations or clearer foresight. Nevertheless, there is growing evidence of financial vulnerability in Canada .

As of the end of June, the debt of Canadian households equalled 107 per cent of their income - an 11-point increase from the beginning of 2006. Canadian house prices are heading firmly south: down 5 per cent in the past year, with the decline accelerating. Americans have already learned the hard way that falling house prices can unleash an unpredictable collapse in the debt chain, as assets that were borrowed against suddenly lose much of their value. Merrill Lynch Canada reported last week that Canadian debt levels were reaching a “tipping point,” and expressed concern over the potential for financial chaos on this side of the border.

This inconvenient warning elicited a very defensive reaction from the campaigning Prime Minister. After all, the Conservative campaign has worked hard to ensure that nothing untoward intrudes on their ruthlessly disciplined drive for a majority.

It's certain that at least some of the waves battering the U.S. financial system are now hitting Canadian shores. What's unknown is whether their arrival will have the same political impact on our incumbent Conservatives, as they're having on the incumbent Republicans.

Mr. Harper's claim that we're fundamentally stronger than the Americans is iffy at best. And lots of Canadians realize that, at a gut level. Many have lost their jobs; many more fear for them. Many lost money on ABCP. And many are now watching the wealth in their homes evaporate, too.

There are two weeks left in this campaign. I predict that concerns over the economy, and the success or failure of the opposition's efforts to pin those concerns on the Conservatives, will determine whether Mr. Harper gets his longed-for majority.

Jim Stanford is an economist with the Canadian Auto Workers union and the author of Economics for Everyone.

 

Hargrove to help coach NHL union
Buzz Hargrove at the Reuters Autos Summit in Detroit, Michigan, Sept. 17, 2008

Never played organized hockey, but retired CAW leader prized as adviser


Sep 23, 2008 04:30 AM
Tony Van Alphen
Business Reporter

Former union leader Buzz Hargrove is moving behind the bench to help the National Hockey League Players' Association.

Hargrove, who retired as president of the Canadian Auto Workers union earlier this month, confirmed yesterday he has agreed to join a special group of the NHLPA that would advise the association on key issues.

"The association wanted to set up an advisory group some time ago to offer assistance on various issues that affect them," Hargrove said in an interview.

"It's a non-paying position. We would meet a few times a year or more, depending on the situation. I won't be doing any collective bargaining."

The group's formation comes after the most tumultuous period in the union's history.

It included the dismissal of executive director Ted Saskin for allegedly hacking into player email accounts last year and the contract dispute and lockout that wiped out the 2004-05 season.

An NHLPA spokesperson would not disclose any details of the advisory group or provide the telephone numbers of executive director Paul Kelly and general counsel Ian Penny.

"We'll be putting out a news release on the group," said Jonathan Weatherdon, the association's director of communications.

But sources say the union has appointed at least two retired players to the eight-member group and one of them is Steve Larmer.

Larmer, a former star with the Chicago Blackhawks and the New York Rangers, abruptly quit as association head of player relations in 2005, primarily because of Saskin's hiring.

The sources added that veteran labour lawyer Ron Pink, of Halifax, will chair the advisory group.

Pink, who has practised labour, employee benefits, employment and pension law for more than three decades, received the Queen's Golden Jubilee Medal for community service in 2002.

Daniel O'Neill, former chief executive of Molson Inc., which at one time owned the Montreal Canadiens hockey club, will be a member of the advisory group, according to sources.

Hargrove, who never played organized hockey, said the NHLPA approached him a few months ago. Penny and Glenn Healy, association director of player affairs, interviewed him before confirming Hargrove's appointment to him about two weeks ago.

Hargrove led the CAW for 16 years, as a skilled contract negotiator, strategist and communicator.

Despite some public perceptions that Hargrove was a strike-happy militant union leader, he encountered only one major walkout at the Big Three domestic automakers. when General Motors refused to match a pattern contract in major bargaining in 1996.

At the start of the NHL lockout in the summer of 2004, Hargrove spoke out publicly in support of a mediator to resolve the dispute because the sides were so entrenched in their bargaining positions. The players' association can opt out of its league contract next summer, two years before its expiry date.

 

Key union strategist
Hemi Mitic quits CAW

'We had a disagreement on succession planning,' said long-time assistant to Buzz Hargrove

Sep 22, 2008 04:30 AM
Tony Van Alphen
Business Reporter

A top official of the Canadian Auto Workers, who was a contender to replace Buzz Hargrove as president this summer, is leaving the union.

Hemi Mitic, a long-time assistant to Hargrove, confirmed yesterday he will depart early next year to pursue labour consulting opportunities.

The 57-year-old Mitic, one of the CAW's most experienced negotiators, organizers and strategists, could have remained with the union until he was 65. But he said the union's selection process and the election of Local 444 president Ken Lewenza to replace Hargrove prompted him to exit earlier.

"There was only one spot for me to go and that didn't work out," Mitic said in an interview. "I have absolutely no regrets. I love the union."

Mitic and Hargrove worked closely for more than two decades but they grew apart about two years ago over the issue of who would be the next leaders of the CAW, one of the country's biggest unions with more than 250,000 members.

"We had a disagreement on succession planning," Mitic said. "I told him things he didn't want to hear."

Hargrove, who led the CAW for 16 years, left earlier this month, about half a year before the union's mandatory retirement age of 65.

He had wanted to remain until next year but said Mitic suggested that other leaders and members thought an earlier departure would be better for the union.

In revealing his plan to leave early, Hargrove told the union's national executive board that no one "had a knife put in me deeper than that" after Mitic made the claim.

Despite their split, Hargrove praised Mitic for his abilities and hard work. "He's as good a firefighter as I've ever seen in going into any tough situation and finding solutions," Hargrove said.

Mitic, a high-school dropout, started as a welder at a Lear Corp. auto parts plant in Kitchener, Ont., in 1967. He became president of Local 1524 and eventually led the region's labour council before joining the national union's staff in 1981.

The union appointed Mitic as national director of organizing in 1986 and Hargrove selected him as an assistant in 1992.

Mitic ran unsuccessfully for the NDP in the 1981 Ontario election and served on the party's federal council. "I have not ruled out politics," he noted.

Mitic, married with three grown children, is a member of the executive committee of the Canadian Governor General Leadership Conferences where labour, business, government and academic leaders meet every four years.

Earlier this year, the Queen made Mitic a member of the Royal Victorian Order in recognition of his public service.

 

Friday, September 19, 2008

Key Ford exec quits company

Bryce G. Hoffman / The Detroit News

One of the key executives responsible for overseeing Ford Motor Co.'s global cost-cutting efforts has quit to become chief financial officer of an Ohio paper company.

David Prystash, a 24-year Ford veteran, submitted his resignation last week. He was the controller of Ford's global product development operations.
Prystash will be taking a job as CFO and senior vice president of NewPage Corp. of Miamisburg.

"He had an opportunity outside the company," said Ford spokeswoman Marcey Evans. "He's elected to leave the company."
His last day at Ford will be today, the company said.

Ford has been struggling to rein in costs as part of a massive restructuring effort aimed at returning the Dearborn automaker to profitability.

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500 jobs to be cut at
Ford in Oakville

Lucrative incentives for early retirement may remove need for layoffs

Sep 11, 2008 04:30 AM
Tony Van Alphen
Business Reporter

Ford is cutting another 500 jobs at its Oakville assembly plant but wants to avoid layoffs by offering lucrative early retirement packages to employees.

The struggling automaker confirmed yesterday it would eliminate the jobs in the plant's paint and body shops, which were part of a proposed third shift that has fizzled because of a continuing decline in the key U.S. market.

Ford had planned a third shift earlier this year, delayed it in July and cancelled the idea last month.

As a result, the Canadian Auto Workers union has negotiated a deal with the company that will offer up to $90,000 to eligible senior employees, plus a $35,000 voucher for a new Ford model, to encourage them to retire.

If the retirement incentive does not attract enough interest to prevent layoffs, Ford will offer a special buyout of up to $100,000 for other workers, CAW officials said.

Ford stopped orientation for about 350 new workers in the final-assembly section of the plant in July. They lost their jobs, but the company kept 190 other new workers who had just transferred from Ford's engine operations in Windsor. Their jobs are now in jeopardy if not enough workers accept the incentives.

"This has been absolutely devastating for those people who sold their houses in Windsor and then bought or leased homes here," said Gary Beck, president of CAW Local 707. "Other workers here have made changes in their lives to work overnight on a third shift. Now they'll have to change again.

"This has been a public-relations nightmare for the company."

Production of crossover utility vehicles at the Oakville plant has slid because of falling U.S. consumer confidence as credit tightens, the housing market worsens and fuel prices soar.

Statistics from industry journal Ward's Automotive Reports reveal that output of the Ford Edge model at the Oakville plant has fallen almost 20 per cent to 95,821 in the first eight months of this year from the same 2007 period

But in the latest three months, from June to August, Edge production plunged more than 50 per cent to less than 20,000 vehicles. The plant is the sole source for the Edge, Ford Flex and Lincoln MKX crossover utility vehicles in the world.

Analysts say the Edge, which experienced a strong launch, should be in the prime period of its production cycle.

"If I were Ford, I would be disappointed with those numbers," added Richard Cooper, vice-president of J.D. Power and Associates in Canada, a leading consumer research firm. Output of the luxury MKX model has fallen 25 per cent to 25,313 in the first eight months of the year but almost 50 per cent in the June-August period. The Flex started production in the second quarter and it is unclear yet if it will generate a lot of sales.

Cooper noted the downturn in the U.S. market has hurt a lot other automakers.

Forecasters are predicting the North American market will plunge from about 16 million vehicles to 14.5 million or as low as 14 million this year.

"No one would have predicted that the market would be down so much," said Cooper.

Under the Ford offer, some 650 employees would be eligible for the early retirement plan. Production workers with 30 years' service, for example, would receive $75,000 and tradespeople $90,000 plus the vehicle vouchers. Employees who are 55 or older with 10 years would receive the same offer.

If the company implemented the buyout program, workers with five to eight years' service would receive $75,000, while employees with more seniority could get $100,000.

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CAW Unanimous for Lewenza

TORONTO - Canada's largest private sector union celebrated the end of an era Sept. 6, 2008 as its members said goodbye to longstanding president Buzz Hargrove and unanimously elected Ken Lewenza as his successor.

Listen

Sep 07, 2008 04:30 AM

Tony Van Alphen

Ken Lewenza, a fiery local union leader from Windsor, became the new president of the Canadian Auto Workers yesterday and immediately roasted the federal Conservative government.

Lewenza, who was unanimously elected by about 500 CAW delegates at a special convention in Toronto, blasted Prime Minister Stephen Harper for the country's beleaguered manufacturing sector and thousands of laid-off workers ignored for three years until last week.

"We've got to stop him in his tracks," Lewenza told the crowd at the Metro Toronto Convention Centre, referring to the federal election expected to be called today. "We can't be fooled by his deceit. Does anyone believe the real face of Stephen Harper is the one we see governing with a minority? The real face of Stephen Harper is the one from the Reform Party, the one from the right-wing National Citizens Coalition and the one that will dismantle our country and make it unrecognizable to us today."

If Harper wins a majority, Lewenza said it would threaten everything Canadians hold dear including public health care, social programs, the environment and the rights of workers.

He said it was hypocritical for the Tories to repeatedly refuse financial aid to struggling companies, claiming it is not in the business of picking corporate winners and losers, but then give money to them just before an election.

Lewenza said the CAW, the country's biggest private sector union with more than 250,000 members, continues to advocate a system of strategic voting.

That means in some ridings the CAW will recommend members vote for Liberals to keep Tories out if the NDP, the union's traditional political arm, has little chance of winning.

Lewenza, who ran Local 444 in Windsor for 14 years, replaces Buzz Hargrove, who led the national union for 16 years and became the most prominent labour leader in the country.

"I'm humbled to be his successor," said Lewenza, 54.

His acclamation follows internal criticism in the CAW that its election process for top leaders is no longer fair and open.

But Lewenza said the process works and "we're the most democratic organization in the world."

Hargrove, 64, also urged workers to become active in the election.

"The incredible challenges working people face today will only intensify should Stephen Harper win a majority government. We all must work to ensure that doesn't happen."

 

BUZZ RETIRES
Buzz Hargrove strikes out on his own

Buzz Hargrove

Labour's most familiar face – and unofficial voice – takes his leave

Sep 06, 2008 04:30 AM
Tony Van Alphen
Business Reporter

He started his career as a hotshot shop steward who flexed union muscle by using hand signals to regularly tip workers and stop a Chrysler assembly line in Windsor.

It will end today, more than four decades later, with a simple wave goodbye as national president of the Canadian Auto Workers at a convention centre here.

Passion, pragmatism and controversy have followed Basil "Buzz" Hargrove along the way from those initial production-line war zones to rough-and-tumble union halls, steamy hotel bargaining rooms and corridors of corporate power.

Hargrove, 64, evokes sharp opinions from labour watchers, other union leaders, company executives and workers about his record and labour legacy.

He was a high school dropout from a poor New Brunswick family. After jumping from job to job in Western Canada for a few years, he landed in Windsor, a tough labour city. The self-described "rambunctious rooster" fought with Chrysler managers all day, played poker and chased women all night.

But over time as a steward, staff representative, assistant to the national president and then leader, he turned into a skillful public speaker, debater and negotiator.

Hargrove, who divorced and remarried last year, has bargained countless multimillion-dollar deals for thousands of workers across the country. Sometimes he bluffed. Sometimes, he blinked.

"I love the union and I love bargaining," he said in an interview this week, reminiscing about round-the-clock, pressure-cooker negotiations and regular 18-hour work days.

"I'll miss challenging myself and others around me every day."

He has never been afraid to take risks and use innovative techniques to craft contracts and resolve workplace problems.

Hargrove took a leading public role in representing the interests of workers, curbing poverty, respecting the rights of minorities, fighting against sexual harassment and ending violence against women.

After winning the CAW's presidency in 1992, Hargrove quickly became the unofficial voice of labour in Canada and its most recognizable name and face.

"I can't think of any labour leader who has fought for equality, fairness and human rights as much as Mr. Hargrove inside the union and outside," said veteran labour watcher Pradeep Kumar, professor emeritus at the Queen's University school of policy studies. "It's a legacy that he should be extremely proud of."

Hargrove has also changed the union from an Ontario manufacturing-based union into a national labour powerhouse representing workers in everything from railways to fisheries, mining and airlines. Membership has jumped more than 50 per cent to 255,000.

On the opposite side, Hargrove has left some friends and foes seething. He bent union principles on concessions at some struggling companies to maintain jobs. He gave up the right to strike at Magna International to make organizing easier there.

Hargrove publicly criticized one of his own big locals for going on strike in a successful personal effort to end a walkout and save the de Havilland aircraft plant here.

Hargrove battled two of his own staff unions in strikes at CAW headquarters. He got into bitter spats with other unions and the NDP, labour's traditional political arm. The party eventually expelled him.

Activists cringed when he put a CAW jacket on the back of Liberal prime minister Paul Martin on the stage at a union convention.

Even Hargrove's exit caused trouble because of charges within the CAW that he orchestrated the election of his successor.

Leo Gerard, who rose from a Sudbury miner to the international presidency of the United Steelworkers of America in the U.S., said Hargrove has accomplished a lot for auto workers and the industry in keeping jobs and investment in Canada.

But Gerard added that Hargrove has not helped the union movement by leaving labour federations and bickering with the NDP.

"I wouldn't be honest if I didn't say I'm disappointed," he said. "Buzz has done a disservice in pulling away and withdrawing from other labour groups and the NDP. It's more difficult to build unity, strength and make progress for working people that way."

Anil Verma, an industrial relations professor at the University of Toronto, said Hargrove has shown a penchant for fighting for what he believes is the best interests of workers, regardless of it offending other unions or political allies.

For example, he riled the Canadian Labour Congress and fellow affiliates by welcoming to the CAW workers who did not want to remain in their old union.

"His argument was if workers feel they are under-represented, it's not their fault and the CAW will be there," said Verma. "He lost a lot of friends in the labour movement. But that's Buzz. He will go against the grain."

Hargrove and the CAW also angered the NDP and other unions because he felt strongly that strategic voting served workers' interests better. The CAW advocated voting for Liberal candidates in some ridings where the NDP had little chance of winning, in efforts to keep out right-leaning Tories and an anti-labour agenda.

NDP supporters described it as wrong-headed and argued the strategy made it difficult to build a political party supporting workers. One union responded by issuing buttons with the message "Buzz off."

Hargrove showed his pragmatism in forging the "Framework of Fairness" deal with auto-parts giant Magna International, a company that historically discouraged union representation. The CAW, which had achieved little success at Magna, agreed to give up the right to strike in exchange for no management opposition in organizing plants.

"It's risky and the jury is still out on that one," said Verma. "But there is historical evidence that employee associations who don't strike have represented workers effectively. Just because you don't have the right to strike, doesn't mean you can't survive as a union."

Other unions derided the move, calling it a sell-out of workers. But Magna chair Frank Stronach said it showed Hargrove is open to change in the best interests of workers and their companies.

"I have great respect for him," said Stronach on learning of Hargrove's departure. "Buzz wants to make sure the working class has a fair share of the wealth. He tried to be reasonable in always pursuing constructive solutions rather than getting into clashes with management."

John Kervin, who also teaches industrial relations at U of T, said Hargrove showed a lot of pragmatism as a union leader, and that has caused tensions with idealists internally and elsewhere in the labour movement.

But Sam Gindin, a former CAW economist and current professor at York University, said Hargrove's pragmatism in recent years has led to contract concessions and the loss of its militant edge and ability to fight concessions.

The CAW's existing election process and Hargrove's efforts to assure victory for his favourite candidate have also reduced democracy and a chance for the union to renew itself, Gindin said.

Meanwhile, industry analyst Dennis DesRosiers said Hargrove has bargained well for his members in the auto industry but their wages and benefits are no longer competitive. Hargrove counters that huge concessions by the United Auto Workers in the U.S. have still led to thousands of job losses and haven't helped workers.

Hargrove's bargaining prowess and his ability to wiggle out of almost hopeless situations have become legendary.

For example, in major bargaining at the Big Three automakers in 2002, CAW locals promised strikes if Ford didn't keep its Oakville truck plant open or Chrysler did not replace a closed Windsor operation.

The union did not reach either goal, but Hargrove and other negotiators deftly bargained other provisions to mitigate the impact, save jobs and dodge strikes.

In early Big Three bargaining this year, Hargrove negotiated what he called "offsets" at General Motors to gain worker support.

But when GM breached the contract and abruptly closed its Oshawa truck plant a few weeks later, the union described those same offsets as $300 million in concessions. The CAW used it to galvanize membership anger, boost public support and leverage for a lucrative package to reduce the impact of the closure on workers.

Charlotte Yates, dean of social sciences at McMaster University, said Hargrove is a complex union leader.

"He's a street fighter, yet a sophisticated strategist," she said. "It is one reason that he has been able to move the union in some di