Losses force GM to
question its future

Auto maker meets with U.S. task force; upcoming financial
statements may include 'going-concern' note

GREG KEENAN

February 27, 2009

The desperate plight facing General Motors Corp. [GM-N] moved into sharp focus yesterday as the auto maker said there may be "substantial doubt" about its ability to continue as a going concern after a massive fourth-quarter loss.

GM's fourth-quarter loss of $9.6-billion (U.S.) and an annual loss that represented the second-biggest pool of red ink in its history headlined another dire day in Detroit as a consulting firm and GM's crosstown rival Ford Motor Co. both slashed their forecasts for U.S. vehicle sales this year.

"We and our auditors must determine whether there is substantial doubt about our ability to continue as a going concern," Ray Young, GM's chief financial officer, said during a conference call.

Mr. Young then joined chief executive officer Rick Wagoner in a meeting with the Obama administration's automotive task force, which effectively holds the fate of GM and the No. 3 Detroit company, Chrysler LLC, in its hands. The task force demonstrated a "genuine willingness" yesterday to understand the plight of GM and the restructuring plan it has submitted to the government, the company said.

Whether what is known as a "going-concern" note will be attached to GM's financial statements won't be determined until next month, but such a statement could trigger defaults on some of the firm's debts and force it to seek even more money from Washington than it already has. The company has been negotiating with some debt holders to waive clauses that say a going-concern note would cause it to breach financial covenants and trigger such defaults.

GM has received $13.4-billion from the U.S. government and asked last week for as much as $16.6-billion more, with the final amount of last week's request depending on how quickly the global automotive sales meltdown stops and how quickly markets recover.

The company's Canadian subsidiary is seeking help of a little more than $7-billion (Canadian) from Ottawa and Ontario, although General Motors of Canada Ltd. has not released any figures publicly.

In a statement released by GM after top executives met with the autos panel for several hours, the company said "Today's meeting with the presidential task force on autos was just the beginning of the hard work ahead for GM and the president's team ... We found a genuine willingness among the task force to understand our business, industry challenges and GM's restructuring plan."

GM lost $30.9-billion in 2008, a year in which it celebrated its 100th birthday. It has not turned a profit since 2004.

"The size of the loss matters not only because it impacts what it will cost to restructure the company, but also the kind of bill for which the taxpayer is on the hook," said long-time industry analyst John Casesa, managing partner of New York-based consulting firm Casesa Shapiro Group LLC.

GM was hammered during the first half of last year by the spike in gasoline prices that obliterated sales of its profitable pickup trucks and sport utility vehicles.

While GM and its Detroit competitors scrambled to adjust to that wrenching change, the financial crisis hit during the fall and sent sales plunging even further in the U.S. market.

"These conditions created a very challenging environment for GM and other auto makers and led us to take further aggressive and difficult measures to restructure our business," Mr. Wagoner said in a statement.

The sales slump has widened now to virtually every market around the globe as fourth-quarter pretax losses for GM in Europe, Latin America and Asia-Pacific underlined yesterday.

There was new evidence that the U.S. market is still in a deep funk. Ford cut its forecast for overall U.S. sales by one million vehicles to 10.5 million this year, even as it said in a regulatory filing that its ability to continue as a going concern is in no doubt.

Consulting firm J.D. Power and Associates reduced its U.S. sales forecast to 10.4 million vehicles from a previous level of 11.4 million.

Three weeks of data show that February sales are tracking better than those in January and may represent light at the end of the tunnel that has led GM and Chrysler close to bankruptcy.

"The crisis in the automotive market continues to worsen, but we believe we are nearing the bottom of this cycle," said Jeff Schuster, executive director of global forecasting at J.D. Power. "Our expectation is for February or March to be the low point, but a high degree of uncertainty and risk remains for the second half of 2009."

Separately, an administration official said the autos task force has made no decisions yet on any aid to auto parts suppliers to avert failures in that sector. Auto dealers are also seeking help from the government.

Ford cuts a painful deal

UAW members will be asked to give up
benefits in order to preserve wages and health care.

Feb 26, 2009
Bryce G. Hoffman / The Detroit News

Factory workers at Ford Motor Co. seem ready to ratify a tentative agreement between the struggling automaker and the United Auto Workers, if only because they see the alternative as too frightening to contemplate.

Union members began getting details of the proposed amendment to their 2007 labor contract Wednesday, after UAW leaders voted unanimously to recommend ratification Tuesday.

The new deal preserves wages and health benefits, but eliminates hundreds of dollars in bonuses and cost-of-living adjustments, ends the jobs bank program, changes work rules and allows Ford to pay up to half its contributions to a union-run retiree health care trust with company stock.

"The UAW has made painful decisions with a clear goal: preserving jobs with as much security as possible," said labor expert Harley Shaiken of the University of California, Berkeley. "This is a defining moment for the industry and the union."

Most UAW members get that and are willing to vote for the changes, said Richard Linz, who works at Ford's Ohio Assembly Plant in Avon Lake.
"We feel like we're over a barrel," he said. "I want to retire from Ford. I don't even know if that's possible anymore. I want to keep working. I want to keep my job."

Though Ford's Avon Lake factory has been temporarily idled, Linz said workers have been calling each other to discuss the details of the agreement that have appeared in the press.

Linz said the announcement by Executive Chairman Bill Ford Jr. and CEO Alan Mulally that they will cut their own pay 30 percent makes it a little easier to accept the cuts he and other union members are being asked to make.

"What they're saying is, 'we all have to make sacrifices,' " Linz said.
Workers will begin voting on the agreement as early as this weekend.
Brian Pannebecker, who works at Ford's axle plant in Sterling Heights, said his local will begin voting on Saturday.

"The good news is that our base pay and medical benefits are not being touched, but we are taking some hits," he said, noting that the elimination of the $600 Christmas bonus will be a real Grinch.

Retirees also are watching developments closely.

"My biggest concern is the VEBA," said Gerald Borsenik, referring to the Voluntary Employees' Beneficiary Association, the union-run retiree health care trust. "Of course, we don't get to vote."

He said that is a sore point with many retired workers, since it is their benefits that are at stake.

The UAW has said it wants all voting on the proposed agreement to be completed by March 9.

GM loss hits $9.6-billion
for the quarter

TOM KRISHER AND KIMBERLY S. JOHNSON
The Associated Press

February 26, 2009 at 8:43 AM EST

DETROIT — General Motors Corp. posted a $9.6-billion (U.S.) fourth-quarter loss and said it burned through $6.2-billion of cash in the last three months of 2008 as it fought the worst U.S. auto sales climate since 1982 and sought government loans to keep the century-old company running.

The nation's biggest domestic auto maker said Thursday it lost $30.9-billion for the full year and expects to state in its upcoming annual report whether its auditors believe the company remains a “going concern.” GM and its auditors must determine whether there is substantial doubt about the automaker's ability to continue it operations.

Chief Financial Officer Ray Young said the determination will depend a lot on whether GM gets further government loans and whether it can accomplish its restructuring goals.

Mr. Young said that auditors are studying the future of the company because “there's uncertainty with how the Treasury will view our viability plan,” and “uncertainty on whether we're going to be able to execute the terms of our loan agreement.”

The company has received $13.4-billion in federal loans since Dec. 31 and says it needs up to $30-billion to stay out of Chapter 11 bankruptcy protection. Top GM executives were in Washington, D.C., Thursday to meet with the Obama administration's auto task force to talk about restructuring and additional loans.

“2008 was an extremely difficult year for the U.S. and global auto markets, especially the second half,” Chairman and CEO Rick Wagoner said in a statement. “These conditions created a very challenging environment for GM and other auto makers and led us to take further aggressive and difficult measures to restructure our business.”

GM reported a net loss of $15.71 per share for the fourth quarter, compared with a loss of $722-million, or $1.28 per share in the year-ago period.

Quarterly revenue fell 39 per cent to $30.8-billion from $46.8-billion, as credit availability froze across the globe, and a lack of consumer confidence and fears of job losses kept people from buying vehicles.

Excluding special items, GM's fourth-quarter adjusted loss was $5.9-billion, or $9.65 per share.

That was worse than Wall Street expected. Analysts surveyed by Thomson Reuters predicted a quarterly loss of $7.40 per share on sales of $35.1-billion.

For the full year, GM's net loss was $53.32 per share, the second-worst annual result in the company's history. The worst loss occurred in 2007, when the Detroit-based company lost $38.7-billion, or $68.45 per share, in 2007, due largely to charges for unused tax credits.

GM's cash burn rate, the difference between how much it takes in and how much it spends, narrowed slightly from $6.9-billion in the third quarter, reflecting GM's restructuring efforts.

The company last year announced the closing of four assembly plants and a parts stamping factory.

Last week, a plan GM submitted to the Treasury Department to justify more loans said the company would close five more U.S. factories and cut another 47,000 jobs globally. GM also reached a tentative deal with the United Auto Workers on concessions that will reduce labour costs.

Since 2000, GM's U.S. salaried work force has shrunk by 33 per cent from its 2000 high of 44,000 people. At the same time, the number of hourly workers has plunged by more than half — to about 63,700 people at the end of last year from 133,000 in 2000.

GM ended last year with about $14-billion in cash, $10.5-billion less that the $24.5-billion it had at the end of 2007. The 2008 figure is close to the minimum amount of cash GM has said it needs to fund its operations.

Mr. Young told reporters the credit crisis spread from the U.S. to other markets, making the fourth-quarter a challenging one.

But there was some hope, he said. While global sales fell, some emerging markets, such as China, are off to a good start in 2009.

“A lot of the governments in these countries are putting a lot of stimulus into the economy as well as the automotive market,” he said, citing lower sales tax rates on cars sold in China and Brazil.

GM shares fell 19 cents, or 7.5 per cent, to $2.36 in premarket activity.

DETROIT–United Auto Workers President Ron Gettelfinger urged union members to vote for contract concessions to Ford Motor Co., saying the automaker can't survive in the long term without major restructuring.

Gettelfinger said in a letter to 42,000 hourly Ford workers that the company lost $14.6 billion last year and is burning through $1 billion per month to stay in business because revenue has dropped so dramatically.

He recommends that members vote for concessions and points out that the union was able to preserve base pay, keep current health benefits and pensions and prevent further plant closures.

But the union has also agreed to give up cost of living pay raises and cash bonuses, and the company will offer another round of buyout and early retirement incentives to shed more workers.

On Tuesday, local union leaders were told Ford would make buyout or early retirement offers to all 42,000 U.S. hourly workers. The union also agreed to take as equity 50 percent of the payments that Ford is required to make into a union-run trust fund that will take over retiree health care expenses starting next year.

In addition, the company's top two executives, Chief Executive Alan Mulally and Executive Chairman Bill Ford Jr., will take 30 percent pay cuts.

Ford has used up $21 billion of its cash reserves last year, Gettelfinger said in the letter.

"The company cannot continue to sustain this level of losses and stay in business," he wrote.

Ford mortgaged all its assets to borrow roughly $25 billion and has been able to avoid taking government loans, unlike its U.S. competitors, Chrysler LLC and General Motors Corp.,

With U.S. auto sales running at an annual rate as low as 9 million to 10 million units, down from 16 million or 17 million in past years, "no auto company, including the transplants, can continue operations without significant modifications," he wrote.

UAW: A Seat on Ford's Board?

In order to extricate itself from billions in health-care obligations, Ford may be forced to make the UAW its largest single shareholder

By David Kiley

Ford Motor reached a tentative agreement, announced Monday, with the United Auto Workers to pay $6.6 billion in obligations to the union's health-care trust fund in stock. The agreement could pave the way for the union to become Ford's largest single shareholder.

The deal was struck with Ford ahead of similar current negotiations with General Motors and privately held Chrysler, which are both negotiating with the U.S. Treasury over continued taxpayer loans to the troubled automakers. GM and Chrysler are also trying to secure deals to reduce the face value of bonds. If they can't get concessions from the UAW and bond holders, GM and Chrysler risk being forced into bankruptcy court.

While it is common in some European countries for union officials to have board seats, it is practically unheard of in the U.S. Daimler-Benz, Volkswagen, and BMW, for example, all have a representative of organized labor on their supervisory boards. And the UAW, when Chrysler was owned by Daimler, had a board seat at the German automaker.

Staying Out of Bankruptcy

But the notion that the union would have such power in the boardroom would have struck generations of Detroit executives—not to mention labor leaders—as inconceivable. Yet while Ford has not applied for government loans from the Troubled Asset Relief Program (TARP), it is restructuring its debt obligations anyway in an attempt to lower costs further, preserve cash, and avoid government loans and bankruptcy court. In a recent interview with BusinessWeek, Ford CEO Alan Mulally said: "We will make sure in all of this that we don't end up being disadvantaged to our competitors."

In 2007, Ford, as well as GM and Chrysler, struck deals with the UAW to reduce billions of dollars in future health-care obligations from its balance sheet. The changes reduced the companies' liabilities for retiree health care by 50%, according to the UAW. In return, the companies promised to make huge lump-sum payments into the trusts to cover much of the retirees' plans. Ford, for instance, paid $2.7 billion into the union's Voluntary Employment Benefits Assn. (VEBA) in January, but owes a total of $13.2 billion to the VEBA, according to Ford, over the next few years. GM is due to make a payment of about $7 billion in 2010, and owes the union a total about $22 billion.

The Ford deal could act as a template for negotiations with GM and Chrysler—except for one hurdle. GM and Chrysler are negotiating with the union at the same time they are dealing with bond holders for concessions, and neither wants to give up more than the other, even with the prospect of Chapter 11 hanging over the company. Ford is not yet negotiating with its debt holders for a "haircut" on the company's debt, according to Ford officials. A haircut, also known as a "cram down," means those holding debt will accept a reduction on the face amount of the bonds. The U.S. Treasury is looking for bond holders to take 30¢ on the dollar for GM's and Chrysler's unsecured debt, while GM's bond holder committee has been fighting for 50¢.

UAW Ford's Biggest Shareholder?

While Ford's deal with the UAW shows Wall Street and Washington that it is making progress lowering its union costs, the company is hoping to exchange as little stock for its cash obligations as possible. Ford's stock is trading at all-time lows and closed on Feb. 23 at $1.73 per share. Its market value on Monday was just barely above $4 billion. (GM's was a distressing $1.1 billion.) By today's share price, Ford, if it availed itself of the maximum terms of the deal, would pay more to the UAW in stock than all of the company's shares are worth today. "We will consider each payment when it is due and use our discretion in determining whether cash or stock makes sense at the time, balancing our liquidity needs and preserving shareholder value," said Ford spokesman Mark Truby in a written statement.

The UAW could become Ford's biggest single shareholder, thus giving the union the right to demand a seat on Ford's board. Ford officials and the UAW have not said yet if a board seat will be part of the settlement.

Ford has two classes of stock. The Ford family controls 40% of the voting shares of the company through Class B shares, which only family members hold. William C. Ford Jr., the great-grandson of founder Henry Ford, is the executive chairman of the company.

But it could be an interesting experiment. If the UAW does get a board seat, for the first time ever at Ford, the best interests of both management and labor would be truly aligned.

Union leaders urge vote
for Ford agreement

* Union leaders urge a vote in support of Ford concessions
* Ford CEO to take 30 pct salary cut in 2009 and 2010
* UAW aims to wrap up Ford voting by March 9
* UAW-Ford agreement includes new buyout offers (Adds details on union's tentative agreement with Ford that includes new buyout offers, healthcare trust funding)

By David Bailey and Kevin Krolicki

DETROIT, Feb 25 (Reuters) - United Auto Workers union leaders urged members on Tuesday to approve a concessionary deal with Ford Motor Co , stepping up the pressure on General Motors Corp and Chrysler to reach similar cost-cutting labor agreements in coming weeks.

Separately, Ford said Chief Executive Alan Mulally would take a 30 percent salary cut for two years as the centerpiece of a package of white-collar pay cuts that could make a vote for concessions more palatable to hourly workers.

Ford executives had said the automaker wanted parity in labor cost reductions the UAW agreed to with GM and Chrysler, which are operating under emergency U.S. government loans. They also promised a shared sacrifice in the cost cutting.

That included the elimination of performance bonuses for salaried employees and senior executives in 2009 and Ford's board agreed to give up all cash compensation this year, Mulally and Executive Chairman Bill Ford said in a memo to employees obtained by Reuters.

The 30-percent reduction in salary for 2009 and 2010 also applies to Bill Ford, though he has not taken any compensation since 2005. The board opted to resume his compensation in 2008, but Bill Ford elected to defer it until the automaker's global automotive operations return to profitability.

Ford has said the cost-saving changes negotiated midway through a four-year contract with the UAW set to run until 2011 were needed to allow it to restructure on its own without resorting to emergency loans from the U.S. government.

"Importantly, we remain firm in our resolve to operate without needing to access a bridge loan from the U.S. government ...," Mulally and Bill Ford said in the memo.

The UAW agreement, which includes concessions intended to reduce operating costs and a change in the way Ford funds a union-aligned healthcare trust, are aimed at making Ford competitive with the U.S. operations of foreign carmakers.

UAW leaders who represent Ford workers met on Tuesday and voted unanimously to recommend approval of the agreement. The union hopes to complete the voting by March 9.

NEW ROUND OF HOURLY BUYOUTS

Ford will offer a new round of buyouts to UAW workers of from $20,000 to $50,000, plus the option of a $25,000 voucher toward a Ford vehicle or a $20,000 cash payment, according to a union summary posted on the Detroit Free Press website.

The automaker also committed to not close its Milan, Saline, Sheldon Road and Sandusky facilities reacquire d from former parts unit Visteon Corp through the contract and to restructure them for sale.

The agreement includes no reductions in UAW base hourly pay, but would suspend cost-of-living adjustments, performance bonuses and the Christmas bonus.

GM and Chrysler, about 80-percent owned by Cerberus Capital Management [CBS.UL], have been kept afloat by a $17.4 billion federal bailout. Both have reached tentative agreements with the UAW on operating concessions that have not been disclosed but are expected to be similar to those reached with Ford.

GM and Chrysler remain in talks with the union about how to change funding terms for retiree healthcare.

Under the proposed change to the Ford contract, which is subject to the member ratification vote and court approval, the automaker has the option of settling up to half of the payments due to the healthcare trust in Ford stock.

Previously, Ford had been obligated to make a $13.2 billion cash contribution to the fund, known as a Voluntary Employee Beneficiary Association, or VEBA.

Under the proposed agreement, the UAW would receive small annual stock contributions from 2009 through 2022 that could be sold quickly to maintain a diverse portfolio and avoid being a long-term owner of large amounts of Ford stock, it said.

Ford's deal with the UAW on the VEBA would save it almost $7 billion in cash and could provide the model for concessions at GM and Chrysler, analysts have said. The agreement would also transfer risk to a growing pool of Ford retirees.

Another change phases out a program of near-total job security for UAW workers even after their positions have been eliminated, U.S. automakers and the UAW have also been talking about contract changes that would make it easier for the companies to hire in new, lower-cost workers and shut down excess plants, people familiar with the talks have said.

Ford execs take pay cuts,
bonuses suspended

Bryce G. Hoffman / The Detroit News

Ford Motor Co. Executive Chairman Bill Ford Jr. and CEO Alan Mulally will take a 30 percent salary cut in an effort to help their company meet its goal of returning to profitability in 2011.

The two executives announced the move in a memo sent to employees this afternoon, a copy of which was obtained by The Detroit News. It also outlined additional compensation cuts for other senior executives and salaried employees in an effort to match the concessions being asked of hourly employees as part of a tentative agreement reached with the United Auto Workers yesterday.

"We know that success will require working together by all parties," they said in the e-mail. "To this end, we are announcing today additional changes to compensation for our senior leadership and salaried employees. Both of us have voluntarily agreed to accept a 30 percent reduction in salary for 2009 and 2010. In addition, as we previously announced."

Bill Ford had already agreed to defer his compensation until Ford's global automotive operations return to profitability.

In addition, the company announced that it will again suspend performance bonuses for all salaried employees for 2009. These would have been paid out in March 2010. The company already has eliminated performance bonuses for 2008, which would have been paid next month, and has suspended merit pay increases.

Ford's board of directors also has agreed to forgo all cash compensation this year.

"We know these are challenging times and we all are affected by the tough actions we are taking. However, these are necessary actions to help us emerge as an even stronger, profitably growing Ford Motor Co. for the benefit of us all," said Ford and Mulally. "Importantly, we remain firm in our resolve to operate without needing to access a bridge loan from the U.S. government -- a move that is being applauded by our employees, our dealers, our suppliers and our customers -- while at the same time participating in the current industry restructuring to ensure Ford's competitiveness with the best in the business."

UAW deal with Ford
pressures rivals

The boys running the Blue Oval would never admit to using their strong ties with top union leaders to pressure the cross-town competition -- and score political points in the process.

But they're doing both.

Monday, the United Auto Workers and Ford Motor Co. announced a tentative deal that would allow the automaker to use company shares to satisfy as much as 50 percent of its roughly $10 billion obligation to a union-run trust fund for retiree health care, established in 2007.

Beleaguered General Motors Corp. and Chrysler LLC, steadily slouching toward quasi-nationalization or bankruptcy or a hybrid of the two, are expected -- but have so far failed -- to deliver similar deals as a condition of their $17.4 billion-and-counting federal bridge loans.

Ford struck first. The surprise move a) sets a pattern that could help GM and Chrysler reach agreement with the union and b) shows what can be achieved with the UAW and c) delivers a PR win that could benefit the Blue Oval in Washington and around the country to the detriment of its struggling rivals.

How? Ford is the only Detroit automaker eschewing federal loans and, again, it's taking the lead in solving the kind of labor-cost problems bedeviling all three companies based here. If you don't think that sends a positive message about Ford to congressional skeptics, the Obama White House and would-be customers, and if you don't think the messaging is deliberate, you aren't paying attention.

"We're going about our business," a Ford manager close to the situation tells me, downplaying speculation that Ford's deal to fund the Voluntary Employees' Beneficiary Association, or VEBA, up to 50 percent in stock is intended to pressure GM.

And so what if it is?

The weeks and months ahead aren't about industry unity; they're about survival. With each passing day, Team Obama is signaling that the bankruptcy of GM and/or Chrysler clearly are options the government is exploring, if only to pressure the struggling automakers, the UAW and bondholders in both companies to reach bankruptcy-like results outside of bankruptcy.

There is no other way to explain a government push to arrange a $40 billion in debtor-in-possession financing package for a potential GM bankruptcy that could be back-stopped by taxpayers. If the troubled automakers, the UAW and, in principle, their bondholders cannot achieve bankruptcy-like workouts, the growing expectation is that there must be a new Plan B -- emphasis on the "B" part.

For months, Ford CEO Alan Mulally has telegraphed that the Dearborn automaker does not intend to be "disadvantaged" by the results of the UAW's talks with GM and Chrysler. How better to ensure that than to craft the kind of results envisioned by the Bush bailout and, now, the Obama auto team?

Reaching a tentative deal with the UAW and getting it ratified are, however, two different things. The clear risk here is that rank-and-file members, attuned to the concerns of we-could-be-them retirees, could scuttle the new VEBA agreement because it risks more funding for the health-care trust fund. At GM, the risk is even greater because its survival outside bankruptcy is less certain, meaning its equity is more likely to be worthless.

All true. But the other truth is that the financial obligations facing Ford, GM and Chrysler come Jan. 1, 2010, are simply too rich for over-burdened companies desperately restructuring themselves to stay alive.

Worse, the past few months of clear antipathy toward Detroit's automakers, the UAW and its members suggest that financing the health-care trust fund with taxpayer dollars would become political dynamite with those who never had such benefits.

A miserable set of alternatives? Yes, but securing something is better than nothing.

Ford Motor Co. has reached a tentative deal with the United Auto Workers union on changes to funding for retiree health care in an agreement that could save it almost $7 billion (U.S.) in cash and provide a model for concessions at GM and Chrysler.

Ford's shares closed up 9.49 per cent at $1.73 on the New York Stock Exchange yesterday, Shares of larger rival General Motors Corp. closed up 1.92 per cent.

Ford said the deal gives it the option to settle up to 50 per cent of payments to the Voluntary Employees Beneficiary Association, or VEBA, in stock. Previously, all payments were due in cash.

Ford owes $13.2 billion to the VEBA trust, excluding health-care payments it will make for retirees in 2009. It said it will consider each payment when it's due "and use our discretion in determining whether cash or stock makes sense ... balancing our liquidity needs and preserving shareholder value."

US Auto team drives imports

Fed task force has few new U.S. cars

David Shepardson / Detroit News Washington Bureau

WASHINGTON -- The vehicles owned by the Obama administration's auto team could reflect one reason why Detroit's Big Three automakers are in trouble: The list includes few new American cars.

Among the eight members named Friday to the Presidential Task Force on the Auto Industry and the 10 senior policy aides who will assist them in their work, two own American models. Add the Treasury Department's special adviser to the task force and the total jumps to three.

The Detroit News reviewed public records to discover what many of the task force and staff members drove, but information was not available on all of the officials, and records for some states were not complete.

At least two task force members don't own a car, and there are still two open slots on the 10-member panel that will be filled by the secretaries of labor and commerce, who have not yet been appointed.

The co-chairs of the task force -- Treasury Secretary Timothy F. Geithner and White House National Economic Council Director Lawrence Summers -- both own foreign automobiles.

Geithner owns a 2008 Acura TSX, registered in New York. He once owned a 1999 Honda Accord and a 2002 Acura MDX, according to public records.

Geithner is the president's designee for purposes of enforcing loan agreements with GM and Chrysler and must approve or reject any proposed transactions by either company that would cost $100 million or more.

His maternal grandfather, Charles Moore, was a vice president at Ford Motor Co. from 1952-63, according to Peter Geithner, the secretary's father. But Geithner wasn't very interested in cars growing up -- in part because he graduated from high school in Asia, his father said.

Summers owns a 1995 Mazda Protege that's registered in Massachusetts. He previously owned a 1996 Ford Taurus GL.

What other task force members drive:

• Office of Management and Budget Director Peter Orszag owns a 2008 Honda Odyssey and a 2004 Volvo S60. He previously owned a 1997 Jeep Grand Cherokee and 1982 Datsun.

• Carol Browner, the White House climate czar, said earlier this month at the Washington Auto Show that she doesn't own an automobile. Public records show she once owned a 1999 Saab 9-5 SE.

• Energy Secretary Steven Chu doesn't own a car, his wife, Jean Fetter, said in a telephone interview on Sunday. Cabinet officials are typically transported to and from work by security officials in government vehicles.

• Environmental Protection Agency Administrator Lisa Jackson owns a 2008 Toyota Prius and a Honda Odyssey minivan, she said Sunday. "It's great," she said of her Prius.

• Vehicle information was not available for Transportation Secretary Ray LaHood or Christine Romer, head of the Council of Economic Advisers.

Here's what task force policy aides drive:

• Austan Goolsbee, staff director and chief economist for the White House Economic Recovery Advisory Board, owns a 2004 Toyota Highlander.

• Joan DeBoer, the chief of staff to LaHood, said in an interview Sunday she drives a 2008 Lexus RX 350. She doesn't consider herself "a car buff" and views her car as a way to get around town.

• Heather Zichal, deputy director of the White House Office of Energy and Climate Change, owns a Volvo C30, according to public records and officials.

• Gene Sperling, counsel to the Treasury Secretary, owns a 2003 Lincoln LS, and previously owned a 1993 Saturn SL2.

• Edward B. Montgomery, senior adviser to the Labor Department, owns a 1991 Harley-Davidson and previously owned a 1990 Ford Taurus L station wagon, public records show.

• Lisa Heinzerling, senior climate policy counsel to the head of the EPA, owns a 1998 Subaru Legacy Outback station wagon, according to her husband.

• Diana Farrell, the deputy National Economic Council director, doesn't own a vehicle. Her husband, Scott Pearson, owns a 1985 Peugeot 505 S.

• Dan Utech, senior adviser to the Energy Secretary, owns a 2003 Mini Cooper S two-door hatchback.

• Rick Wade, a senior adviser at the Commerce Department, owns a 1998 Chevrolet Cavalier and previously owned a 1998 Toyota Corolla.

• Jared Bernstein, Vice President Joe Biden's chief economist, owns a 2005 Honda Odyssey.

The White House declined to comment.

President Barack Obama traded in his Chrysler 300C for a more fuel-efficient Ford Escape hybrid during the 2008 presidential campaign.

Joe Biden, the son of a car dealer, owns a 1967 Chevrolet Corvette -- a wedding present from his dad. He primarily commuted from Delaware to the Senate on Amtrak.

UAW AND FORD REACH TENTATIVE AGREEMENT ON FUTURE FUNDING OF THE VEBA HEALTH CARE TRUST

Editor’s Note: The following statement is attributable to Joe Hinrichs, group vice president, Global Manufacturing and Labor Affairs, Ford Motor Company.

Dearborn, Mich., Feb. 23 – The United Auto Workers union and Ford Motor Company have reached a tentative agreement on modifications to the Voluntary Employee Beneficiary Association (VEBA) retiree health care trust.

We are pleased with this agreement, which provides us the option to settle with Ford common stock up to 50 percent of the payments into the VEBA in lieu of cash. We will consider each payment when it is due and use our discretion in determining whether cash or stock makes sense at the time, balancing our liquidity needs and preserving shareholder value.

The VEBA agreement – together with the agreement reached Feb. 15 by Ford and the UAW to modify certain operating provisions of the 2007 National Labor Agreement – is subject to ratification by the active UAW-Ford membership and other conditions, including pursuing restructuring actions with other stakeholders. Additionally, the VEBA agreement requires court approval.

The agreements, if finalized, will allow Ford to become competitive with foreign automakers’ U.S. manufacturing operations, and are critical to our efforts to operate through the current deep economic downturn without accessing government loans and continue to fully invest in our ONE Ford product plan.

I would like to thank the entire UAW leadership and national bargaining committee – particularly UAW President Ron Gettelfinger and UAW Vice President Bob King – for their leadership during these important discussions. I also would like to thank Ford’s national bargaining team for their tireless efforts over the past few weeks.

Clement pushes Chrysler
on restructuring

OTTAWA – The federal government needs to get a better idea from Chrysler Canada about the implications for this country of the company's financial restructuring plan, says Industry Minister Tony Clement.

In an interview yesterday on CTV's Question Period, Clement said he's especially interested in finding out what product lines Chrysler has in mind for its plants in Windsor and Brampton.

Chrysler provided only a sketchy outline of its latest proposals last Friday, sending a brief covering letter to the federal and Ontario governments that added little to plans previously submitted to the new administration of Barack Obama in the United States.

Chrysler said it didn't have to go into great detail about developments north of the border because its American and Canadian operations are so highly integrated.

But the paucity of new information disappointed some industry analysts, and Clement made it clear he wasn't satisfied.

"We do have an integrated market," he acknowledged.

"But at the same time, if we're talking about Canadian taxpayer dollars, we do want to have some specifics about what exactly is going to be going on in Canada.

"I think that message did get through."

Clement said the government asked for more information and some additional material arrived on the weekend and will be analyzed by officials.

He also noted that Chrysler isn't asking for any more government aid in Canada beyond the $1 billion in bridge financing already requested last year.

"That has not flowed to Chrysler as of yet ... We're in (the process of) kind of the last t's being crossed and i's being dotted on that."

General Motors informed Clement and his Ontario counterpart Michael Bryant last Friday that the firm will need more than the $3 billion in aid already sought in Canada, but it put no precise figure on the latest request.

GM also indicated it will trim its Canadian operations to 7,000 employees by next year and slash its dealer network in the country.

It said, however, that Canadian vehicle production will be maintained at between 17 and 20 per cent of the total between 2009 and 2014.

Picking a leader for Ontario NDP

Feb 22, 2009

After 13 years under Howard Hampton, the provincial New Democrats are choosing a new leader. Unfortunately, however, some of the best potential candidates are not in the race.

While hard-working and intelligent, Hampton has not been an effective leader. In style, his belligerent approach has alienated many New Democrats from the Bob Rae era, not to mention Buzz Hargrove and the Canadian Auto Workers (CAW). In substance, he has led the NDP back to the polarizing positions of the 1960s, which seem dated today. And as the MPP for Kenora-Rainy River, he appeared to place a higher priority on northern issues than on those affecting the more populous south.

The results tell the story: in three elections under Hampton, the NDP scored historic lows in both popular vote and seats. As he leaves the leader's office, the party has just 10 seats in the Legislature (down from a high of 74 under Rae). Perhaps more disturbingly, the NDP's public profile is nearly invisible, except when it attracts negative publicity for actions like its recent filibuster that delayed passage of the bill ending the strike at York University.

The party could benefit, then, from a new leader with a less confrontational approach, a 21st century outlook on policy, and an urban orientation. Someone like Peggy Nash, a CAW staffer and former federal MP, Marilyn Churley, a former minister in the Rae government, or Adam Giambrone, a Toronto city councillor and chair of the TTC. But none is running, and it is too late to enter the race with voting having already started (by mail) and the convention set for March 7.

Instead, New Democrats have to choose a leader from among four sitting MPPs – Gilles Bisson, Andrea Horvath, Michael Prue and Peter Tabuns. All are veteran politicians. All are decent and thoughtful people. None could be described as inspiring.

Of the four, Bisson and Prue have been the most ready to challenge NDP orthodoxy during the leadership campaign. Bisson has called for the NDP to move away from its "tax the rich" stance in favour of "wealth creation," and he has advocated a tougher position on crime. But like Hampton, Bisson is a northerner, and it is time for a southern NDP leader.

Prue is pushing for a debate on whether the NDP should continue to support separate school funding. And he alone of the four candidates questioned the party's decision to hold up the York U. bill. But in other respects, Prue's positions seem hackneyed, up to and including his campaign slogan ("results we've never had before").

Tabuns comes across as a single-issue candidate focused on the environment and energy – a reflection of his past position as head of Greenpeace Canada. He appears to be the choice of many in the party establishment.

Of the four, Horvath would be our choice. While during the campaign she has stuck rigidly to past NDP platform positions, she represents change in other ways – generation (at 45, she is the youngest of the four candidates), geography (she is from Hamilton) and gender (the provincial NDP has never had a woman leader). And there is hope she would grow in office.

General Motors of Canada Ltd. says it can no longer afford its pension and medical benefit plans.

The struggling automaker is aiming to renegotiate labour contracts by the end of March as it turns to Ontario and the federal government for money to help it restructure – and thus pay pension and medical benefits earned to date.

GM says it is waiting for actuaries to calculate how many billions of dollars would be required to secure pensions earned so far by 56,000 employees and retirees.

But it warns in a vague outline of its survival plans "the total obligations (or debt) represented by GMCL pensions as they are currently structured are no longer sustainable.

"GMCL is working with the CAW and the governments to explore options to address this challenge."

The company does not spell out how it proposes to secure pensions for retirees while cutting compensation costs for employees. All it says is it is proposing to follow its U.S. parent by transferring money to a union-administered trust fund that would pay for future medical benefits.

Starting in 2007, salaried employees had the formula for earning future pension entitlements cut from an average of their pay in the final years of their careers to an average for their remaining careers.

GM plans to cut its total workforce in Canada to 7,000 by the middle of 2010. The job reductions would leave it with five retirees for each active worker.

"It is becoming increasingly difficult to service GMCL's legacy cost (or pensioners' benefits) due to an increasingly large retiree population, high health-care cost, health-care inflation and poor pension asset returns stemming from a recessional market," the company says.

An operating company cannot legally cut pension benefits earned to date. Pensions may only be cut to the extent the pension is short of money when the sponsoring company is forced into bankruptcy. Pensioners then become unsecured creditors.

Ontario has a Pension Benefits Guarantee Fund intended to cover any shortfall for the first $1,000 of a monthly pension. But the insurance plan is now in deficit.

GM Canada notes it had $10.2 billion in pension commitments as of Nov. 30, 2007 and only $8.8 billion in assets. But it would owe more if it were to cease operations. With about 69 per cent invested in stocks, the assets in the plans for hourly and salaried worker would have shrunk dramatically since then.

Last August, former CAW union president Buzz Hargrove told the Star the risk of pension reductions was "so remote a possibility it's not worth speculating on."

Reeling General Motors has significantly increased the amount it's seeking as a lifeline from Canadian taxpayers to more than $6 billion.

GM of Canada Ltd., at one time the country's biggest industrial enterprise, submitted a survival plan to the federal and Ontario governments yesterday that asks for a lot more in loans than the automaker was originally offered, as well as proposes historic changes in the way it operates.

Those changes would include a shift in responsibility of future benefit costs to its union; government help to pay for existing pension obligations; wage and salary cuts for all employees; formation of a separate "contract manufacturer" company and a significant reduction in dealers.

Although GM would not disclose the value of its loan request, federal Industry Minister Tony Clement and Ontario Economic Development Minister Michael Bryant confirmed that it is between $6 billion and $7 billion.

In December, GM sought up to $3.4 billion in loans from the federal and Ontario governments, while Chrysler Canada Inc. sought $1.6 billion. At the time, the governments offered GM about $3 billion and Chrysler $1 billion in short-term loans.

Prime Minister Stephen Harper said then that the automakers might seek more money later.

"Over the coming weeks, my officials and I will evaluate the plans to ensure that they have viable long-term solutions that will sustain the industry well into the future," Clement told reporters.

"I would have to say this is a good first step. We are moving as quickly as possible in these negotiations, keeping in mind that any measures must be in the best interests of Canadian taxpayers and the Canadian economy."

The North American auto industry is experiencing its worst downturn since World War II because of a global financial crisis that has tightened credit and slowed business. Plunging autos sales in the U.S., the world's biggest market, have triggered serious cash flow problems for GM and Chrysler, which were already struggling.

In the past five years, GM and Chrysler have cut assembly plants and parts operations, eliminated thousands of jobs and invested heavily in new production systems.

The plan GM submitted yesterday said it does not contemplate any further job losses and plant closings "at this time." It has already implemented cuts and announced closings that will reduce its workforce to 7,000, from the 20,000 it employed just five years ago.

The company is shutting down an assembly plant in Oshawa in May and a transmission factory in Windsor next year.

GM also indicated in its plan that over the next five years the company would slash its dealer network from the current 700 retailers to between 450 and 500. The dealerships now employ 33,000 workers.

Although most of Chrysler's remaining operations appear safe, the future looks bleak for a casting operation with 300 workers in Etobicoke, which will close in 2011 unless a buyer is found.

Clement and Bryant acknowledged the governments, companies and its stakeholders including unions and suppliers need to resolve many issues to reach final deals by a March 31 deadline, before public funds are released.

Bryant said everything, including repayment schedules, pensions and other legacy costs "is up for negotiation."

Neither GM nor Chrysler has yet tapped any of the federal and provincial money originally offered. GM said in its plan it would ask for "proportional support" to what the automaker's Detroit parent wants from the U.S. government to stay alive. In the U.S., GM Corp. increased its request for aid by $16.4 billion (U.S.) to almost $30 billion in a survival plan to Washington this week.

The Canadian subsidiary expects to account for 17 to 20 per cent of the parent company's North American production until 2014.

Meanwhile, Chrysler Canada Inc., simply submitted the same plan its Detroit parent had filed with the U.S. government this week.

Reid Bigland, chief executive officer of Chrysler Canada, said the U.S. plan applies because operations are highly integrated.

Bigland's decision raised questions about why the company did not submit a specific plan addressing Canadian issues in a request for so much public money. Clement said the government has told Chrysler it needs more details about the firm's plans for Canada.

The automakers' plans, particularly the GM submission, call for more cuts in labour costs and benefits so they can qualify for the aid.

GM said it needs to reduce workers' wages and benefits so they are competitive with compensation packages at non-unionized auto plants in the U.S.

Furthermore, it wants to shift responsibility of retirees' health care to a separate trust that the union would run. It would be similar to a plan that the United Auto Workers accepted a few years ago to ease the burden on GM in the U.S.

Ken Lewenza, president of the Canadian Auto Workers union, said last night workers have already provided savings of $900 million to GM in their last contract.

But he reiterated the union "will be part of any solution" in making sure GM survives and remains healthy. Workers currently earn about $34 an hour at GM in Canada.

In its plan, GM revealed it has discussed a long-term refinancing of its legacy costs for salaried and hourly employees with the Ontario government.

With files from Brett Popplewell, Madhavi Acharya-Tom Yew, Robert Benzie

Buzz Hargrove,
your timing's perfect

DEREK DeCLOET

Globe and Mail

February 20, 2009

Great leaders know when it's time to leave. But few have ever timed their exit as perfectly as Buzz Hargrove, who gave up the presidency of the Canadian Auto Workers on Sept. 6. Lehman Brothers collapsed eight days later, an historic event that sent the global economy into a deep funk, auto sales off a cliff and General Motors and Chrysler hurtling toward bankruptcy.

The world fretted. Mr. Hargrove set to work on his book deal.

Yes, it's all Ken Lewenza's mess to deal with now, and what a bind he is in.

“The problem is not our workforce. The problem is not our product,” the new CAW chief protested Tuesday night at a press conference at Toronto's Sheraton Centre hotel. “The problem is the global financial crisis.” But the flip side of being the blameless victim of global forces is that, by definition, you're powerless, too.

The biggest decisions are being made in Washington and Detroit. A few are being made in Ottawa. At Queen's Park sits the Canadian autoworkers' biggest ally in government, but it's a small player in the larger drama.

Some of the old Buzz bluster remains (“What more can they do in Canada when they've been in constant restructuring in the last 10 years?” Mr. Lewenza asked). But it's fainter now, undermined by the cold reality that that union has no leverage and that, when it comes right down to it, only the U.S. Congress can grant the kind of money – $19-billion (U.S.) – that GM and Chrysler say they need just to keep going. And there probably isn't a single Congressman who could locate Oshawa on a map.

What will the CAW have to give up to keep Canadian auto assembly plants running? Mr. Lewenza couldn't say. It's too early. He'd spoken to his U.S. counterpart, United Auto Workers president Ron Gettelfinger, less than an hour earlier about the UAW's “tentative understandings” with the three Detroit-based auto makers, but the details were still unclear.

So, too, is the negotiating power of the Harper government, which agreed to put up $2.7-billion of a $4-billion emergency loan for the Bailout Two, only to hear GM Canada say it didn't need the money yet.

In the long run, is there any need for GM to make vehicles here? Mr. Lewenza wishes the answer to be yes but even he had to admit that the Oshawa operation would be a rump, employing perhaps 8,000 unionized workers by the time the CAW's contract expires in 2011, down nearly 25 per cent from today's already-shrunken levels.

That's if things go reasonably well. If U.S. auto sales remain depressed, far below the previous norms of 16 million to 17 million vehicles a year, no one knows where the bottom is.

You might well ask why so much public money has been pledged to protect such a relatively small number of jobs.

The obvious answer is that it supports many more jobs, through suppliers and spinoff effects.

The less obvious is answer is that GM Canada isn't an auto maker as much as a pension fund that happens to own some plants and equipment.

Mr. Lewenza estimated that, three years out, 28,000 to 30,000 people will be drawing from its pension funds. But those funds are underfunded by several billion dollars, creating a major headache for governments, particularly Ontario's, if GM were to close up in Canada. (Chrysler's Canadian pension funds are in better shape.)

Sym Gill, the CAW's pensions and benefits director, said the solution to the pension woes rested with “the government, the companies and ourselves... We're ready to listen to any proposals.” Some form of taxpayer infusion or guarantee for the GM pension scheme would be welcome, Mr. Gill suggested. That might be wishful thinking, though.

Meanwhile, a source in the book publishing business says it's anticipated Mr. Hargrove's forthcoming book will be a big seller, given the timeliness of it. At least somebody's going to make a few bucks from all this.

Thursday, February 19, 2009

GM needs $12.7B for
pension fund by 2014

David Shepardson / Detroit News Washington Bureau

WASHINGTON -- General Motors Corp. said it needs to make $12.7 billion in pension contributions by 2014 and is exploring options for its underfunded pension plans.

In a conference call Wednesday, GM Chief Financial Officer Ray Young said the company was "trying to understand what our options for pension funding are."

The restructuring plan GM submitted to the government Tuesday predicts the automaker will need to make a $5.9 billion pension contribution in 2013 and $12.3 billion in 2014. GM expected to borrow the money, but could get additional government help to make up the shortfall.

GM disclosed on Tuesday that its pension funds were underfunded by $12.7 billion as of Dec. 31 -- with an $11.1 billion shortfall in its hourly pension fund and $1.7 billion in its salaried fund.

In 2007, GM froze its salaried pension plan, preventing workers from getting higher pensions for additional years of service. The move saved $420 million in 2007.

GM sold $13.4 billion in bonds in 2003, doubling its long-term debt, primarily to fund pensions and other retiree benefits. Under the terms of its federal loans, GM is trying to cut its long-term debt by two-thirds by swapping it for company stock. But GM bondholders believe the plan requires a disproportionate sacrifice from them, in part by asking them to give up so much of the value of their bonds to pay pensioners who are not being asked to help GM reduce costs.

Companies across the United States saw their pension funds take sharp hits in 2008 as the stock markets were off sharply.

Last month, the outgoing head of the Pension Benefit Guaranty Corp. warned that Detroit's Big Three automakers face a $41 billion pension shortfall.

The Pension Benefit Guaranty Corp. said by its accounting methodology that GM faces a $20 billion shortfall as of Nov. 30. GM spokeswoman Renee-Rashid Merem said the difference resulted from varying assumptions and accounting methods between GM and the PBGC. She said GM remains in contact with the PBGC.

The PBGC has warned that the GM pension situation was of growing concern.
"If GM were a healthy company with positive cash flow, able to meet all of its obligations and future funding obligations," then the underfunded status wouldn't be a significant issue, PBGC Director Charles E. F. Miller told The Detroit News in January.

GM isn't the only automaker with pension issues. As of Nov. 30, the plans for hourly and salaried workers at Ford Motor Co. had an $11.7 billion deficit, according to the PBGC; Chrysler LLC had a $9.3 billion deficit as of Jan. 1.

WINDSOR–Chrysler may still kill a shift at a major assembly plant here soon and the future of a company parts plant in Toronto is looking bleaker, union leaders say.

Despite assurances from Chrysler that no jobs losses are pending, top officials from the Canadian Auto Workers said yesterday that if slumping minivan sales don't start improving in the next few months, the company will probably drop a shift and more than 1,000 jobs here.

"I'm very concerned about it," said Rick Laporte, president of CAW Local 444. "The third shift is teetering here. That's today, but hopefully in the next month or two sales will pick up."

The plant, the world's biggest minivan operation, has sputtered in recent months because of a sharp downturn in the U.S. market.

Laporte's comments came after Chrysler executives indicated the company would not cut any more operations or jobs in Canada as part of a restructuring plan here and in the U.S.

Chrysler released some of its plans earlier this week in efforts to secure billions of dollars in additional loans from the U.S. government. The company will submit specific plans for Canada tomorrow in efforts to get $1 billion from the federal and Ontario governments.

Chrysler president Tom LaSorda also noted that if the market doesn't improve, there could still be job losses in Canada. If Chrysler cuts a shift at the Windsor plant, it would wipe out another 15,000 jobs at companies in the region that supply parts and services.

Chrysler forklift operator Lino LoMedico hopes his job is safe because of 17 years of service, but said he still feels like an "endangered species."

"It's definitely affecting everyone's psyche," said LoMedico 46, who is on layoff this week."People are very scared."

Laporte and CAW national president Ken Lewenza also expressed continuing concern about Chrysler's engine casting plant in Etobicoke as pressure builds on the company to find cost savings.

The future of the plant, which employs about 300 workers, has been uncertain for almost a decade. Union negotiators won a reprieve again in bargaining last year but there is a provision the plant, which opened in 1942, would close in 2011 unless Chrysler finds a buyer.

General Motors also submitted a restructuring plan in the U.S. this week and will file one in Canada on Friday in efforts to secure up to $4 billion in government loans.

GM, which has already eliminated thousands of jobs in Ontario, operates two assembly plants in Oshawa and parts factories in St. Catharines and Windsor. One assembly plant in Oshawa is shutting down in May and a transmission factory in Windsor will close next year.

The restructuring plans contemplate some concessions by about 19,000 workers at the two companies, but Lewenza said the union is still analyzing what reductions may be necessary so labour costs remain competitive here.

Sources say the United Auto Workers agreed to a freeze in cost of living increases, elimination of lump sum cash bonuses, overtime limits and work-rule changes. Some provisions would not apply in Canada because of differences in contracts.

Meanwhile, Ontario Premier Dalton McGuinty said the car makers' plans indicate the province has dodged a bullet but added "it's still early days yet."

In their plans, Detroit-based GM and Chrysler said they would be cutting 50,000 jobs worldwide, with about half in the U.S.

"In the grand scheme of things, it's relatively good news," McGuinty told reporters at Queen's Park.

With files from Robert Benzie

Retirees fight Delphi cuts

Groups file objections to prevent auto supplier
from canceling health care, life insurance benefits.

Feb 18, 2009

David Shepardson / Detroit News Washington Bureau
WASHINGTON -- A group of more than 1,000 Delphi salaried retirees has hired a law firm to try to block the Troy-based auto supplier from canceling their health care and life insurance benefits.

The ad-hoc group, the Delphi Salaried Retiree Association, hired San Francisco-based Farella, Braun & Martel LLP to file the formal objection to Delphi's plan Tuesday, the filing deadline. U.S. Bankruptcy Judge Robert Drain will hear the request by Delphi on Feb. 24.

"The retirees have accomplished an incredible amount of progress in only one week," said Den Black, a member of the retirees association. "It is clear that Delphi is attempting to hijack the retirees by robbing them of benefits that were earned over decades and promised at the time of their retirement. It is also clear that Delphi is attempting to head-fake the court by rushing for a motion that will have a traumatic impact on a multiple of 15,000 families."

Another group of retirees filed an objection Tuesday, asking whether Delphi had approached the government for assistance. Delphi fails "to address whether they have attempted to obtain bailout funds from the federal government," said the filing by law firm Spencer Fane Britt & Browne LLP of St. Louis.

On Friday, another law firm representing Delphi retirees, Stahl, Cowen Crowley LLC, filed an objection to Delphi's plan. Those retirees point to employee benefit records that suggest the benefits were permanent. A 2001 letter to retirees from Delphi said the life insurance "will remain in effect for the rest of your life and is provided by Delphi at no cost to you."

The retirees argue that Delphi wants to deny retirees "a voice to at least defend themselves against this onslaught."

On Feb. 4, the company sought permission to cancel health benefits for current and future salaried retirees, a move that it says would save the company $200 million from now through 2011, or about $70 million a year.

The auto parts supplier also sought to end post-retirement basic life insurance benefits for current and future retirees.

The moves would allow Delphi to reduce its balance sheet liabilities by nearly $1.2 billion. About 15,000 salaried retirees with medical and insurance benefits would lose coverage. The company wants to end coverage "as soon as (it is able) after March 31."

The company also moved to cancel all retiree health reimbursement accounts for Medicare-eligible salaried retirees and terminate the Medicare Part B special benefit for current and future salaried retirees and their surviving spouses.

"This is a decision that was as tough for us to make as it was for employees to receive. It's a tough, hard decision," Delphi spokesman Lindsey Williams said earlier this month, noting the declining auto market and worsening economy prompted the move. "It wasn't one we wanted to do."

Delphi has about 10,000 salaried employees.

For workers hired after 1999, Delphi doesn't pay retiree health benefits but puts 1 percent of an employee's base pay into a retirement savings plan. That contribution would be canceled if the court granted permission.

Retirees would be allowed to keep coverage if they paid for it, Delphi said.

Delphi, which has been under bankruptcy protection since 2005, has been struggling to emerge in recent months in the face of tight credit. Delphi had planned to continue the programs until it ran into difficulty raising enough money to emerge from bankruptcy. The company noted that auto sales have declined dramatically.

Delphi's "reasonable business judgment no longer permits them to maintain discretionary benefit programs ... that would cost hundreds of millions of dollars," the company said in a court filing. "Delphi has been working and continues to work closely with its advisers and stakeholders to re-evaluate its business plan and implement cash-conservation measures wherever it can."

Delphi said in its filing that it plans to revise its bankruptcy plan and file it by the end of the month as it struggles to shore up its cash. It asked the court to approve a deal to accelerate a $100 million payment from General Motors Corp. into the first quarter from the second quarter. It also disclosed that the value of the company may now be less than what it owes banks and investors funding its bankruptcy case.

This is the latest benefit cut sought by Delphi. In September, Delphi won permission to freeze its pension plans.

Delphi's hourly manufacturing cost has been cut to about $27 an hour this year from $73 an hour in 2005. Delphi rocked the auto industry when it filed for Chapter 11 bankruptcy protection Oct. 8, 2005. Since then, it has lost more than $12 billion, closed 21 of its 29 U.S. factories, and cut its hourly work force nearly 50 percent and its salaried work force almost 40 percent.

The Delphi retirees have started a Web site at www.delphisalariedretirees.org.

Canadian Auto Workers union president Ken Lewenza reacted cautiously last night to the latest survival plans put forward by troubled automakers General Motors Corp. and Chrysler LLC.

Lewenza said he received the green light from local union leaders yesterday to begin restructuring talks with the Canadian units of the Detroit Three automakers – GM, Ford and Chrysler – in the next few weeks.

"Those negotiations would be aimed at ensuring that active labour costs at Canadian facilities of the three companies remain fully cost competitive with the companies' counterpart facilities in the United States, even as those operations are restructured in coming months," Lewenza told a news conference.

The union president said the work in coming days will be to follow up with the Canadian management teams of the U.S. automakers.

"At the end of the day we're going to take our responsibility as a union seriously and do what we need to do to protect investment in Canada, protect our jobs in Canada and protect our retirees in Canada," Lewenza said.

Prime Minister Stephen Harper acknowledged yesterday that more auto jobs will probably disappear in Canada as General Motors announced it is cutting 47,000 jobs globally in a far-reaching restructuring that could mean more bad news for Ontario workers.

But Lewenza said Canada is already functioning with a bare minimum workforce and cannot afford any more said job cuts.

He said the Canadian subsidiary has been restructuring for the past 10 years and will only have 8,000 active workers once GM Canada finalizes its plant closings later this year.

GM announced the job cuts, as well as the closing of five more U.S. factories, along with Chrysler LLC's decision to trim 3,000 jobs in the U.S.

General Motors and Chrysler in Canada have until Friday to present similar recovery plans to the Harper government in order to access up to $4 billion in assistance from Ottawa and the Ontario government.

While warning that GM and Chrysler will probably shed more jobs, Harper said, "I'm confident with our participation in the restructuring that we will maintain our share of this industry in North America."

The Prime Minister said he's also "not concerned about General Motors moving out of Canada."

He was reacting to suggestions that by declining a $3 billion emergency short-term bailout last month from the federal and provincial governments, GM was signalling its intentions to close up shop in Canada.

"I am confident that Canada, with the partnership of Ontario, coming to the table with our share of funding, that we will maintain a strong industry in this country," Harper said.

In Windsor, the mood after the announcement of the survival plans was one of indifference – for some, the announcements were yet another blow to an already beleaguered industry.

"(Windsor) is not gonna completely crash, disappear and become a ghost town," said Dax Chauvin, 30, who once dreamed of following in his father's footsteps and working at the Chrysler assembly plant.

"But it won't be what it was in the '80s and '90s, where you could get a career (in the auto industry) and get a stable pension."

Chauvin, who worked at the plant throughout college and university and hoped to one day land a white-collar job there, said he plans to go this spring to Alberta and work in the tar sands.

"Everyone in my age group is packing up and leaving," said Chauvin, who works as a bouncer at a local bar and wants "simple dream stuff" like having a career and a family.

His dream once was to put in his 30 years at the plant and get a good pension, just as his father, two uncles and numerous cousins did, but that died many years ago, he said.

Don Grant, who makes moulds for automotive components, is concerned about what will happen to the city's auto sector, which he refers to as "heart of the city."

"We've already felt the hit but I don't think it's over," said the 39-year-old father of four.

"Whatever they do in the States will affect things here."

The impact, he said will hit not only those in auto manufacturing, but all their suppliers as well.

And he wondered how safe the future of the Chrysler assembly plant was, fearing that a high Canadian dollar could see it moved elsewhere.

As for his job, he thinks it's safe but worries about a slowdown in production.

With files from Isabel Teotonio, Richard J. Brennan, Les Whittington and the Star's wire services

CAW will do what's
needed to save jobs

________

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

WHAT THEY'LL DO FOR
THEIR MONEY IN THE US

General Motors

• Cut 47,000 jobs worldwide and shut five more U.S. factories in a massive restructuring plan by 2012. Of the job cuts, 26,000 will be overseas.

• Further reduce the number of vehicle models. The plan envisions a reduction in nameplates from 48 in 2008 to 36 by 2012.

• All major U.S. vehicle launches from 2009 to 2014 will be high-mileage cars and crossovers.

• Eight brands would be reduced to four core lines – Chevrolet, Buick, Cadillac and GMC. Pontiac will remain as a highly focused niche brand.

• Review the Saab brand. The Swedish unit could file for bankruptcy later this month.

• Talk to potential buyers for the Hummer brand.

• The Saturn brand, meanwhile, will remain in operation through the end of 2011. General Motors said it's open to the possibility of a plan from retailers or investors that would allow a spin-off or sale of Saturn.

GENERAL MOTORS RESTRUCTURING PLAN HIGHLIGHTS GM’s Plan details a return to sustainable profitability in 24 months
 Demonstrates GM‘s viability under conservative economic assumptions
 Expands and accelerates the Plan submitted on December 2
 Lowers the Company‘s breakeven to a U.S. market of 11.5-12.0M units annually
GM is comprehensively transforming its business, globally
 Brands, nameplates and dealer networks streamlined and focused
 Productivity and flexibility gains enabling more facility consolidations
 Shared global vehicle architectures creating substantial cost savings
 Unprofitable foreign operations addressed

GM’s Plan emphasizes the Company’s continued focus on great products
 ‘Fewer, better’ vehicles in U.S. supporting Chevrolet, Cadillac, Buick and GMC
 Renewed commitment to lead in fuel efficiency, hybrids, advanced propulsion
 All major U.S. introductions in 2009-2014 are high-mileage cars and crossovers

GM’s Plan calls for considerable sacrifice from all stakeholders
 Bondholders and other debtors
 Hourly and salaried employees, executives and retirees
 Dealers and suppliers
 Shareholders

GM’s Plan addresses the requirements of the loan agreement with the United States Department of the Treasury
 Competitive product mix and cost structure
 Compliance with Federal fuel efficiency and emissions requirements
 Domestic manufacturer of advanced technology vehicles
 Rationalization of costs, capitalization and capacity
 Major progress made with the UAW and hourly employees; considerable progress
 made with bondholders; additional work under way to achieve term sheet
 requirements and savings targets
 Positive net present value (NPV)
 Repayment of Federal loans

Reflecting further deterioration in economic, industry and credit markets since December 2, GM’s Plan details need for additional Federal funding
 Restructuring actions accelerated to mitigate this need
 Partial repayment of Federal funding still slated to begin in 2012
General Motors is vital to a robust U.S. economy, and a revitalized GM will greatly advance America’s technology leadership and energy independence
 Highly focused on a U.S. supply base and U.S. R&D, design and engineering
 Directly and indirectly supports 1.3 million U.S. jobs
 Committed to investing in advanced technologies and high-tech ―green‖ jobs
 A sound investment for U.S. taxpayers that will be repaid fully

Chrysler

• Cut 3,000 more jobs

• Eliminate the Dodge Aspen, Durango and Chrysler PT Cruiser.

• Reduce production capacity by 100,000 units and cut fixed costs by $700 million (U.S.) in 2009.

• Sell $300 million in "non-earning assets" in 2009

• Promises to commence paying back its government loans in 2012.

Chrysler said its plan was based on industrywide car sales in the U.S. market totalling 10.1 million units in 2009, then rising to 11.6 million in 2012. That forecast was lower than Chrysler's December projection, and represents a sales decline of about 720,000 units, based on the company's 10 percent market share.

Availability of credit to consumers and dealers is the "single most important element of Chrysler's viability," the automaker told the U.S. government. It is "critical" that Chrysler Financial find a permanent funding solution, the company said.

The 177-page plan would help the company achieve a positive net present value of $17.3 billion after taking into account all existing and projected costs, including repayment of 100 percent of the Treasury Department loan, Chrysler said.

The plan also included:

DEALER CONCESSIONS
Chrysler will cut dealer margins, eliminating fuel fill reimbursement, and cutting service contract margins.

UNION CONCESSIONS
The term sheets for labor and VEBA modifications will make Chrysler's cost structure competitive with foreign automakers' U.S. plants. However, the VEBA modifications are conditioned on further due diligence and satisfactory debt restructuring.

SUPPLIER CONCESSIONS
Chrysler is talking with suppliers and believes it can "obtain substantial cost reductions." Chrysler also supports supplier associations' proposals which would provide a government guarantee of automakers' accounts payable.

CREDITORS
Chrysler's plan includes cutting $5 billion of outstanding obligations from certain creditor groups, which would also provide immediate cash flow from interest savings of between $350 million and $400 million annually.

ALLIANCES
Chrysler said its proposed Fiat alliance would help stabilize the U.S. auto market and help Chrysler repay its Treasury loan faster. "Chrysler's intent is to build on its product alliances or form global alliances to enhance its viability. The company has proposed that a percentage of its new equity be retained in a trust controlled by the president's designee to facilitate these alliances in the future."

MANAGEMENT CONCESSIONS
Chrysler suspended its 401(k) match, performance bonuses, merit increases, and eliminated retiree life insurance benefits.

DOE TECHNOLOGY FUNDING
Chrysler said it expects to receive U.S. Energy Department advanced technology funding of $2.5 billion in 2010, $2 billion in 2011, and $1.5 billion in 2012.

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

GM plan calls for $30B, 47,000 job cuts
WATCH VIDEO

Canada's auto industry has hit a new low in global trade as it braces today for details of major restructuring plans by struggling General Motors and Chrysler in the United States – plans that likely will have another profound negative impact on the future of the sector here.

Canada's auto trade deficit – the value of vehicle and parts imports minus exports – shot up to its highest level in history last year, soaring to $13.8 billion.

That's more than double the $6.6 billion seen in 2007.

The Statistics Canada figures also show Canada is in a deficit position within North America in auto trade for the first time. The country's auto trade surplus with the U.S. plunged to $4.3 billion, less than a quarter of the level just three years ago. Meanwhile, its deficit with Mexico totalled $4.5 billion, slightly less than in 2007, but more than enough to offset the surplus with the U.S.

Demand for Canadian-made vehicles and parts plunged last year in the key U.S. market because of the global financial crisis, the downturn in the housing market and soaring fuel prices.

The gloomy statistics came as negotiators for GM and Chrysler, their main union and bondholders worked into the night in Detroit to hammer out agreements on how they would slash costs and eventually repay $17.4 billion (U.S.) in government loans to Washington.

The U.S. government wants to see that plan today.

If they reach agreement, industry watchers say, it will lead to significant concessions by thousands of Canadian workers, plant closings, heavy job losses and a ripple effect throughout the already troubled economy.

"There will be pain in Detroit and there's no way Canada can escape," said analyst Dennis DesRosiers, who has studied the industry here for three decades. "We're looking at major surgery and Canada will be part of it."

Also yesterday, U.S. President Barack Obama announced that instead of naming a "car czar," he would launch a government task force to lead the auto industry's restructuring. The task force will include Ron Bloom, a former investment banker who helped restructure the U.S. steel industry and has worked with the United Steelworkers union since 1996.

Thousands of workers in assembly and parts operations have already lost their jobs during the past year primarily in southern Ontario because of the steep decline in the U.S. market, where the province exports most of its auto production.

The Canadian subsidiaries of GM and Chrysler are seeking about $4 billion in loans from the federal and Ontario governments but they won't be submitting plans here until later this week, after they see what their parent companies file with lawmakers in Washington.

Talks between the Canadian Auto Workers and GM of Canada Ltd. and Chrysler Canada Corp. on concessions remain on hold pending the outcome of negotiations between the United Auto Workers and the two parent manufacturers in Detroit.

"I'm on pins and needles," said CAW president Ken Lewenza last night. "I really have no idea what's going on, what the deals look like or what will happen next."

About 20,000 workers at the two companies here face cuts in wages and benefits that will depend on the level of concessions by UAW members south of the border. During the past year, plunging sales in the U.S. have triggered bigger than expected losses and a cash flow crisis, and sped up the need for major changes.

The governments also expect the automakers to secure price cuts from parts suppliers that will impact hundreds of thousands of other workers on both sides of the border.

The two automakers, who have already used up hundreds of millions of dollars in public aid, and Ford have been losing market share to Asian rivals for more than 15 years and must now shrink to survive. Ford hasn't tapped the governments in both countries for aid yet but is seeking a standby line of credit if necessary.

"Ultimately it will end up in blood on the factory floor here," said DesRosiers.

GM operates two assembly plants in Oshawa plus parts factories in St. Catharines and Windsor. The company has announced the closing of an assembly plant in Oshawa in May and a transmission factory in Windsor next year.

Chrysler, which is in worse financial shape than GM and Ford, operates assembly plants in Brampton and Windsor and a parts factory in Etobicoke.

A source told industry journal Automotive News that GM expects to identify more than $1 billion (U.S.) in savings from additional plant closings and work rule changes when it files a plan.

In other negotiations, U.S. Representative Thaddeus McCotter, a Michigan Republican, said Congress expects a commitment from GM bondholders to let the automaker pay off a sizeable portion of its $30 billion (U.S.) debt with company stock in lieu of cash.

In Canada, the overall record deficit of $13.8 billion in auto trade last year is in sharp contrast to the peak surplus of $14.3 billion in 1999. Canada's overall auto trade has declined almost every year since then.

The release of the gloomy trade numbers here also revealed a continuing increase in Canada's auto deficit with offshore countries including Japan, Korea and Europe because of declining exports to them. That deficit has grown annually for more than a decade.

The slide in the auto sector contributed significantly to Canada's poor overall merchandise trade balance last year. It included an overall trade deficit in December for the first time since 1976, StatsCan reported last week.

"This data confirms that Canada's unbalanced trade with Asia and Europe is a major cause of the industrial carnage we see around us today," Lewenza said in a statement.

"For years we tolerated a growing offshore imbalance, because our strong position in the U.S. market bailed us out. But clearly we can't count on the U.S. market to prop up our trade numbers anymore, which makes it all the more essential to address those trade imbalances with the rest of the world."

The union has pressed Ottawa for action for more than five years to address the declining trade performance. It predicted growing production and job losses if the government did not force other countries to allow fair access for Canadian auto products into their markets.

Lewenza repeated calls for a national auto strategy and noted it will be a condition for union support in accepting concessions with GM, Chrysler and Ford.

Ford Motor Credit
will cut 1,200 jobs

Feb 16, 2009
Bryce G. Hoffman / The Detroit News

Layoffs begin this week at Ford Motor Credit, the lending arm of Ford Motor Co. The Detroit News has learned that layoffs, which first were announced last month, will come this week.

The Dearborn automaker plans to eliminate some 1,200 jobs, or 20 percent of the total work force, at Ford Credit to reduce costs as it struggles to return to profitability in 2011.

The company said the layoffs will be spread over several months.
"We have told employees that departures will occur from mid-February to late July," said Ford Credit spokeswoman Meredith Libbey.

Last month, Ford Credit posted a net loss of $1.5 billion for 2008, a $2.3 billion drop from the net profit of $775 million it reported a year earlier. That contributed to Ford's overall record loss of $14.6 billion.

The automaker recently completed a painful round of downsizing, cutting about 10 percent of the salaried payroll at its U.S. automotive operations.
Analyst Rebecca Lindland of IHS Global Insight said Detroit's carmakers have to be aggressive about cutting costs in this economy, which has seen automobile sales sink to 1980s levels.

"Right now, it's all about surviving 2009," she said.

"Every dollar is going to count."

Since it began the current restructuring campaign at the end of 2005, Ford has cut 60,500 jobs in North America -- including 13,200 white-collar jobs and 47,300 hourly blue-collar positions.

The automaker, which is alone among Detroit's Big Three in not asking the federal government for loans, told lawmakers last fall that it is striving to at least break even in 2011.

Ford had previously pledged to return to profitability in 2009, but abandoned that goal after car and truck sales began to decline sharply in the wake of the Wall Street crisis.

CEO Alan Mulally has called Ford Credit a "competitive advantage" for Ford, given that General Motors Corp. and Chrysler LLC no longer control their lending arms.

This has allowed Ford to continue offering leases and loans to more customers at a time when some competitors have been forced to cut back dramatically, further eroding their vehicle sales.

WASHINGTON – The Obama administration faces difficult choices on the fate of the U.S. auto industry, weighing the cost of pouring billions more into struggling companies against possible bankruptcies that could undermine plans to jump-start the economy.

General Motors Corp. and Chrysler LLC are racing against tomorrow's deadline to submit plans to the government to show how they can repay billions in government loans and return to viability despite a sharp decline in auto sales.

The terms of the federal loans set "targets" for concessions, largely from debt-holders and the United Auto Workers union, but concession talks have made little progress with just a couple days left before the initial deadline.

Negotiations between GM and the UAW broke off Friday night but were to resume yesterday, still focusing on exchanging the company's cash payments into a union-run retiree health-care trust for GM stock, according to a person briefed on the talks who didn't want to be identified because the bargaining is private.

GM and UAW officials declined comment.

GM and Chrysler don't need to have everything nailed down for tomorrow's progress reports, but the companies are expected to detail concessions along with plant closings, the potential elimination of brands and thousands of job cuts.

After tomorrow there will be several weeks of intense negotiations ahead of a March 31 deadline for the final versions of the plans.

Detroit-based GM and Auburn Hills, Mich.-based Chrysler are living off a combined $13.4 billion (U.S.) in government loans. If they don't receive concessions by March 31, they face the prospect of having the loans pulled, followed by bankruptcy proceedings.

The Wall Street Journal said in its Saturday edition that GM is considering as one option a Chapter 11 bankruptcy filing that would create a new company.

Any bankruptcy would be particularly painful, with some economists predicting the country could lose 2 million to 3 million jobs this year and the unemployment rate, now 7.6 per cent, could swell past 9 per cent by the spring of 2010.

In interviews yesterday, White House senior adviser David Axelrod didn't respond directly when asked if the U.S. economy could withstand a GM bankruptcy. Nor did he directly address whether the Obama administration would let GM go into bankruptcy.

"I'm not going to prejudge anything. I think that there is going to have to be a restructuring of those companies. I'm not going to get into the mode of how that happens. We'll wait and see what they have to say on Tuesday," he told Fox News Sunday.

Executives at the two automakers have said bankruptcy is not an option because consumers would not buy cars from a company that might go out of business.

"How that restructuring comes is something that has to be determined," Axelrod said. "But it's going to be something that's going to require sacrifice not just from the auto workers but also from creditors, from shareholders and the executives who run the company. And everyone's going to have to get together here to build companies that can compete in the future.''

Harley Shaiken, a University of California-Berkeley labour economist who has studied the automakers, doesn't think the Obama administration would run the risk of bankruptcies given its efforts to create jobs.

"We're clearly on the edge of that abyss right now. Going over it would do irreparable damage not simply to the auto industry but to the manufacturing base in this country," Shaiken said.

Axelrod wouldn't say whether the administration would offer the auto industry more bailout money. GM already has borrowed $9.4 billion to stay in business, and it would receive an addition $4 billion if the Treasury Department approves its viability plan.

Chrysler wants $3 billion more on top of the $4 billion it has already borrowed.

"We need to see what it is that they come up with this week," he said.

DETROIT – Talks between the United Auto Workers and General Motors Corp. central to a turnaround plan for the struggling automaker have broken down over the issue of retiree health-care costs, a person briefed on the talks said yesterday.

A parallel set of talks between Chrysler LLC and the UAW over similar concessions were continuing over the weekend but little progress had been made, the person said.

The breakdown of talks at GM and the stalled negotiations at Chrysler come just before Tuesday's deadline for both automakers to submit new restructuring plans to Washington as a condition of the $17.4 billion (U.S.) in federal aid that has kept them both operating since the start of the year.

"It doesn't seem like the stakeholders are really prepared to give a whole lot," said independent auto industry analyst Erich Merkle. "It's a high-stakes game of poker right now."

If GM cannot win agreement from the UAW and creditors to reduce its debt, analysts say the Obama administration will face a politically tough choice: either pump billions of dollars more into the struggling automaker or steer it toward bankruptcy as some critics of the bailout have urged.

Differences over how to pay the health-care costs of retirees led to UAW negotiators walking away from talks held near GM's Detroit headquarters Friday night, the person familiar with the talks said.

GM declined to comment directly on the state of negotiations with the union. "We are committed to meeting the terms of the bridge loan and executing our restructuring plan," GM spokesperson Renee Rashid-Merem said.

Chrysler said it was also committed to meeting the terms of the federal bailout, which requires both automakers to reduce labour costs and the amount owed to a UAW-affiliated fund. "We continue to engage all of our stakeholder groups as we work through this process," Chrysler said in a statement. UAW representatives were not immediately available for comment.

Chrysler has been given $4 billion in emergency funding from the U.S. Treasury. It seeks $3 billion more.

GM owes the UAW some $20 billion – money pledged to a health-care trust for retirees. The union faces demands that it reduce its claim to half of that amount in exchange for stock in a recapitalized GM under the terms of the federal bailout for the automaker.

GM has received $9.4 billion from the U.S. government and has been pledged another $4 billion if it can show it can be viable at a time when U.S. auto sales are near 30-year lows.

The Wall Street Journal reported yesterday that one scenario being considered by GM would put its viable assets, including international operations, into a single company. Other assets would be sold under the protection of a bankruptcy court, the newspaper said.

A bankruptcy filing would allow GM to rework its contracts with creditors, the UAW, dealers and its suppliers.

But it would also mean even steeper job losses. GM, Chrysler and Ford Motor Co. have cut 250,000 jobs since the start of the decade and are looking to cut more.

David Paterson, a GM Canada spokesperson, refused to comment on the U.S. situation but hinted that GM Canada is currently ironing out its own reconstruction plan to be submitted to Ottawa on Friday.

He would not say if employee and retiree concessions such as benefits cuts were part of the viability plan that will be presented to the federal government but made it clear that the global economic meltdown is a defining factor in the companies' belt-tightening efforts.

Ken Lewenza, president of the Canadian Auto Workers union, said he will be keeping a keen eye on the worrisome American proceedings.

"You cannot have a healthy auto industry in Canada and an unhealthy auto industry in Detroit," he said. "There's just too much integration between both countries. We've been sitting on pins and needles with the constant speculation."

Federal Industry Minister Tony Clement has suggested that Canadian autoworkers will have to make sacrifices to save their industry. He insists that the auto industry won't survive without a reduction in labour costs.

On Jan. 19, he spoke to the Canadian International Council and stated, "I think it's evident that change will have to be made by the automakers, by the unions and other stakeholders in order for this industry to survive." He announced that carmakers need to renegotiate wages with the Canadian Auto Workers.

It was estimated that the new (CAW) contracts will indicate that Canadian workers will cost $27 more per hour than their American counterparts. It was noted that labour costs owned by offshore manufacturers are generally lower as their employees aren't unionized.

The CAW, however, insists that its members cost less than those in the United States because of Canada's public health-care system, a higher rate of productivity and the lower dollar value.

CAW president Ken Lewenza continued to attack the disparity viewpoint.

"Concentrating on the compensation paid to workers, which in Canada is 7 per cent of the total cost of an assembled vehicle, is just being totally dishonest with the challenges we have in the auto industry," he said. "Until this global financial crisis and credit freeze is corrected, autoworkers are going to continue to face significant layoffs, significant insecurities, regardless of how much we make."

Perhaps Clement should take note of the pay cuts that are affecting our Canadian workers due to closures at assembly plants. On the other hand, perhaps Clement should look in his own back yard and justify how, in these difficult economic times, government ministers have managed to give themselves huge pay hikes. Alberta Premier Ed Stelmach, for one example, received a 24.5 per cent increase, and the 23 members of his cabinet received a 29.58 per cent increase.

If Clement gets his way, a nasty precedent will be set and it won't stop with the auto sector.

Clement stated that he finds the discussions regarding government funding for the automakers "disappointing" and that Ottawa has been ready to hand over its money since December. The question that immediately jumps to mind is, "With what strings attached?"

Before committing to such loans, the UAW (United Auto Workers, in the United States) and CAW will be closely examining the terms of repayment. Let's not be too hasty here. After all, only a few short months ago, Clement was adamantly opposed to any governmental financing. Now, he wants to play Santa Claus.

The U.S. government is at least backing research and development costs with green technology and aiding buyers in their financing of new vehicles. What has Clement done in Canada to help the auto industry? Take a look: imports have tripled since 1996.

* Fact: North America imports more than four million vehicles from offshore per year. This year, offshore imports will consume almost 30 per cent 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: 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: Since 1996, Canada's auto imports from Japan have grown 118 per cent. But our auto exports to Japan have declined 60 per cent. Our auto trade deficit with Japan equals $6.3 billion. For every dollar we export to Japan, we import $135.

* Fact: Since 1996, Canada's auto imports from Korea have grown 710 per cent. But our auto exports to Korea have declined 75 per cent. Our auto trade deficit with Korea equals $1.7 billion. For every dollar we export to Korea, we import $177.

* Fact: 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: According to the U.S. Bureau of Labour Statistics, hourly labour costs for Canadian autoworkers are significantly lower than in Germany, Japan and the United States.

* Fact: Workers at Toyota's 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: In its 2008 contract with the Big Three (now being implemented), the CAW negotiated cost savings that will total more than $300 million per year (once fully in place).

So, let me ask you, Mr. Clement: are you willing to make some personal sacrifices -- i.e. pay cuts -- to save this country (as your recent party's budget will show this country with a deficit) or would you rather attack and continually watch the manufacturing sector disappear, putting the tens of thousands of men and women who built this country out of work?

Gary Beck is president, Canadian Auto Workers Local 707 (Oakville).

NEW YORK–General Motors Corp. is planning to slash another 10,000 salaried jobs by May, saying the cuts are unavoidable with a government restructuring deadline looming and industrywide sales in one of the worst downturns in history.

The Detroit-based automaker said today it will reduce its total number of white-collar workers by 14 per cent to 63,000. About 3,400, or 12 per cent, of GM's 29,500 salaried U.S. jobs will be eliminated and other jobs will be cut in other regions of the world depending on staffing levels and market conditions.

General Motors of Canada Ltd. is cutting its white-collar, salaried workforce by possibly hundreds of jobs and temporarily trimming pay of remaining staff as it desperately fights to stay alive during the industry's current economic storm.

GM Canada's Detroit parent, which is burning through billions of dollars in cash, announced the reductions of its global salaried workforce in efforts to slash costs and qualify for public financial aid from the U.S. and Canadian governments before deadlines next week.

GM's cuts would work out to about to 340 jobs in GM's current Canadian salaried workforce of about 2,400, but a spokesperson would not confirm the range of reductions.

"We will not announce a specific number relative to the impact on GM Canada but it is clear that our operations here will be affected in addition to previously announced salaried reductions associated with the closures of both the Oshawa Truck and Windsor Transmission facilities," said Stew Low, director of communications for GM of Canada.

Low added in an e-mail to the Canadian Press that pay cuts that will be applied to most of the salaried employees who remain will be in addition "to significant reductions already announced to GM salaried benefits in Canada."

"This is more difficult news for Ontario families," Premier Dalton McGuinty said in London today.

"We will have a smaller auto industry in Ontario... (and) fight as hard as we can to maintain a share of that industry."

In Canada, the federal and Ontario governments have said they're willing to provide the equivalent of 20 per cent of what the U.S. government provides – about C$4 billion – to help subsidiaries of the Detroit Three automakers, although conditions are attached.

One of the conditions is that the automakers and employees represented by the Canadian Auto Workers union negotiate new, lower labour costs. The CAW has said it's willing to talk and help the automakers survived but also advanced its own set of preconditions.

CAW president Ken Lewenza, whose union represents workers at the Canadian subsidiaries of General Motors, Ford (NYSE: F) and Chrysler, said that car dealers, bond holders, shareholders, executive wages and benefits all must take a hit along with unionized workers.

He added that GM's salaried, non-union workers have already been affected and will undoubtedly feel additional pain.

"``I don't think we've had two consecutive days in a row where there hasn't been bad news in the auto industry. But when you announce 10,000 job losses globally, there's going to be an impact in Canada. It's inevitable," Lewenza said.

He added that "significant cuts" have already been made to GM's salary groups in Canada and they are at "the bare minimum."

In its plan to the U.S. Congress submitted late last year, GM said it would have to reduce both salaried and hourly positions so that the company could become viable for the long term.

The company said it plans to reduce its total U.S. work force from 96,537 people in 2008 to between 65,000 and 75,000 in 2012, but it did not specify how many of the surviving jobs would be salaried or hourly.

GM has dramatically downsized both its salaried and hourly work forces in recent years. Since 2000, GM's salaried work force has shrunk by 33 per cent from its 2000 high of 44,000 people.

At the same time, the number of hourly workers has plunged by more than half – to about 63,700 people at the end of last year from 133,000 in 2000.

Most of the cuts announced today are expected to take place by May 1.

The company's statement said there would be no buyout or early retirement packages as GM had offered in the past, but laid-off employees will get severance pay, benefit contributions and other assistance.

GM spokesman Tom Wilkinson would not say exactly where the U.S. cuts would come, but he said the automaker will continue to staff areas such as electric vehicle development that it expects to be important going forward.

"The goal is to put our people in the areas that are critical to our future success," Wilkinson said.

GM also said it will cut the pay of most of its salaried U.S. workers effective May 1. The pay cuts will be reevaluated at the end of the year, GM said.

The pay of U.S. executive employees will be cut by 10 per cent, while other salaried workers will see cuts of three per cent to seven per cent, GM said.

GM faces a Feb. 17 deadline to present a plan to the U.S. government showing the wounded automaker can become viable.

GM has received US$9.4 billion from the Treasury Department and expects to get $4 billion more, but the government can demand repayment March 31 if it determines the company can't become viable.

The company is required to show the government it can achieve ``positive net present value," which means that the present value of a company's expected net cash flows exceeds the initial investment in the company.

The loan terms also require bondholders to swap part of the company's debt for equity. The UAW also must make concessions that will reduce labour costs to the level of Japanese automakers' plants in the U.S.

GM's plan also will include shuttering additional factories, according to people familiar with the plans.

GM has yet to announce its fourth-quarter and full-year 2008 financial results, but analysts expect the automaker's losses to total in the billions of dollars for both periods.

GM reported a $2.5 billion loss in the third quarter alone and said it burned through $6.9 billion in cash during that period, adding to urgent warnings that it would run out of cash without government aid.

Canada union, automakers
not yet in contract talks

OTTAWA, Feb 10 (Reuters) - The Canadian Auto Workers union said on Tuesday that it has not yet entered into any formal talks on reopening collective bargaining agreements with the struggling Detroit-based automakers.

The CAW said in late December it was open to negotiating new wage and benefit deals with the Canadian arms of General Motors, Ford and Chrysler, opening the door to concessions less than a year into three-year contracts.

At the time, the union said the talks could start within days. But on Tuesday CAW President Ken Lewenza said there had been no developments on the file.

In December, Ottawa and the Ontario government unveiled an aid package that would provide C$4 billion ($3.2 billion) in emergency loans to the Canadian arms of General Motors, Ford and Chrysler to keep them operating while they restructure.

Lewenza said the union was ready to make sacrifices as part of an overall solution for the manufacturers' woes but was still waiting to see the terms the government has set for the companies to qualify for emergency loans.

"There are no formal negotiations going on right now," he told a news conference.

"We're waiting for the (loan) term sheet to be done and then we're also monitoring very closely the pain that's being inflicted on others, recognizing that we're not going to escape some type of sacrifice," he said.

The companies have until Feb. 20 come up with a comprehensive plan that would allow them to get the government aid. Lewenza said he was frustrated that the terms of the proposed loans had not yet been made public.

The Associated Press

SHANGHAI–China's monthly vehicle sales surpassed those in the United States for the first time in January, moving this country closer to becoming the world's biggest auto market, data released Tuesday showed.

With its growing middle class and vast potential as a consumer market, China is vital for General Motors, Volkswagen and Toyota as they count on demand here to offset weakness in the U.S. and elsewhere.

But China's ascent in the global auto market has been hastened by the plunge in U.S. auto sales, which tumbled 37 per cent in January to a 26-year low of 656,976 units.

Chinese vehicle sales also have cooled, but hardly as dramatically. In January, 735,000 vehicles were sold, down 14.4 per cent from a monthly record 860,000 last January, the China Association of Automobile Manufacturers said.

Mike DiGiovanni, General Motors Corp.'s executive director of global market and industry analysis, said last week he expected Chinese auto sales could hit 10.7 million units in 2009, more than his estimate of 9.8 million unit sales in the U.S. this year. Autodata forecasts 2009 U.S. sales at 9.57 million.

China's vehicle market has grown dramatically in recent years, overtaking Japan in 2006 to become the world's second-largest by annual sales. With 1.3 billion people, China will inevitably leapfrog the U.S., with a population of 300 million, into the No. 1 spot, industry experts say.

Still, if American car demand revives in coming months, the United States will remain the world's largest market by annual sales – at least for another year.

China's best-selling automakers are GM and Germany's Volkswagen AG but its own ambitious producers, such as Chery Automobile Co., are growing fast.

General Motors says it sold a record 1.09 million vehicles in China, up 6 per cent from 2008.

January sales in China were 0.8 per cent below those in December and well below the 790,000 some analysts had anticipated.

To spur the slowing auto market here, the government has rolled out measures to help boost vehicle sales as part of a multibillion-dollar economic stimulus package while it also tries to promote cleaner, more energy-efficient engines.

The sales tax on cars with engines less than 1.6 litres has been cut by half to 5 percent through the end of the year. The government also is spending 5 billion yuan (about $730 million) on subsidies to farmers to replace three-wheeled vehicles or outdated trucks with small, 1.3-liter or less vehicles.

Another 10 billion yuan ($1.5 billion) is going into upgrading automakers' technology and developing alternative energy vehicles.

In 2008, China's auto sales grew 6.7 percent from the previous to 9.38 million units – the first time growth has fallen below 10 percent since 1999.

Trucks and buses make up a larger share of China's sales than those of the United States or Japan. Some observers say that makes direct comparisons misleading. But many rural Chinese use such commercial vehicles for everyday family use.

Trade Minister Stockwell Day cheered last week after the United States Senate amended the "Buy American" clause in its $800 billion-plus stimulus package.

Day suggested the amendment, acknowledging "U.S. obligations under international trade agreements," represented a triumph of Canadian diplomacy. He called it "a great step forward."

But what was really gained?

First of all, the fact that the U.S. is bound by its international trade agreements should go without saying.

Secondly, both the WTO (the international trading regime) and NAFTA (the North American free trade deal), while applicable at the federal level, specifically exempt state and local governments and agencies from "government procurement" obligations.

And in the stimulus package now before Congress, formally known as the American Recovery and Reinvestment Act, much of the money will flow to state and local governments for a range of projects from highway expansion to bridge repairs, transit upgrades and school construction.

Under the House of Representatives version of the act, any iron or steel used in these projects must be American in origin. The Senate version would extend that requirement to all manufactured products. The different versions are to be reconciled this week in talks between the two houses of Congress. Bet on the broader version emerging from those talks.

Some Canadian commentators have suggested this is much ado about nothing because the U.S. has had Buy American legislation on its books for decades, notably for transit and airports. But Canadian manufacturers and exporters are concerned that the stimulus package would extend the Buy American requirements to a much broader range of projects.

Accordingly, businesses here are pressing for a specific Canadian exemption from the Buy American clause in the stimulus bill. There are, indeed, precedents for this. In 2002, for example, Canada (along with Mexico) was specifically exempted from punitive new U.S. tariffs on imported steel.

But that was when the Republicans were in charge in Washington. With the Democrats now controlling both houses of Congress and the White House, an exemption is less likely.

So Canadian labour leaders are arguing for mirror legislation here – a Buy Canadian law that would apply to federal money that flows to provinces and municipalities for infrastructure projects.

"Instead of putting on a Boy Scout's uniform and wringing our hands about others' domestic-sourcing practises, Canadian officials should play hardball," says Ken Lewenza, president of the Canadian Auto Workers (CAW). "They must defend our jobs with just as much determination as Americans defend theirs."

Some provinces already have Buy Canadian measures in place. Ontario, for example, requires 25 per cent minimum Canadian content for transit equipment. But the CAW (whose members make transit equipment at Bombardier's Thunder Bay plant) says that is too low and is calling for at least 50 per cent Canadian content.

There are concerns that such Canadian content requirements would drive up costs and/or trigger a trade war. The former concern must now be balanced against the need to protect jobs, while the latter may be exaggerated given that the U.S. and other countries are already doing this.

Much is at stake here, in both jobs and dollars. We need a clear-headed debate on the issue in the coming weeks, instead of applause for minor amendments to American laws.

CAW left in limbo on auto aid

Feb 8, 2009

The Canadian Auto Workers union is still awaiting details on terms of government loans to struggling vehicle makers here and the outcome of union negotiations in the U.S. before opening talks on concessions.

CAW president Ken Lewenza said yesterday the union had hoped to start talks with General Motors, Chrysler and Ford earlier this week but the Detroit Three have not released aid terms and the United Auto Workers has not said how it will lower labour costs in the U.S.

"It never happened," he said. "Our point is there is no sense in talking until we have seen the terms and conditions for the loans from the governments and what the UAW will do. We haven't heard much."

GM and Chrysler, in deep financial trouble, are seeking billions of dollars in loans from governments in both countries. Ford has not sought immediate aid but wants a standby line of credit.

Among conditions, the Canadian and U.S. governments have stressed are that automakers must lower labour costs to the level of non-union auto plants.

"We still don't know what the benchmarks are," Lewenza said.

Lewenza, who represents about 25,000 workers at the three firms, said he was surprised with the lack of data on labour talks in view of deadlines during the next two weeks for automakers to submit restructuring plans to governments.

Meanwhile, Gerald Fedchun, president of the Automotive Parts Manufacturers Association, said he pressed federal officials this week to begin providing aid for suppliers via the Export Development Corp.

"The money hasn't start flowing and smaller companies need it right now or there won't be anyone around when it's available," he said.

Ford Motor Co. Ltd. said yesterday it intends to cut as many as 850 jobs in Britain and that it wants to review this year's pay deal with workers.

The layoffs represent nearly 7 per cent of Ford's U.K. workforce of 12,900.

The company said it would trim employment at its transit van plant in Southampton by up to 500 through a voluntary separation plan. The plant is now operating fewer than four shifts a week, the company said.

Ford also plans to trim 350 other jobs by May in a restructuring of its salaried staff.

The company said it hoped the cuts could be made through a voluntary separation program offering lump-sum payments and for senior workers the possibility of retirement on full pension.

Ford said it wanted to re-evaluate this year's pay deal of 5.2 per cent because business had worsened significantly for the company since the raises were negotiated in October.

CAW eyes labour cost cut

GREG KEENAN

February 4, 2009

AUTO INDUSTRY REPORTER

The Canadian Auto Workers union would have to reduce wage, benefit and pension costs by more than $500-million annually at General Motors of Canada Ltd. to match labour costs at the highest-paying Japanese assembly plant in the United States.

Negotiations between the auto maker and the union on reducing labour costs are expected to begin later this week as GM and Chrysler Canada Inc. try to meet a Feb. 20 deadline set by Ottawa and Ontario to meet the governments' terms for loans, including a condition that the companies reduce labour costs to make them competitive with Japan-owned plants.

GM has prepared a "shopping list" of demands that it has made verbally, Chris Buckley, president of CAW local 222 at GM's Oshawa, Ont., operations, said yesterday, but formal, written requests for cuts have not been made.

Mr. Buckley would not outline GM's proposals, but other union sources said among the cuts sought are the elimination of two weeks of time off, known as special paid absences, and a reduction or elimination of cost of living adjustments for retirees.

The $500-million figure comes from a Globe and Mail calculation based on total costs of $77 an hour in Canada - including retiree costs and with the Canadian dollar at par but excluding productivity factors - compared with $49 (U.S.) an hour at the Toyota Motor Corp. assembly plant in Georgetown, Ky.

That $28 an hour difference, in either currency, multiplied by the approximately 20 million hours worked at GM Canada plants, equals $560-million annually.

The figure for Chrysler is about $420-million based on about 15 million hours worked at that company's two assembly plants and one parts plant in Canada.

"We're looking to co-operate where we can in terms of pulling cost out," Mr. Buckley said, but he added that the union has already told GM that it will not touch local agreements at the plant level, instead focusing only on overall labour costs across the company.

GM Canada spokesman Stew Low would not comment on Mr. Buckley's statements.

If GM can't reach an agreement with Ottawa and Ontario on loans and the CAW doesn't reduce labour costs, "there's a very real possibility that GM could choose to wind down their Canadian operations," Mr. Buckley said.

CAW president Ken Lewenza said he doesn't share that view, but he said it's easy to understand how people can be nervous when assembly plants are shut for several weeks, as the Oshawa plant is, followed by the elimination of one shift of workers when it starts back up again later this month.

Mr. Lewenza noted that the possibility of GM closing its Canadian operations is one reason the CAW is insisting as part of the negotiations on labour costs that the auto maker retain a manufacturing footprint in Canada.

"The reality is that General Motors is going to be a smaller company after this restructuring," he said. "They're still going to have excess capacity."

GM has been offered a $3-billion (Canadian) loan by Ottawa and Ontario. Chrysler has been offered $1-billion by the two governments.

GENERAL MOTORS (GM)

Close: $2.85 (U.S.), down 4¢

A 47 per cent drop in sales at General Motors Canada Corp. last month left auto sales this country at their lowest level in 20 years.

Yesterday's gloomy sales numbers came as a union official suggested GM could close its operations in Canada if workers don't accept concessions soon. GM declined to comment.

Industry-wide, sales and leases of new cars and trucks tumbled 26,000, or 25.3 per cent, to 76,850 in January compared with the same month last year, according to manufacturers.

The results marked the worst January sales in Canada since 1988 and reflected the continuing slump in the North American industry.

Sales in Canada fell by double digits for the third consecutive month in January. December sales tumbled by more than 21 per cent.

"Canada has clearly joined the global automotive recession and is bringing a lot of companies with it," industry watcher Dennis DesRosiers said.

Sales at GM plunged more than 12,000 vehicles, or 46.6 per cent, to 14,254 last month.

TORONTO STAR GRAPHIC

The same day GM released its results Chris Buckley, president of Canadian Auto Workers Local 222 in Oshawa, said the reeling automaker could close a major car plant in the city if the union didn't help its North American restructuring effort.

The company is already closing a nearby truck plant in May because of the sharp downturn in demand for pickups in the United States.

"If we're not part of the solution, it is possible GM could wind up its remaining Oshawa operations," he said in an interview. "But we plan on being part of the solution."

GM spokesperson Stew Low said the company would not comment on Buckley's remarks.

But Premier Dalton McGuinty suggested he doesn't believe GM would pull up stakes in Ontario because of recent investments, productivity and quality.

NDP Leader Howard Hampton was not as optimistic, accusing McGuinty of being naïve with the Detroit Three automakers now in the process of restructuring before a government deadline so they can get billions of dollars in public aid.

"When you talk with activists in the auto sector they are very concerned that one of the Big Three will no longer be in Ontario," Hampton said.

In Ottawa, Conservative MP Jeff Watson (Essex), chair of the party's auto caucus, said he disagreed with Buckley's concerns about a GM plant closing, which would affect more than 12,000 workers and hundreds of thousands of jobs in the parts and services sectors.

"I think they (GM) are committed to Canada," Watson said. "They were very clear to us that while they may not need the money for liquidity, they are very interested in partnering with us with respect to the restructuring plans"

Sales at Chrysler Canada Inc. slid 33.7 per cent to 11,170 vehicles and business at Ford Motor Co. of Canada Ltd. dropped 14.2 per cent to 10,901 during the month.

"All three of these companies are having a hard time breaking through the perception that they are in trouble which is turning a lot of consumers away from their dealers," DesRosiers said in a note to clients.

However, Honda Canada Inc.'s sales fell 37.1 per cent to 7,559; Nissan Canada Inc.'s deliveries dropped 16.1 per cent to 4,259 and Mazda Canada Inc.'s volumes declined 12.3 per cent to 4,150. Business at Toyota Motor Manufacturing Canada Inc. dipped 2.7 per cent to 10,269.

Bucking the declining trend, Hyundai Auto Canada Inc. said its business shot up almost 19 per cent to 4,607 while Kia Canada Inc.'s sales rose 1 per cent to 1,825.

In the U.S., Chrysler LLC's's sales plunged 55 per cent; GM Corp.'s deliveries dropped 49 per cent; Ford Motor Co Ltd.'s volumes tumbled 40 per cent and Toyota's business fell 32 per cent.

With files from Rob Ferguson

and Richard Brennan

CAW worries GM will
pull out of Canada

Feb 03, 2009

Leaders of the Canadian Auto Workers union are using increasingly conciliatory language as they await word from General Motors on the fate of the company's Canadian operations.

CAW Local 222 president Chris Buckley says he's concerned the company may pull out Canada entirely, which he says would affect about 12,000 workers and hundreds of thousands of indirect jobs.

Buckley says he's concerned GM may escalate its Canadian cutbacks after the company's board of directors wrap up a meeting in Detroit today.

He also says it doesn't bode well that estimated U.S. auto sales figures released Monday showed a 39 per cent drop for GM, making it 14 consecutive months that sales are down.

Buckley says he wants to speak with GM officials as soon as possible to pass on that the union is willing to be part of the solution.

The union is continuing to press the federal government to supply GM with guaranteed loans, as long as they're conditional on the company maintaining operations in Canada.

"As a union it makes no sense to ignore this crisis, we understand this is a terrible situation and if we choose to ignore this crisis there's a possibility General Motors would pull out of Canada," Buckley said in an interview.

"We're not about to give them a reason to pull out of Canada."

While Buckley was once hard-nosed and talked tough in seeking demands from the Detroit Three automakers, he has been forced to soften his stance in light of the current economic climate.

Federal Industry Minister Tony Clement has also said automakers should be reducing labour costs to make the Canadian auto industry more competitive.

"We haven't closed the door on anything just yet," Buckley said of the concessions the union is willing to make.

The union is now waiting for the phone to ring so they can advance talks with GM.

"At this point, I can tell you if we choose to ignore this crisis, it will put us in a very difficult position as far as (GM) having a Canadian presence," he said.

"I would suspect after their board meeting they'll have their restructuring plan put in place and hopefully Canada's a part of it."

Canada Press

DETROIT–General Motors Corp. and Chrysler LLC are offering blue-collar employees another round of buyout and early retirement offers as the automakers try to cut their work forces and reduce expenses, union officials said.

GM detailed its offers in an email message to local union officials Monday, according to a union official who spoke on condition of anonymity because workers have yet to be notified of the packages.

Chrysler made its offers Friday to all hourly workers represented by the United Auto Workers except those at the company's Kenosha, Wis., engine plant, according to a memo detailing the offers that was obtained by The Associated Press.

Chrysler spokeswoman Shawn Morgan confirmed in a written statement that the company is making the offers. She said they would have been presented to employees in December, but they had to be delayed because production was suspended at Chrysler's factories for much of December and January.

Both GM and Chrysler have seen sales decline with the overall U.S. auto market and have been forced to take government loans in order to survive.

According to the memo from UAW vice-president General Holiefield to local presidents and other officials, the union negotiated for another round of offers at Chrysler because of conditions the federal government imposed on the company in exchange for granting the loans.

The conditions require the Chrysler and GM to make changes to their UAW contracts, including elimination of the jobs bank, in which workers get most of their pay even when they are laid off. Chrysler, GM and the union said last month that the jobs banks had been eliminated.

"Many of you raised concerns that more of our members may have accepted special packages or explored other options if they had knowledge of the changes in the CBA (collective bargaining agreement) that may impact their current situation, i.e., elimination of the jobs bank, etc.," Holiefield wrote.

The new round of offers may be more appealing to workers who are on indefinite layoff due to the U.S. auto sales slump. The companies can leave the jobs vacant for now, then later fill the jobs as needed with new workers who can be paid about half what current employees make.

Chrysler's roughly 26,800 production workers represented by the UAW make about US$29 per hour, while GM's 62,000 UAW-represented workers make around $28. Under a contract reached last year, the company can pay some replacement workers around $14 per hour and give them less-costly health care and retirement benefits.

Workers at both companies have until Feb. 25 to accept the offers.

Chrysler's early retirement package includes $50,000 cash and a $25,000 voucher to buy a car, while the Auburn Hills-based company's buyouts include $75,000 cash and a $25,000 car voucher, according to the union memo. The buyout offer is more lucrative, with $115,000 plus a $25,000 car voucher for workers with 10 or more years of seniority at closed plants in St. Louis and Newark, Del., according to the memo.

News of Chrysler's offers was reported earlier Monday by the trade publication Automotive News.

GM's offers, to nearly all its UAW employees, are less lucrative. The Detroit company is offering $20,000 in cash and a $25,000 car voucher for workers who retire early and those who simply leave the company, according to the union official.

GM spokesman Tony Sapienza and UAW spokeswoman Christine Moroski declined to comment on the offers.

Chrysler and GM were each forced to obtain government loans to stay in business. Chrysler received $4 billion and expects to get another $3 billion after it shows the government its plan to become viable Feb. 17. GM has received $9.4 billion and expects to get $4 billion more when it files its plan.

Ford Motor Co., which says it has enough borrowed cash to make it through 2009 and doesn't expect to use government loans, expects to get the same concessions from the UAW that GM and Chrysler get as part of their government loan agreements.

But Ford spokeswoman Marcey Evans said the company has "no plans at this time to offer buyouts to hourly workers." The Dearborn-based automaker offered 10 early retirement and buyout packages to all hourly workers during the first quarter of 2008 and offered packages at selected factories in the third quarter. About 7,100 employees left the company as a result, she said.

Ontario's unique pension-plan safety net that makes payments when companies go bankrupt is teetering on the edge of being wiped out and could fold if a large corporation were to go under soon, experts warn.

The provincial government is currently accepting comments on a report it commissioned in 2006 – the first review of pension laws in 20 years – and lead author Harry Arthurs concluded the Pension Benefits Guarantee Fund, the only such program of its kind in Canada, could soon become history.

"I think one sufficiently large company or several large companies (going bankrupt) would cause the plan to go broke," Arthurs said in an interview, adding that the Ontario government is in no way required to save the pension-insurance program.

"They certainly have no legal obligation to bail it out ... and I think it's an interesting question – if there isn't enough money, what happens next?"

Since 1980, the Pension Benefits Guarantee Fund has provided pensioners with up to $1,000 per month in the case that a pension plan fails to provide its full benefit, or any at all.

The program is funded by corporate payments and had been run successfully for decades.

But the report notes it's increasingly common that companies are reporting high levels of unfunded pension liabilities – shortfalls in funds needed to pay out its pension requirements – and the provincial fund is threatened by a possible "shipwreck scenario."

That could occur if a bankrupted company with many employees flooded the fund with claims and the government found the shortfall too expensive to make up.

Similar fears have been raised in the past because of troubled companies like Algoma Steel, Massey Combines and Stelco, and special provisions were made by the government to keep the fund afloat.

But the plan last reported a deficit of $102 million, and there's no guarantee the government would be willing to again prevent a shipwreck scenario, said Simon Archer, a senior staff member of the expert commission that wrote the report.

He said a shipwreck scenario appears to be "pretty realistic" considering the plight of companies like Nortel, and struggles faced by automakers, manufacturers and the pulp and paper sector.

"If the question is how likely is it, I'd say there's pretty good odds these days that there's going to be a major insolvency and that will put pressure on the PBGF," Archer said.

While pensioners with large corporations would likely be among the first to be looked after in the case of a government bailout, a failure of the fund is a scary proposition for employees with smaller companies, he added.

"The big guys are going to get attention one way or another but the little guys need this insurance system to keep their pensions in place," Archer said. "Problem is, if you're a tiny little auto parts plant in Brantford or wherever, the government's not going to step in because you're not powerful enough ... to attract political attention."

The report recommends that the government not only find a way to maintain the fund, but also boost its premiums to a maximum of $2,500 a month to reflect the current cost of living. "Nobody loses a pension, what a good public policy that would be," Archer said.

The head of the Financial Services Commission of Ontario, which oversees the fund, was not made available for an interview. An Ontario government spokesperson also wouldn't comment.

Workers at a third Magna International plant have ratified a controversial "Framework of Fairness" contract that eliminates their right to strike. But the local union's president says there wasn't anything fair about the process in getting the deal.

Angus MacDonald, president of Local 1256 of the Canadian Auto Workers, charged yesterday the bargaining committee at Magna's Mississauga Seating Systems plant ignored directions from members in negotiations and staff of the national union improperly interfered in efforts in order to "ram through" the deal.

MacDonald, who opposes the Framework of Fairness concept of closer ties between labour and management at Magna, also said in an interview the committee froze him out of negotiations and wouldn't let him speak to members at the vote on a tentative contract last week.

"It showed contempt by the committee and staff for the democratic traditions of our union," said MacDonald. "The workers were undermined here."

However, CAW national president Ken Lewenza and local union negotiators countered that workers voted freely in favour of the tentative, two-year contract.

"The bargaining committee there went through some difficult discussions and a difficult round of negotiations," said Lewenza, who supports Magna's concept.

"And, at the end of the day, the members made the ultimate decision to support it."

Workers, who earn an average of about $26 an hour, voted 173 to 143 in favour of the two-year contract. The deal maintains benefits, gives workers lump sum payments of $800 and a wage increase tied to inflation in early 2010, but institutes changes in company-union labour relations under the new concept.

The infighting at the plant over the deal comes at a time when the North American auto industry is in turmoil. A sudden drop in sales has triggered massive production cuts and layoffs, including downtime at such Magna operations as its Mississauga plant, which employs more than 400 workers.

Earlier this decade, Magna founder and chair Frank Stronach initiated the Framework of Fairness concept to improve collaboration between labour and management for the benefit of the company and workers as global competition increased.

In 2007, Aurora-based Magna, one of the world's biggest auto-parts makers, and the CAW negotiated a deal whereby the union gave up the right to strike and agreed to binding arbitration and other changes in traditional labour contracts. In exchange, the CAW gained access to Magna plants for organizing without company interference.

Union delegates from across the country supported the concept, despite criticism from some current and past CAW leaders that it sold out workers in exchange for monthly dues.

In addition to giving up the fundamental right to strike, they also criticized the concept for replacing the traditional grievance procedure with a weaker process and providing management with more clout in the election of workers to union leadership positions.

Despite the access, the CAW has organized only one plant under the concept since 2007. Workers at Mississauga Seating and a plant in Windsor had already organized before accepting the concept.

"It has been slow and we expected more (plants) by now," said Lewenza. "We've been getting interest from several plants but it's hard to get the leadership of the company and management on track on this in view of the industry falling apart."

At Mississauga Seating, workers initially showed resistance to the concept. Stronach's idea of democracy was "dictatorship at its best" and the company was trying to "bully" and "frighten" workers, according to MacDonald.

Workers strongly directed their bargaining committee to engage in traditional negotiations and not in talks on the Magna concept, despite pleas from Lewenza at a meeting last fall.

But when talks started recently, management talked to the union committee about the need for co-operation as the plant fights to remain competitive and save jobs. The company indicated that it could secure more business if automakers knew there would be no disruptions in parts deliveries because of no-strike provisions.

That prompted the plant bargaining committee to reverse course and pursue a deal under the Framework of Fairness concept.

MacDonald said the committee also directed him to leave because he did not support other negotiators, who included three CAW national representatives, in pursuing the new strategy.

"I simply wanted the committee to support the wishes of the members," MacDonald said. "They didn't want me there. When I called the national office, I never got any support."

MacDonald said the committee also didn't notify him of the ratification meeting and would not let him address workers when he arrived.

But he noted the committee allowed Magna's top official for human resources to speak to workers in support of the deal.

But Duane McFadyen, the union's plant chair, said MacDonald initially interrupted the meeting and officials told him he could ask questions later, but he chose not to do so. MacDonald said he was never given the opportunity.

Lewenza said in retrospect, the union and local should have spent more time educating workers about the merits of the Magna concept. But he defended the bargaining committee's actions in negotiations.

"I think they did what was in the best interests of the members in view of what the industry is going through."

The Canadian Auto Workers will start negotiations for concessions with General Motors, Ford and Chrysler early next week in efforts to keep the teetering automakers alive.

The union, which represents more than 25,000 employees at the three automakers, announced yesterday that bargaining committees will reopen their existing contracts for "extraordinary" talks to make sure labour costs are competitive with workers at the companies' U.S. plants who are also negotiating concessions.

"Labour costs clearly did not cause this worldwide crisis in the auto industry, and labour concessions cannot possibly solve that crisis," said CAW president Ken Lewenza. "But we can't ignore the precarious financial state of these companies, the extraordinary government offers of aid and our need to remain fully competitive for future investment."

Although Lewenza did not use the word "concessions" after meetings with the committees here, he acknowledged last month that workers face reductions in wages and benefits plus further job losses so the companies can qualify for multibillion-dollar loan packages from the federal and Ontario governments.

The companies are also tapping government aid packages of $17.4 billion in the U.S. to help them while they work on a massive restructuring that will shrink operations in both countries. A major slump in auto sales and a deepening recession in North America have left the three companies close to collapsing.

But after requesting immediate aid last month, GM of Canada Ltd. indicated in the last week that it doesn't need some $3 billion in repayable loans. But GM added it could seek the money again soon.

Ford Motor Co. of Canada Ltd. told the governments last month it needs a "standby" line of credit of about $2 billion, while Chrysler Canada Inc. wants $1 billion.

Lewenza added yesterday he doesn't envisage a situation where the union would break from historical matching or "pattern" contracts if one of them decides not to accept loans.

"Realistically at one point or another, they will all need money," he said. "Furthermore, we have no intention of breaking from the pattern and putting our members in a situation where they are competing against each other."

Lewenza said GM negotiators have been the "most aggressive" in pursuing talks, but the union has not decided at which company it will open bargaining.

GM has also provided little information on "benchmarks" in wages and benefits that would improve competitiveness so it can qualify for government aid, he said.

However, industry sources say special absence days of six weeks over three years; legal aid; tuition assistance and some health-care expenses are vulnerable when negotiations start. Furthermore, they say the companies could extend a current freeze in a cost of living allowance (COLA) and inflation protection for retirees.

Workers, who earn almost $34 an hour, agreed to a wage freeze, a temporary COLA cut and some reductions in benefits in a new three-year contract last spring.

In an attempt to ease pressure for concessions, the CAW released a report earlier this week that showed members at assembly plants have an overall labour cost edge over unionized and non-unionized plants in North America because of superior productivity.

CAW Big Three Master Bargaining Committees Joint Meeting

January 29, 2009

RESOLUTION

In the wake of the unprecedented downturn in the global economy and its impact on auto sales (especially in the U.S. market), and the resulting financial crisis facing the three North American auto producers, the three CAW Master Bargaining Committees (representing unionized workers at the Canadian operations of General Motors, Ford, and Chrysler) met in Toronto today to discuss the current situation and next steps.

Members of the three bargaining committees jointly and unanimously authorized the CAW National President and Master Bargaining Committees to engage in contract discussions with the Canadian units of the three automakers in coming weeks, as part of the broader restructuring of those companies (including the provision of government financial assistance to them).

Those negotiations would be aimed at ensuring that active labour costs at Canadian facilities of the three companies remain fully cost competitive with the companies’ counterpart facilities in the U.S., even as those operations are restructured in coming months.

Should these discussions result in a tentative agreement regarding proposed changes in the existing Master Contracts with the three companies, that agreement would be contingent upon:

In addition to considering possible changes to the existing collective agreement, the bargaining committees also indicated their willingness to engage in broader discussions with company and government officials regarding alternative mechanisms for funding legacy benefits such as retiree health and pension benefits.

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

DETROIT, Jan 29 (Reuters) - The Canadian Auto Workers union said on Thursday it was open to negotiating new wage and benefit deals with embattled U.S. automakers, opening the door to concessions less than a year into three-year contracts.

"Labor costs clearly did not cause the worldwide crisis in the auto industry, and labor concessions cannot possibly solve that crisis," CAW President Ken Lewenza said in a statement.

"But we can't ignore the precarious financial state of these companies," he said.

The move to re-open contract talks with the Detroit-based automakers came on the same day that Ford Motor Co posted a record full-year loss of $14.6 billion.

Ford is considered the strongest of the trio of automakers formerly known as the Big Three.

General Motors Corp and Chrysler LLC had to turn to the U.S. government for a $17.4 billion bailout.

The United Auto Workers, the union that represents U.S. autoworkers, has begun its own round of talks with GM, Chrysler and Ford.

The CAW said it was forced to act to keep Canadian labor costs competitive as the companies restructure under pressure from the U.S. government.

Lewenza and bargaining teams for the three automakers will begin talks as soon as next week, the CAW said.

In exchange for concessions, the CAW said the automakers would have to accept financial assistance from the governments of Canada and the province of Ontario, and make a commitment to future production in Canada.
Any changes to the contracts would also have to be ratified by a majority of members.

"We have consistently indicated that the CAW will be part of the solution," Lewenza said.

"But the workers could work for free, and it wouldn't make a difference without a broader national strategy to address this industry's deeper problems."

Ford seen posting big loss,
cash burn for Q4

By David Bailey

DETROIT (Reuters) - Ford Motor Co (F.N) is expected to post a big fourth-quarter loss on Thursday, but investors likely will be looking a lot closer at the automaker's cash burn rate and prospects for 2009.

The crucial question for investors and creditors is whether Ford, which has said it does not need U.S. government loans, will be forced to change its plans in the face of a still-contracting global auto market.

The U.S. auto market, the world's largest, fell to 26-year lows in December and are expected to have fallen further at the start of this year, ratcheting up the pressure on an already reeling industry.

Ford has sought a $9 billion line of credit to use as insurance against a worsening in the global economy.

Ford has taken pains to set itself apart from struggling rivals General Motors Corp (GM.N) and Chrysler, which have been pledged $17.4 billion of government loans and have said they need additional funds to turn around their operations.

Indeed, the U.S. economy has continued to weaken in the new year and the first month of 2009 has not looked much different in terms of sales than the last three months of 2008. U.S. light vehicle sales ran at a 10.3 million rate in December.

Standard & Poor's said in late 2008 that Ford had a few more quarters of comfort than its rivals, but would still face significant danger of falling below cash levels needed to maintain its automotive business.

Analysts on average expect Ford to post a fourth-quarter loss of $1.22 per share before one-time items, according to Reuters Estimates. That would translate to a loss of more than $2.8 billion.

Deutsche Bank said on Wednesday it expected Ford's results to come in below the per-share consensus with significant pretax losses in North America, Europe, Ford's Volvo brand and Ford Motor Credit.

"But investors will likely focus on the operating cash burn," Deutsche Bank said, adding that working capital results could be much below the negative $3.4 billion Deutsche Bank expects due to production cuts in North America and Europe.

"The magnitude of the deterioration in results in Europe will be a focus given the severe production declines observed in the fourth quarter relative to flat production through the third quarter," Deutsche Bank said.

Ford burned through $7.7 billion of cash in the third quarter, a rate higher than GM's for that quarter. Ford has said its cash burn rate for the fourth quarter was lower than that, but still significant.

Ford reported $18.9 billion of automotive cash at the end of the third quarter and had access to $10.7 billion of untapped revolving credit.

The automaker also hopes to receive $5 billion of direct loans from the Department of Energy's program to support improvements in fuel economy. That funding, if it comes to pass, would be spread over a number of years.

Ford is expected to update its 2009 U.S. auto industry sales forecast and may update its own production plan for the first quarter and its progress on restructuring.

The automaker had set a broad range for its U.S. industry sales in Congressional testimony late last year, when it also estimated returning to profitability in 2011. That range is expected to be narrowed this week.

In November, Ford said it planned to improve automotive cash by $14 billion to $17 billion through 2010 through a number of cost cuts, including reducing expenses for salaried workers by 10 percent by the end of January in North America.

The automaker also has sold off assets to raise cash.

Ford sold a 20 percent stake in Mazda Motor Corp (7261.T) in November and has been shopping Volvo, the last of its former premier auto group of European brands that included Aston Martin, Jaguar and Land Rover.

Ford and the United Auto Workers appear to agree that the automaker would also benefit from concessions granted to GM or Chrysler as those companies cut labor costs to meet the conditions of their government bailout loans.

Ford unveiled an electric car plan at the Detroit auto show, one that will require the U.S. government to adopt a more expansive energy policy that would support the entire auto industry's conversion toward electric or hybrid vehicles.

(Reporting by David Bailey; editing by Richard Chang)

OTTAWA–Government officials are hoping a $12 billion program aimed at freeing up automotive credit will lure customers back to dealer lots after sales went cold last month.

The government announced yesterday in its proposed budget that it plans to create the Canadian Secured Credit Facility, which will provide more funds for lenders who in turn would offer consumers and businesses better terms to borrow money and finance the purchase or lease of vehicles and equipment.

The move follows the turmoil in financial markets and a freeze in credit during the past year that made it extremely difficult for auto shoppers and equipment buyers to finance purchases.

For example, it contributed significantly to a plunge in auto sales, production cuts and a slowdown that rippled through the economy. Companies such as GE Capital, Ford Credit and GMAC could not get funds to lend to customers.

"Families with a good credit history find it difficult to get a lease for a new car," Finance Minister Jim Flaherty said yesterday.

"There was a gap and now we're filling it," said one finance department official, who suggested the program will probably operate for several months, but noted it will continue as long as there's a need.

"They're hitting the core issue in the automotive marketplace," industry analyst Dennis DesRosiers said in an interview. "It's not the fact that GM, Ford and Chrysler have the wrong product or bad product. The fundamental problem ... is that consumers aren't buying, and they're not buying because they can't get credit."

Federal officials, however, were not able to elaborate on how the plan will ensure consumers will find it easier to secure financing or leasing on attractive terms.

Under the program, the government will borrow funds to purchase from financial institutions up to $12 billion of asset-backed securities supported by loans and leases on vehicles and equipment ranging from cars and tractors to construction gear and copying machines.

An industry group will assist in refining program terms before it's rolled out, the federal official said.

With files from Star wire services

As negotiations for concessions start at reeling General Motors and Chrysler, the Canadian Auto Workers says workers at assembly plants here hold a labour cost edge over their union and non-union counterparts in the United States.

In efforts to debunk public impressions that workers will need to slash pay because of a big labour cost gap before the automakers can obtain government loans, the CAW says better productivity here gives Canadian workers a strong overall advantage over competing non-unionized employees at foreign-based automakers in the U.S.

That should limit demands for major concessions here, union leaders argue.

The CAW, which represents some 20,000 workers at GM and Chrysler in Canada, says its members earn an average of $67 an hour in wages and benefits That translates into about $53 (U.S.) an hour because of a falling Canadian currency during the last six months.

Hourly wages and benefits at unionized assembly plants in the U.S. are about $60, while labour costs are $49 at non-unionized plants of Japanese, Korean and German-based automakers in the U.S.

But a senior CAW official says an internal study released today shows Canadian workers have a significant edge in productivity that gives them an overall labour cost advantage compared with their counterparts at unionized and non-unionized U.S. plants.

CAW economist Jim Stanford said higher productivity here translates to the equivalent of a $5-an-hour edge over unionized assembly operations in the U.S. and $16 at non-union plants south of the border.

"Overall, it costs less to assemble a vehicle in terms of labour expenses in a CAW plant than it does at a non-unionized transplant in the U.S.," said Stanford, who is also a strategist for the national union.

The CAW's position contrasts sharply with the view of some industry watchers that labour costs at GM and Chrysler here are $15 to $25 an hour higher than non-unionized foreign-based producers in the U.S.

Those figures do not include the productivity factor.

The U.S. government wants the United Auto Workers members to take big pay cuts at GM and Chrysler in the U.S. before the automakers qualify for up to $17.4 billion in financial aid so they are more competitive with their Japanese-based rivals.

The two Detroit-based automakers are also asking for reductions in CAW members' wages and benefits that would make plants more competitive here so they can get up to $4 billion in loans from the federal and Ontario governments.

CAW president Ken Lewenza has said the union would be "part of any solution" to keep GM and Chrysler alive in Canada. But he also rejected reports about a large labour cost gap with other automakers.

He said in an interview that the automakers on both sides of the border have not identified "benchmark" wage and benefit rates from their competitors that they would use in negotiations for any concessions.

Union officials met with GM of Canada last week, but Lewenza said there was little talk about how much the company is seeking in concessions.

"We're just in a holding pattern right now," he said.

The two sides are waiting for a clearer indication from the U.S. government about what cost cuts it is seeking, including worker concessions, he said.

In his report on productivity, Stanford said average labour productivity is more than 11 per cent higher in Canadian plants compared with the U.S., and about 35 per cent better than operations in Mexico.

Unionized assembly plants in Canada are more productive than non-union operations, according to the report.

Stanford noted that high productivity has as much of an impact on competitiveness as hourly labour expenses and will provide an edge for Canada in the industry's restructuring.

"Part of our goal with this study is to remind decision makers and the public that cost competitiveness depends just as much on production as it does on wages," he said.

Meanwhile, TD Economics released another gloomy outlook for the North American auto industry. The bank predicted a 28-per-cent plunge in auto production this year, which will put more pressure on reeling suppliers.

Several analysts have forecast double-digit declines in sales and output in North America in 2009, but few industry watchers have estimated declines that high.

TD economist Dina Cover noted that while General Motors and Chrysler will get billions of dollars in loans from governments on both sides of the border, "the risk of bankruptcy has far from been eliminated."

TD expects a modest recovery in sales in 2010, but business will remain at a "depressed level" of 11 million vehicles in North America, down from 15 million to 16 million annually in recent years. Cover also said Detroit-based automakers will shrink in Canada and that will mean fewer parts suppliers, too.

The Canadian Press

Fiat was Chrysler's best option - UAW chief

By David Bailey

DETROIT, Jan 21 (Reuters) - United Auto Workers President Ron Gettelfinger on Wednesday said an alliance to give Italy's Fiat 35-percent of Chrysler LLC was the best deal the U.S. automaker could strike to preserve jobs.

"I think we all knew Chrysler needed to partner with somebody. It was a matter of who and what would do the least harm to people," Gettelfinger said. "Do we want to see Chrysler go away? I don't think that's a good idea."
He added: "I personally think that of all of the options out there, this was the best one."

Gettelfinger, who was speaking at the Automotive News World Congress, also said he was optimistic the union could work with the new Congress and the Obama administration.

The UAW campaigned for Obama in states like Michigan, Ohio and Indiana in the November election and has been sharply critical of Republicans in Congress for blocking an auto bailout bill and then pushing for deep union concessions in the emergency package approved by former President George W. Bush.

"I think you'll see a meeting coming up with the Big Three CEOs and the president very shortly," said Gettelfinger.

Under pressure to head off the collapse of one of the U.S. automakers, the Bush administration approved $17.4 billion in loans for GM and Chrysler in late December. Chrysler got $4 billion of loans and says it needs $3 billion more.

The terms of the government funding mandate that GM and Chrysler seek deep concessions from bondholders and the UAW and prove that they can be viable by end March.

One of the provisions backed by Sen. Bob Corker, a Tennessee Republican, would force the UAW to accept stock instead of cash for half of the amount the automakers pledged to a union-affiliated trust fund for retiree health care.

Gettelfinger said that provision, along with a call for the UAW to accept wages competitive with the non-union workers of Japanese automakers in the United States, would be hard for the union to accept or implement.

"Now we have this senator telling us you have to trade cash for equity? What's the value of it?" Gettelfinger said. "C'mon. Just because we're union don't mean we're stupid."

BEST OPTION OPEN?

The union offered its backing for Chrysler's tie-up with Fiat as soon as it was announced earlier this week.

Fiat and Chrysler's owner Cerberus Capital Management unveiled the terms of a proposed alliance under which the Italian automaker would take a stake in Chrysler's auto operations in exchange for access to technology and help selling vehicles outside the United States.

The deal, which does not involve cash, is contingent on Chrysler securing the additional $3 billion from the U.S. government.

Analysts have said the deal would strengthen Chrysler's truck-heavy vehicle line-up. Some also have questioned whether the automaker can find the cash to make the deal work if the U.S. auto market remains depressed.

Under Cerberus, Chrysler had contact with a range of potential partners before settling on Fiat including Renault-Nissan and GM, people familiar with the talks have said.

Gettelfinger said a GM acquisition of Chrysler would have cost thousands of jobs, especially in Detroit where both automakers have their headquarters. "It would have devastated the area," he said.

Gettelfinger said the union would have supported other partners for Chrysler besides Fiat. But he said he would have opposed a takeover of the company by a Chinese company.

He did not specify the reasons for his opposition to a deal with a Chinese automaker. The UAW has been critical in the past of Chinese trade, environmental and labor policy.

"Let's just say the environment is not good there for free trade," Gettelfinger said.

Delays in reaching an auto aid deal with General Motors and Chrysler in Canada will probably mean the closing of parts suppliers within weeks and could disrupt the entire sector, an industry leader says.

Gerald Fedchun, president of the Automotive Parts Manufacturers' Association, said yesterday suppliers are starving for cash, which the automakers and governments are holding up in negotiations for up to $4 billion in public financial aid.

"The delay could definitely cause some suppliers to go down," Fedchun told reporters after a speech by federal Industry Minister Tony Clement.

"Personally, I think it will.

"We're pretty certain a bunch of them are right on the edge because of a lack of decent cash flow for over a year."

Several automakers are down for part or most of this month to reduce an oversupply of cars and trucks in North America in an industry that is in economic turmoil.

That has exacerbated a growing cash flow crisis for teetering suppliers.

It means a lot of suppliers won't receive cash until at least mid-March since automakers don't pay them for 45 days or longer under current practices.

The parts industry viewed the aid package as a critical lifeline since Chrysler and GM had been delaying payments for longer periods because of their worsening financial troubles.

"The problem is if it doesn't flow fast enough, some companies won't make it," Fedchun said. Furthermore, he said some of the firms could be critical suppliers that could stall production at numerous assembly plants.

The Canadian parts sector, which has struggled for several years, is also seeking about $1 billion in short-term loan or loan guarantees to help many medium and smaller-size companies stay alive until the industry recovers.

At a breakfast meeting of the Canadian International Council, Clement did not indicate whether the government would provide specific aid for the parts sector in next week's federal budget.

But the government has signalled it will take measures to improve credit conditions so consumers can buy more vehicles.

Clement also noted the federal and Ontario governments are ready to start giving the $4 billion in loans at lower than marketplace rates and under other "tough" conditions to GM and Chrysler here.

One of those conditions calls on the automakers to pay "amounts owing'' under "reasonable" terms, which require timely payments to parts suppliers. The governments announced last month that the money would start flowing at the end of December.

But GM and Chrysler subsequently asked for a deferral, while their parent companies negotiated with the U.S. Treasury on terms for a $17.4 billion (U.S.) package south of the border.

"I'm finding, in all honesty, the pace of these discussions to be disappointing," Clement said.

Ontario Premier Dalton McGuinty said later there is "a real sense of urgency" in providing the money.

"But now, you know, we're down to the short strokes and we want to make sure that we get it right."

Fiat uses GM money
to help rescue Chrysler

Jan 20, 2009

Today Fiat S.p.A. and Chrysler LLC (Chrysler) – with its parent Cerberus Capital Management L.P. – announced plans to strike a global alliance, and it never would have happened without the help of General Motors Corp.

Fiat, of course, used billions of dollars of GM money to rebuild its product line and refashion its business under the leadership of Canadian Sergio Marchionne, CEO of Fiat Group. Ah, the GM connection.

Back in 2000, GM struck an alliance with Fiat not unlike the one announced today with Chrysler. For Fiat back then, it was a defensive alliance.

The then-DaimlerChrysler was pursuing a full acquisition of Fiat at a time when all the world's auto makers were striking deals with one another following the so-called “merger of equals” between Daimler-Benz and Chrysler Corp. But Fiat did not want to be taken over completely.

Instead, GM paid $2.4 billion in stock to acquire 20 per cent of Fiat Auto (figures in U.S. dollars). The deal also made Fiat a 5.1 per cent shareholder in GM.

Fiat needed the help from what was then a profitable GM and GM needed Fiat's expertise in small engines and diesel engines. GM's goal then was not very much different than Chrysler's goal now – get small car and diesel help from Fiat.

At the same time, Fiat's goal was not very much different from Chrysler's now – get help from someone with deeper pockets and a healthier balance sheet.

The big picture goal in 2000 was for GM and Fiat to eventually share platforms. Many assumed that Fiat would even make a return to the United States after leaving in 1983 because of poor sales and endless quality problems.

Well, none of that ever worked out. GM has proven over the years that it's not great with alliances, the Daewoo purchase notwithstanding. By early 2005, Fiat was in dire straits and threatening to exercise a put option that would have forced GM to buy the remaining 20 per cent of Fiat.

GM wanted none of that. Fiat was in stronger position, however, and the struggle came to an end when GM threw in the towel and agreed to pay out nearly $2 billion to terminate once and for all the Fiat put.

So add it up: GM paid $2.4 billion for 20 per cent of Fiat and another $2 billion to give it back. GM did get some engine technology out of the deal, but not $4.5 billion worth.

As veteran commentator Jerry Flint of Forbes magazine noted at the time: “The $2 billion handed to Fiat could be enough to turn GM around. It is enough to buy a rear-drive platform for the Cadillac DeVille and a big Buick, plus a hybrid for Chevrolet. It's enough to tool a plant for five-speed automatic transmissions so Bob Lutz's new models don't have to carry outdated four-speeds, with enough money left over to add XM radios to a year's production.”

Fiat, of course, took the money and did just the sorts of things Flint said GM could and should do with $2 billion. The Fiat product line was rebuilt and now Fiat is relatively healthy by global car company standards.

This should be a cautionary tale for the Chrysler people: Do not underestimate Marchionne and the Fiat people. They are shrewd business people who know how to build cars and brands.

For instance, the Fiat 500 microcar is a sexy hit in Europe and so well done that Ford Motor will use its mechanical underpinnings, the 500 platform, for its next-generation Ka. Yes, yes, Fiat has other alliances in the works.

Of course, today Fiat is having its struggles just like other auto makers. Sales were sliding at the end of the year and profit on the automobile side was a meagre €190 million for the third quarter and for the first nine months of the fiscal year profit at Fiat Group from automobile was €626 million. But unlike Chrysler, Fiat is worth something.

They aren't printing money on car sales in Turin, but no one disputes that Fiat has emerged as a success story in the past few years and it never would have happened without a cash infusion from GM.

Chrysler's people say the alliance with Fiat will provide “access to competitive, fuel-efficient vehicle platforms, power train, and components to be produced at Chrysler manufacturing sites. Fiat would also provide distribution capabilities in key growth markets, as well as substantial cost savings opportunities.”

Fiat will also help Chrysler manage its business, something sorely needed. And the deal gives Cerberus the exit strategy most observers say it wants desperately.

In another twist of irony, Daimler AG is also getting its little piece of Fiat after all these years. Remember, Daimler still owns about 20 per cent of Chrysler.

Will the Fiat-Chrysler alliance work? Will it help Chrysler survive? Of course it will, at least in the short term, although it remains to be seen how this alliance fits into the restructuring plans Chrysler must soon submit to the U.S. and Canadian governments as a condition of getting bailout money.

But in the longer term, alliances and takeovers in the auto business have generally gone badly. Only the Nissan-Renault alliances stands out as a huge success, though again I should give credit to GM for doing a good job using Daewoo as a source of small cars.

But the Daimler and Chrysler, that merger of equals, was a share-destroying fiasco. Ford's efforts with Jaguar, Land Rover and so on also turned out very badly. It's not easy getting different companies and different cultures to work together.

If I were a betting man, I'd wager Fiat gets the better end of this deal.

Canada: Cut auto wages

Tuesday, January 20, 2009

Alisa Priddle / The Detroit News

The Canadian government is requiring automakers to cut wages as part of a condition of the $3.2 billion (U.S.) loan from the Canadian and Ontario governments to the Canadian subsidiaries of Chrysler LLC and General Motors Corp.

CAW President Ken Lewenza expressed surprise and anger Monday at the suggestion of wage cuts for Canadian autoworkers to bring them in line with their U.S. counterparts, including those employed by nonunionized foreign carmakers.

"We should be at the table. Nobody has engaged us at all about the loan or conditions," he said, Federal Industry Minister Tony Clement brought the condition -- a draft of which was sent to the automakers Jan. 8 -- to light Monday in a speech in Toronto.

Clement also criticized automakers for not concluding negotiations, despite the urgency for the money and a Feb. 20 deadline to deliver a comprehensive plan. That is shortly after the Feb. 17 deadline for the U.S. automakers to present restructuring plans to Congress.

Lewenza said he thinks talks are in a holding pattern until negotiations are complete with the UAW and plans are finalized with the U.S. government.
"Canada can't do it alone. If the U.S. (bailout talks) break down, the Canadian government would pull its support," he said.

Lewenza stressed the union will continue to be part of the solution and ensure the industry is competitive, but when it comes to wages and benefits "we certainly won't be dictated to by the federal government."

The CAW leader said he will not divide his 27,800 active members (including Ford of Canada) by suggesting they adopt two-tier wages similar to those agreed to by the UAW, even though falling auto sales rule out the need for new hires at the lower rate.

Nor does he see the need to match wages at transplants in the U.S., noting labor represents only 7 percent of the cost of a vehicle. "We could work for nothing and the employers would still be in trouble," he said, as the root problem is the financial crisis.

Canadian auto workers earn the equivalent of $54 an hour, with the Canadian dollar valued at $.80, Lewenza said. That compares with $58 for UAW workers and $49 or less for transplant workers.

Meanwhile, there does not seem to be an urgency to get government aid to the carmakers.

Canadian aid was announced Dec. 20. Term sheets on behalf of both the federal and Ontario government followed Jan. 8. They are a draft to work from, said Chrysler spokeswoman Mary Gauthier, who declined to provide specifics of the conditions.

At the Detroit auto show last week, Chrysler Vice Chairman Tom LaSorda seemed unaware the terms had been released, telling reporters he wanted to meet with the Canadian government this week on the matter. LaSorda and Lewenza spoke last week in Detroit and Lewenza said there was no indication of the need for more concessions.

Some of the pressure in Canada was relieved when the U.S. government gave its first loan to the parent companies, said GM of Canada spokesman Stew Low.

He said the Canadian arm doesn't need the $2.4 billion promised (two-thirds of it federal money) in the short term and GM Canada is proceeding methodically to ensure its restructuring plan is viable and sustainable so the loan can be repaid.

"We will draw on the loan when we are sure we can meet the conditions," Low said.

He said GM will meet the Feb. 20 Canadian deadline, but he would not put a timeframe on when the money might be needed. Nor does he see a need for drastic production cuts on the Canadian side beyond plans to close the Oshawa, Ontario, truck plant in May and the closing of a Windsor transmission plant in 2010.

Chrysler Canada also has no timeline for when it expects to complete its plan and receive a $800 million loan, Gauthier said.
Canadian auto suppliers are seeking about $800 million in loans or loan guarantees from the government, as well.

ST. THOMAS – Canadian Auto Workers union members at the Sterling truck plant in St. Thomas have voted 97 per cent to accept a closure agreement providing enhanced severance and benefit arrangements.

Daimler AG announced in October it was scrapping the Sterling brand and ending production at the southwestern Ontario factory, eliminating more than 700 jobs, amid sagging demand for its heavy trucks.

The plant, which employed more than 2,000 people at its peak, is set to close March 27.

The CAW said Monday that the agreement ratified Sunday provides the 750 workers currently employed at the plant with two weeks of severance pay for each year of service. They also each will receive a $5,000 lump-sum payment and six months of benefits after the closure.

About 600 workers laid off in November are eligible for two weeks of severance for each year of service, a $3,500 bonus and a six-month extension of benefits.

Six hundred others laid off in April 2007 will each get $1,000.

Sterling workers will also be given preferential consideration for any job openings at Daimler's Freightliner parts depot in Mississauga, Ont., and the company is providing $100,000 to fund a job placement centre and $50,000 for tuition assistance.

"Our committee worked extremely hard to get the best possible agreement for our members, but this remains a tough time for these skilled workers, their families and the St. Thomas community and the surrounding area," stated CAW president Ken Lewenza.

"This Sterling truck plant closure underlines again the need for the federal government to take immediate action to deal with the manufacturing jobs crisis in Canada, which continues to mean the loss of skilled, good-paying jobs."

The Sterling shutdown comes as factory jobs across Canada, but especially in the Ontario manufacturing heartland, are being wiped out by the thousands.

Statistics Canada estimates the country lost 32,000 manufacturing jobs in 2008, an improvement from 130,000 in 2007 as increases in Alberta and Quebec offset an ongoing slump in Ontario.

General Motors, Deere & Co., Volvo and others have recently cut jobs and announced plans to shut down plants in southern Ontario.

In its October closure announcement, Germany-based Daimler cited "continuing depressed demand across the industry and structural changes in the company's core markets."

The St. Thomas plant produces a range of medium- and heavy-duty vehicles, largely for applications such as dump trucks.

Ottawa demands lower
auto worker costs

To tap federal funds, GM, Chrysler must slash labour costs to U.S. levels –
which means equalling Japanese competitors

SHAWN MCCARTHY AND GREG KEENAN

From Monday's Globe and Mail

January 19, 2009 at 2:55 AM EST

OTTAWA and TORONTO — General Motors Corp. and Chrysler LLC must submit a plan to slash labour costs in Canada to U.S. levels, and ultimately to those of Japanese car makers in North America, in order to tap a $4-billion government bailout fund, says federal Industry Minister Tony Clement.

The companies have yet to draw on the bailout package, which was announced before Christmas, and have until Feb. 20 to indicate how they will comply with terms and conditions that are now being hammered out, Mr. Clement said Sunday in an interview.

But he said those conditions will mirror tough terms laid out in the U.S. bailout package that require the Detroit-based companies to get their hourly compensation in line with Japanese-owned plants.

“We cannot compete – and we cannot have the industry survive here – if we're not cost-competitive,” the Minister said.

“If they wish to meet the conditions by Feb. 20, they have to have filed a plan of action for Canada which includes getting labour costs in line with the U.S.”

Ottawa's insistence car makers cut costs could provoke a battle between the companies and the Canadian Auto Workers union, which has said it is prepared to help improve competitiveness but has resisted contract concessions.

Chrysler is expected to begin talks with the CAW this week, while General Motors has indicated to CAW president Ken Lewenza that its executives will consult with the union before submitting its plan.

Some analysts have estimated Canadian workers could see wages and benefits cuts of $15 to $20 an hour.

These cuts are possible if the Detroit-based companies are forced to bring compensation in line with Japanese manufacturers. At a par dollar, Canadian unionized workers earn the equivalent of $67 (U.S.) in wages and benefits, but that drops to $53.60 (U.S.) when the loonie is trading at 80 cents (U.S.), according to the CAW.

American workers earn an average of about $58 an hour in wages and benefits, which is set to decline because the companies and the United Auto Workers agreed to a two-tier system with lower compensation for new workers.

Workers at Toyota's Kentucky plant earned about $49 an hour in wages and benefits, but the average may be even lower because several Japanese plants are located in low-wage states in the Deep South.

In approving a $17-billion bailout plan last month, the Bush administration included specific targets for reducing labour costs by the end of this year.

In a filing with the Securities and Exchange Commission, General Motors said the U.S. plan requires the companies to cut per person and hourly compensation – including wages and benefits – “to an amount that is competitive with average total amount of such compensation” paid by Toyota, Honda and Nissan in the U.S.

The White House aid package also requires Detroit-based companies to overhaul their work structures to be competitive with Japanese auto makers, who are renowned for their more cost-effective production methods.

The UAW is expected to lobby president-elect Barack Obama and the Democratic-controlled Congress to ease those onerous conditions, but the American union has acknowledged that its workers should expect rollbacks in wages and benefits.

Mr. Clement said there are various estimates of the differential – depending on assumptions about the value of the dollar, whether Detroit's legacy costs are included and whether productivity rates are factored in.

Federal officials say Canadian plants consistently rank near the top in terms of productivity and quality, two factors that can offset higher wage rates in terms of overall cost competitiveness.

CAW executives have indicated they are reluctant to reopen contracts or provide concessions on compensation, but that they are willing to work with the companies to improve cost competitiveness.

Mr. Clement said yesterday that he was not demanding specific concessions from the union, saying it is up to the companies and unions to negotiate a strategy.

“Clearly, if this industry is going to survive in Canada, the CAW is going to have to sit down [at the negotiating table] and be reasonable,” he said.

The Minister said the entire industry is in upheaval as sales have plummeted and Ottawa expects a much smaller industry to emerge.

With car makers shuttering their assembly plants this month, parts suppliers are increasingly desperate and are looking for help from Ottawa. As a condition of the bailout, the federal and Ontario governments required the auto makers pay their parts suppliers in a timely fashion.

But Mr. Clement acknowledged that some parts makers will have trouble surviving the slump in sales as the auto giants, both Detroit-based and foreign, have closed down their assembly plants for several weeks.

“If people are not assembling cars, it's hard to succeed as a parts supplier,” he said. “Suppliers are going to have to take a haircut, too.”

He added that the car makers and government will have to be vigilant to ensure the continued supply of parts that are critical to production of vehicles.

Ottawa is also expected to allocate additional money to ease the credit crunch, which is making it increasingly difficult for consumers to borrow to buy or lease vehicles, and for dealers to finance their inventories.

The U.S. Treasury Department announced last week that it would lend $1.5-billion to Chrysler's financing arm for consumer financing.

Open letter to the Prime Minister of Canada and provincial/territorial premiers on the occasion of their First Ministers Meeting
in Ottawa on Jan. 16

Dear Sirs:

We are calling on you as our elected leaders to collectively forge an agreement that provides new employment insurance and training supports as part of an economic stimulus package that responds to the gathering storm in Canada's job market.

The crisis has already inflicted considerable pain on families and communities. A further battering looms, with layoffs in virtually all sectors of the economy.

There is broad consensus on the need for better EI benefits. The Council of Chief Executives has joined in the call for improvements urged by unions and various parliamentary committees, and reflected in Bill C269 and many others.

Unemployment insurance can be the most powerful of all economic stabilizers. A federal study has shown that during the recessions of the early '80s and '90s, UI prevented deeper and longer downturns and reduced the shock of both job and GDP losses.

But we've entered this new economic crisis with a much weaker EI system. It provides only half the coverage it did in the last recession. At any given time only 42 per cent of the unemployed are receiving EI – because fewer workers qualify and because benefit weeks were reduced.

The U.S. Congress has seen the wisdom of giving priority to adjusting the UI system as part of its stimulus package. In November it passed a second federal extension to state unemployment benefits, which means that workers in many states are now collecting up to 59 weeks of benefits. A bill supported by President-elect Barack Obama would provide a further extension to the end of 2009. If that happens, workers laid off in early 2008 may be collecting UI benefits for up to two years in many states.

In Canada the EI maximum is 45 weeks but only for regions with 10 per cent unemployment. Most workers live where the maximum is only 36 to 40 weeks. From coast to coast, workers in cities like Vancouver, Calgary, Regina, Winnipeg, Ottawa, Quebec City, Fredericton and Halifax have a maximum of 36 weeks.

We've gotten EI wrong on at least three accounts.

We've made it more difficult to qualify for benefits. In a region with 8 to 9 per cent unemployment, qualifying hours are more than three times what they were in the recession of the early 1980s and more than double what they were in the early '90s.

We've reduced the duration of benefits. Many displaced workers are shocked to find that benefits don't run to 50 weeks as they used to. While a pilot project extends benefits by five weeks to a 45 week maximum, it only applies to 21 of the 58 EI regions.

We've reduced the benefit level, now only 55 per cent of earnings. At one time it was 66 2/3 per cent. There's also a 2009 maximum of $447 (below the $465 maximum set for 1996 then cancelled), which means workers earning over $900 weekly get less than half their former earnings. Furthermore, workers are forced to exhaust any severance pay before getting EI.

It's time to repay some of the more than $54 billion that successive governments have borrowed from the EI "surplus" premiums paid by workers and employers. Indeed, until 1989 the federal government actually contributed to the EI account to pay for extended benefits. It has not contributed since then.

We urgently petition you to support these measures as part of a stimulus package:

(a) Increase benefit duration to at least 50 weeks in all regions.

(b) Provide an additional year of "Special Extension" benefits if national unemployment exceeds 6.5 per cent, paid from federal general revenues.

(c) Further extend EI Part 1 benefits as "Skills Development Income Support" so long as the worker remains in approved training. New provincial training initiatives and course completion rates will inevitably suffer if workers do not have sufficient income. This will be particularly important where long-term workers need extended training and literacy programs. Those who don't qualify for EI should be given similar income support through funding increases to Labour Market Agreements.

Set a fixed 360 hours to qualify for all types of EI benefits – in all regions. Currently the requirement is set monthly and varies from 420 to 700 hours depending on the unemployment rate in each of the 58 EI regions. There is no reasonable justification for this variation. Prior to 1996 when an insurable week was defined as 15 hours or more, workers could qualify for a short duration claim with fewer than 360 hours. Many workers can't meet the tough new requirements, especially given the growth in part-time and temporary jobs.

Eliminate the two-week unpaid "waiting" period.

(a) Provide benefits that are at least 60 per cent of earnings, based on workers' 12 best weeks of earnings, and increase the $447 maximum benefit rate.

(b) Suspend the allocation of severance pay.

Actively promote and expedite EI Work Sharing, including a new Work Sharing While Learning program. Encourage innovative uses of these programs to help workers stay on the job.

Revamp Older Worker Adjustment Initiatives, including supports for intensive retraining and bridging to retirement. This will be particularly important for long-term employees in vulnerable industries and regions.

At some point we should also turn our attention to recent changes in the EI Act that moved us away from counter-cyclical financing of EI. We should set EI premium rates so that we are raising rates in upturns and reducing them during downturns, which a 1995 federal report concluded was key to EI's role as Canada's "single most powerful automatic stabilizer." We're failing to save in the fat years for the lean years – which are very much upon us now.

Yours truly,

Ken Lewenza, President, Canadian Auto Workers

A lot of Toyota dealers are smiling, despite the turmoil in the auto industry.

While dealers for some manufacturers are struggling because of a big sales slump and too many stores in Canada, Toyota retailers sold more autos than ever last year.

Toyota's 239 dealers across the country sold an average of 875 cars and trucks in 2008, far more than any other company, statistics from DesRosiers Automotive Consultants showed yesterday.

That represented an 11 per cent increase for Toyota dealers from 2007 and a 68 per cent jump in average annual sales since 2000.

The increase also marks the first time that an automaker has sold more than 800 vehicles per store in Canadian history.

"The success of their product was a key part of reaching this level but the capabilities of each individual dealer was also a critical element," said DesRosiers president Dennis DesRosiers.

"That is often forgotten or at least not well understood by many."

Toyota, including the Lexus brand, moved into second place in sales among automakers last year behind industry leader General Motors.

GM's 718 dealers sold an average of 497 vehicles last year, down 9 per cent from 2007, according to the statistics.

The company has fallen to seventh place in average dealer sales since the beginning of the decade when it topped the industry. Chrysler fell to eighth place and Ford slipped to 10th place.

"The Detroit Three can't shed dealers fast enough to offset their loss in market share," DesRosiers noted.

"Indeed, the Chrysler (dealer) body actually grew by one last year."

GM reduced its network by 14 stores and Ford shaved five outlets last year.

Since 2000, GM's retail network has dropped by 114 stores.

The number of Toyota dealers has remained between 230 and 240 in recent years despite a strong growth in overall sales.

Toyota surpassed GM in average dealer sales in 2003 and has steadily increased the gap.

Honda, BMW and Mazda ranked second, third and fourth in average sales per dealer last year, but all of them lost business to fall further behind leader Toyota.

General Motors Corp. removed more than $1 million in tooling equipment yesterday from a Brampton auto-parts plant belonging to insolvent SKD Automotive Group after getting a court injunction that ended a three-week union blockade.

Mr. Justice Colin Campbell issued an order earlier in the day giving GM permission to recover the equipment at the plant, following no objections in the Ontario Superior Court of Justice from counsel for the Canadian Auto Workers and SKD.

The plant has resumed temporary parts production of floor panels and other components for Honda, Chrysler and Ford under a 60-day "accommodation agreement."

It also gives SKD time to find a buyer or reach a severance agreement for workers if it closes, according to Paulo Ribeiro, a CAW staff representative.

Ribeiro said the union, which represents about 230 laid off and active workers, could not gain anything else in the dispute.

"We couldn't win this legally," Ribeiro said.

"The costs would just be rising with the same result. We got everything we could during our negotiations with the parties."

The dispute is indicative of increasing turmoil in the industry because of a plunge in auto demand in the U.S. and Canada during the past year.

That is pushing many parts suppliers over the edge. They were already struggling under years of price pressure in the intensely competitive auto industry.

It has also prompted anxious automakers to pull work away from teetering suppliers to more secure sources. At the same time, workers are fighting to keep plants open to save their jobs.

For example, automakers pulled millions of dollars of equipment from Progressive Moulded parts plants last summer, as the company collapsed under a mountain of debt and the North American industry's biggest sales decline in decades.

A blockade at a cluster of Progressive plants in Vaughan fizzled and non-unionized workers received no severance pay.

The latest dispute arose Dec. 23 when GM attempted the removal of tooling equipment from the SKD plant in Brampton, after expressing concerns about the supplier's ability to produce and deliver components to an assembly plant in the U.S. GM has the right to remove the equipment.

A lawyer representing GM said in a court affidavit that SKD had acknowledged it is insolvent.

GM sent trucks to remove the equipment but the CAW blockaded the plant.

The automaker sought assistance from Peel regional police to enforce its rights.

However, an officer told GM that police would not intervene without a court order.

SKD, which traces its roots to Windsor in the 1930s, also informed GM it could not assist the automaker in removing the equipment. The company requested a court hearing last week for the injunction but it was held up while stakeholders, including SKD, the automakers and the union discussed a possible solution.

SKD is expected to file a formal application this week for temporary protection from creditors under the federal Companies' Creditors Arrangement Act.

That will give it time to seek potential buyers for the plant's assets and possibly keep it open.

Ribeiro said since SKD has run out of money, Chrysler, Ford and Honda are temporarily paying the wages of workers.

SKD makes metal components such as bumpers, quarter panels and speaker brackets.

Ford seeks its own UAW deal

Louis Aguilar and Bryce G. Hoffman / The Detroit News

Ford Motor Co. won't necessarily seek the same concessions from the United Auto Workers as General Motors Corp. and Chrysler LLC hope to get in labor talks sparked by the federal bailout, said a Ford executive involved in the negotiations.

"The UAW and Ford have a unique relationship, and that has resulted in the solutions that are unique to Ford -- as witnessed during the 2007 talks," said Joe Hinrichs, Ford's vice president of global manufacturing and labor affairs. "The expectation is that we would continue to build on that."

An example of that relationship is in the two-tier wage system of future hires negotiated in the national labor pacts. Ford was able to negotiate a deal where a percentage of all workers start at $14 an hour. GM and Chrysler negotiated lower pay for "non-core" manufacturing jobs, which limits the lower wage to workers who don't directly work on assembling vehicles. Separate talks already are under way between the union and GM and Chrysler, said UAW President Ron Gettelfinger. Under the terms of the $17.4 billion in loans granted to the automakers last month, GM and Chrylser have until Feb. 17 to make changes in their national labor agreements that will bring UAW wages more in line with foreign auto plants in the U.S. GM and Chrysler need to include those concessions as part of restructuring plans they must submit to the government by March 31. If the deadline is not met, the loans could be called.

DETROIT–Despite apparent slow initial sales, Ford says prospects for the Oakville-made Flex crossover wagon remain strong.

David Mondragon, president and chief executive officer for Ford Motor Co. of Canada Ltd., said at the North American International Auto Show here yesterday that he expects sales of the vehicle will continue climbing as the impact of the second phase of a marketing campaign is rolled out.

The remarks come after the sales chief of parent Ford Motor Co. acknowledged sales of the Flex, a key vehicle in the company's rejuvenation plans, may not have met expectations in the first few months in showrooms.

Mondragon said in an interview at the auto show in Detroit that the company launched the unique-looking family vehicle in the second half of last year with an "awareness" campaign and now is proceeding to marketing that emphasizes the Flex's features, benefits and fuel economy.

"It was a strong launch," he said. "Now we've moved to a second phase that shows a vehicle with multi-purposes.

"After awareness, you build consideration."

Mondragon noted monthly sales in Canada have climbed steadily, from 259 in September to 370 in December, despite a huge drop in overall industry sales in Canada and the United States.

"You can see sales are starting to grow," he said. "It's a direct result of the second phase (of marketing)."

Ford sold 2,134 Flex models in the second half of the year while U.S. deliveries totalled 14,457.

Ford had originally projected annual sales of about 100,000 for the Flex, which has three rows of seats, a low look and a spacious interior.

The vehicle, which was originally described as the company's "people mover," replaced the Freestar minivan, whose sales slid dramatically earlier this decade.

The company had also built the Freestar exclusively in Oakville.

In October, Jim Farley, the parent company's vice-president of marketing and communications, said the vehicle might not have met preliminary internal projections and marketing would change to explain its functional benefits.

Farley noted that one reason for a slow start was that half of the buyers are new to Ford.

At the Oakville plant, which also makes the Edge and luxury Lincoln MKX crossover vehicles, workers had produced about 37,000 Flex models by the end of November.

Reports said slow sales of the three vehicles prompted Ford to cancel a third shift in Oakville. But Ford spokesperson Lauren More said yesterday the company didn't proceed with the shift because of worsening industry conditions in the U.S.

Ford Canada not looking
to draw credit line

By John McCrank

DETROIT, Jan 11 (Reuters) - Ford Motor Co's Canadian subsidiary has ample liquidity and no plans to access the line of credit it has arranged with the Canadian government, the unit's president and chief executive said on Sunday.

"Our liquidity is strong, our share is up on a quarter over quarter basis, and our lineup has never been better," said David Mondragon, who took over the top post at Ford's Canadian arm on Sept. 1.

Ford has secured a line of credit with the governments of Canada and the province of Ontario to be used if market conditions worsen.

Ford is also seeking a parallel $9-billion letter of credit from the U.S. government that it could use if the U.S. auto market weakens beyond its expectations in 2009.

The Canadian arms of the Detroit Three -- Ford, Chrysler LLC, and General Motors Corp -- are together eligible for short-term loans of up to C$4 billion to help keep them alive while they restructure their businesses.

Mondragon, speaking on the sidelines of the North American International Auto Show in Detroit, said access to capital was still an issue for consumers, though, as around 90 percent of Canadians either finance or lease their vehicle.

He said he was encouraged by the steps the Canadian government has taken to try to loosen up the financial markets and make more credit available, such as buying mortgage-backed securities from banks.

He said Ford had made other suggestions to the government to stimulate sales in a year that Ford expects the Canadian market to drop by around 7.5 percent.

"Number one is a tax-free holiday on vehicles that would definitely stimulate and encourage consumers to come in and purchase vehicles," he said.
Ford is also advocating that Ottawa, along with the provincial governments of Canada, start a scrappage program to take some of the older vehicles off the road and put cash into the pockets of consumers looking to upgrade their vehicles.

Other governments, including Spain, have run such programs, which offer tax credits or other payouts to encourage consumers to stop driving older cars and trucks.

U.S. automakers are also urging the U.S. government to take similar steps as part of the economic stimulus plan expected to be taken up by the incoming Congress.

"Approximately 30 percent of the vehicles in Canada, or approximately 6 million vehicles out of a fleet of 20 million, are 11 years or older," Mondragon said, adding that those vehicles produce emissions 12 times worse for the environment than new vehicles.

After a strong performance in the first three quarters of the year, industry wide sales of new vehicles in Canada slumped 21 percent in December, on top of a 10 percent slide in November, for a 1 percent decline for the year.
Sales at Ford Canada fell 6 percent in December after climbing 1 percent in November.

The company also man aged to claw back some of the market share it has been losing to offshore rivals. In the fourth-quarter, Ford's share of the Canadian market grew by 2 percentage points from the third quarter, said Mondragon.

Ford on Sunday unveiled a partnership with Canadian auto-parts supplier Magna International to build a battery-powered small car to be delivered to market in 2011.

Ford won't tap into bailout funds

Jan 11, 2009 01:45 PM

Reuters News Agency

DETROIT–U.S. automaker Ford Motor Co intends to forge ahead and not use a line of credit it has requested from the U.S. government, despite an ongoing slump in auto sales.

"The game plan is to keep going on our own and to try as hard as we can to not do that," company executive chair Bill Ford said during a Ford event at the Detroit auto show, responding to reporters' questions about the line of credit.

"Right now as we see it we're comfortable, but we have asked for a line of credit just in case the world implodes as we know it," he said.

The other two U.S. automakers General Motors Corp and Chrysler LLC – which is controlled by private equity firm Cerberus Capital Management LP – have both received loans from the U.S. government to help them survive through the worst U.S. auto sales in decades as the world's largest economy languishes in recession.

Ford, the No. 2 U.S. automaker, has insisted that it has sufficient cash to keep going on its own and has not taken a government loan.

Ford has been seen by analysts as better placed to weather the latest economic storm because it borrowed more than $23 billion (U.S.) in 2006 to fund its turnaround, loans that were secured against most of the company's assets.

Ford, the great-grandson of company founder Henry Ford, told reporters that government incentives should be considered for U.S. consumers to buy hybrid vehicles as gas prices have fallen well below the highs reached in July 2008, and said that "right now, the entire economy needs help."

Bill Ford added that he expects gas prices will rise as the U.S. economy recovers.

Hyundai Genesis, Ford F-150
get top auto honours

Jan 11, 2009

DETROIT–Hyundai Motor Co. saw its foray into the luxury market rewarded Sunday when its Genesis sedan received the South Korean automaker's first North American Car of the Year award.

The Genesis narrowly beat out the Ford Flex, a seven-passenger crossover vehicle, for the honour. But Ford Motor Co. won top truck honours for its Ford F-150 in the awards presented on the first day of media previews for the North American International Auto Show in Detroit.

Mark Fields, Ford's president of the Americas, said Hyundai's win in the car category illustrates the competitiveness of the North American market.

"The best keep getting better," Fields told reporters after the awards were presented. "I think what it says is it's a broad playing field out there. And those people with a focus on the customer can win.''

The other finalist for car of the year was the Volkswagen Jetta TDI. The two other North American Truck of the Year finalists were Chrysler LLC's Dodge Ram pickup and Daimler AG's Mercedes-Benz ML 320 Bluetec.

It's another big honour for the F-150, which is the best-selling vehicle in the U.S. and was named 2009 Truck of the Year by Motor Trend magazine. Fields said the award should help bring more people into Ford's showrooms and help its dealers.

He said it also shows that Ford can compete.

"It means that we can produce the best in the world, and I think that's a shot in the arm for the entire domestic industry,'' Fields said.

Hyundai launched the rear-wheel-drive Genesis a year ago, a car it saw as its ticket into the ranks of the world's top-end automakers. The company bills it as a competitor to luxury models such as the Mercedes-Benz E-Class, BMW AG's 5-Series and Toyota Motor Corp.'s Lexus GS.

"Genesis ... really does make a new beginning for our company," Hyundai vice-chair H.S. Lee told reporters in accepting the award. "It represents the engineering excellence that our company has tried for and it is a game-changing vehicle which will define our product going forward.''

The awards are given by 50 automotive journalists from the U.S. and Canada who represent magazines, television, radio, newspapers and websites. They're designed to recognize vehicles based on factors that include innovation, design, safety, handling, driver satisfaction and value.

To be considered for the honor, which often is used in automakers' advertising, vehicles must be new or substantially changed from the previous model. More than 50 new vehicles were eligible this year, but jurors winnowed that list to 14 cars and 11 trucks before the finalists were named last month.

The North American honours have been given annually since 1994.

Toronto Star

The federal and Ontario governments won't say if they are seeking a no-strike provision from teetering General Motors and Chrysler as a condition of up to $4 billion in loans.

The lack of confirmation follows revelations that their parent auto companies in the United States have agreed to a strike ban to secure up to $17.4 billion (U.S.) in loans.

GM and Chrysler must still seek the support of United Auto Workers in the U.S., but the leader of the Canadian Auto Workers yesterday rejected any possibility that his union would approve a ban on walkouts here.

CAW president Ken Lewenza said such a provision would "trample" workers' rights. It appears anti-labour Republicans inserted the provision as part of the aid package south of the border, he noted.

"We would never agree to that," Lewenza said in an interview. "It's a non-starter. As far as we're concerned, Canadian governments shouldn't be involved in the bargaining process between companies and workers."

As it is, CAW members couldn't legally walk off the job at GM and Chrysler until 2011 when their contracts expire. That's also when the companies are to repay the final portions of the loans.

However Prime Minister Stephen Harper and Ontario Premier Dalton McGuinty have already conceded the two automakers may need more public money in future to survive the current downturn in the industry, a key engine of the North American economy.

In contrast to Canada, U.S. workers at individual GM and Chrysler plants can walk off the job in local disputes despite a national contract.

Lewenza said GM and Chrysler in Canada have not approached his union about any concessions to make them more competitive. The federal and provincial governments have stressed workers must "be part of the solution" in any aid package.

The union is open to ideas that would help the companies, Lewenza has said.

Ottawa and Queen's Park announced the aid package Dec. 20 and said the first payouts would occur on the "closing" date of Dec. 29.

However, the governments disclosed this week that the companies asked to defer the payouts until next week as talks continue.

In Ottawa, Pierre-Luc Poisson, a spokesperson for Industry Canada, would not confirm that the no-strike provision is on the table.

"We are negotiating specific terms and conditions," he said in an email response.

The governments have revealed few of the aid package details.

CAW president rejects U.S. style strike bans at Canada's auto plants...

Jan 09 2009 - The Canadian Press

TORONTO _ The president of the Canadian Auto Workers says his
union won't accept a ban on strikes similar to one detailed in the
U.S. as a condition of US$17.4 billion in loans to Chrysler and
General Motors.

Ken Lewenza said the CAW has not yet been informed of any
conditions attached to C$4 billion the federal and Ontario
governments have agreed to lend to Chrysler and GM.

But he says he was ``shocked'' to hear about a U.S. provision
that automatically places the two companies in default if union
workers go on strike.

A General Motors Corp. filing this week with the U.S. Securities
and Exchange Commission detailed the provision banning strikes as
part of its US$13.4 billion in federal loans.

A person briefed on Chrysler LLC's US$4 billion loan, who didn't
want to be identified because the company is in talks with the
United Auto Workers about concessions, confirmed Thursday that the
Chrysler deal also has a similar provision.

The UAW isn't a party to the deal and hasn't threatened a strike,
its most potent weapon against the Detroit automakers.

``It's just one more indication that the Republican party not
only wants to challenge the strength of the (United Auto Workers),
they want to take away every tool we may have in our arsenal to
defend the interests of our members,'' Lewenza said in an interview.

He said a similar provision in Canada would simply ``add fuel to
the fire'' in an industry that has been beset by tens of thousands
of job losses in recent years.

``I would be incredibly disappointed if the government dictated
that as a condition because I think that violates our collective
bargaining rights as protected by law,'' Lewenza said. ``We won't
accept it, simple as that.''

The Canadian and U.S. governments agreed to provide billions in
emergency loans to the beleaguered automakers after they warned they
could go bankrupt without financial help.

CAW may be willing to negotiate major concession over wages

Thursday, January 08, 2009

There are signs that the Canadian Auto Workers might be ready to bargain a major concession as they try to help save the Detroit big 3 auto manufacturers from collapse. The CAW has always opposed something called 'Two-tiered wages' where new workers are paid less than current employees. American auto workers have already made that concession and on Thursday night, in a taping of Global's Focus Ontario, Canadian Auto Workers President Ken Lewenza, said it might be on the table for his people.
"You'd have to be silly in today's environment just to shake off any idea or any suggestion that may come forward that maintains investment in Canada" Lewenza tells host, Sean Mallen.

You can watch the complete interview with Ken Lewenza on Focus Ontario this Saturday Jan 10th at 6:30 pm EST on Global.
© Broadcasting 2009

Toyota asks workers to lower pay

YURI KAGEYAMA
The Associated Press
January 8, 2009 at 7:18 AM EST

TOKYO — — Toyota Motor Corp. [TM-N]said Thursday it is negotiating with its workers in Japan to slash salaries as it stops production to adjust to slumping global demand.

Toyota spokeswoman Ririko Takeuchi said the size of the cut is still undecided. She said talks are under way after the company decided this week to idle production at all 12 of its Japan plants for 11 days over February and March — a stoppage of unprecedented scale for Toyota, Japan's top automaker.

Under Japanese law, companies must pay at least 60 per cent of the average regular wages during such stoppages, she said.

In a stunning reversal of its previously booming fortunes, Toyota projects that it will sink into its first yearly operating loss in 70 years for the fiscal year ending March 31. And fears are growing about the ripple-effects of the U.S. financial crisis to this nation's export-reliant auto industry, including parts-makers.

With record sales in 2008, Toyota has jumped past Chrysler and Ford to become the No. 2 automaker in Canada. But, with a huge decline in sales in December, what is the outlook for 2009? BNN interviews Stephen Beatty, managing director, Toyota Canada.

Toyota is shedding 3,000 temporary workers in Japan — about half its domestic temporary work force — by the end of March.

The job cuts have not affected the nearly 70,000 full-time Japanese staff, who like workers at major corporations here are generally protected with lifetime employment. Toyota employs 316,000 people globally.

Toyota officials have said they are trying to ease the transition for its laid-off workers, allowing them to stay in the company dormitory for a month, instead of just a week, as in previous cases.

“Protecting employment is of utmost importance for us,” Toyota President Katsuaki Watanabe told reporters last month. “But tough market conditions are likely to continue, and they could get worse.”

Japanese automakers may be faring better than their U.S. counterparts General Motors Corp. [GM-N] and Chrysler LLC, which have been on the brink of collapse until securing a multibillion dollar government bailout.
But the plunge in global demand and the surging yen have hammered their earnings.

Toyota, the maker of the Corolla subcompact and Prius hybrid, saw its U.S. sales in December tumble 37 per cent on year. It expects 50-billion yen ($555-million U.S.) in net profit for the fiscal year ending March 31, down from 1.7-trillion yen the previous year.

GM chief assures pensioners

Jan 9, 2009

NEW YORK–General Motors Corp. chief executive Rick Wagoner said yesterday the Detroit automaker can survive long-term without cutting benefits to retired workers.

Wagoner made the remarks on NBC's Today Show, joined by United Auto Workers president Ron Gettelfinger. Their appearance from Detroit preceded next week's start of renewed labour talks.

The $13.4 billion (U.S.) federal loan package granted to GM last month requires that the union make concessions and that GM submit a restructuring plan by March 31.

Wagoner said he is "confident" both sides can agree on changes to the labour contract.

Gettelfinger said the union will ensure that "what we do is done in the best interest of our members, as well as our retirees.''

Wagoner said the much-cited $10-an-hour wage difference between GM workers and workers at U.S. plants owned by foreign automakers "may be a little on the high side." He said GM productivity is among the highest in North America.

Wagoner also said he never considered resigning during the bailout hearings that took place in November and December, even if it would have improved the bailout's chance of passing. He reiterated that GM has set aside merger discussions with rival Chrysler.

Chrysler's days
numbered, say analysts

Jan 07, 2009 06:54 PM

DETROIT–Even by the standards of battered automakers, Chrysler is in dire shape. Its sales in December were down a stunning 53 per cent, far worse than Ford or General Motors, and analysts say it probably won't survive the year as an independent company – despite $4 billion in government loans and the possibility of more.

Things were so bad last year that a single Toyota model, the Camry/Solara midsize car, outsold the entire fleet of Chrysler LLC's passenger cars.

"Basically they're done," said Aaron Bragman, an auto analyst with the consulting company IHS Global Insight in Troy, Mich. ``There is no real possibility of turning this thing around as an independent company in my opinion.''

Chrysler spokeswoman Shawn Morgan said she could not provide an immediate comment after requests Tuesday and Wednesday.

U.S. sales of Chrysler, Dodge and Jeep brand vehicles fell 30 per cent last year, the worst decline of any major automaker. It lost more market share than any of its peers, down to 11 per cent. Analysts say most of Chrysler's products, especially its cars, don't look, feel or drive as well as the competition's.

Chrysler plans to introduce an electric car in 2010, but until then, there are few promising models to boost sales. Many analysts predict that by 2010, Chrysler will be acquired by another automaker or sold in pieces by its majority owner, New York private equity firm Cerberus Capital Management.

Chrysler's chief financial officer has said the company needs $7 billion every 45 days to pay parts suppliers, and analysts question whether the company's meager sales are generating enough cash to make those payments.

Analysts also say an acquisition by General Motors Corp. is still possible. The two companies discussed it late last year before GM backed away to focus on its own cash issues.

Nissan Motor Co. could be interested in buying Chrysler's truck business. Chrysler is already signed up to make pickup trucks for the Japanese company.

Jonathan Macey, a Yale University law professor who has been critical of U.S. automakers' management, said Chrysler's sales numbers are "further evidence of an unviable entity.''

When automakers went to Washington late last year, their aim was to get enough money to become viable again. They wound up with only enough help from the Bush administration to get them through March, when Barack Obama will be in office and might provide more aid.

Macey said giving the carmakers any money is burning cash.

"I'm a big fan of not throwing good money after bad," he said. ``The idea that you would enter into a financing relationship like this without any parameters is more evidence of the complete insanity of all this.''

A Treasury Department spokeswoman noted that the agreement for the government's automaker loans required that the administration designate someone to keep analyzing the companies' finances and viability.

Macey, author of a book on corporate governance, said it's too late for Chrysler and GM to solve their problems, including high labor costs and union work rules that hinder competitiveness.

To get the loans, GM and Chrysler had to agree to negotiate concessions from creditors and the United Auto Workers union, but the specifics have yet to be worked out. The government can call in the loans March 31.

Chrysler CEO Robert Nardelli, in a presentation to the Senate Banking Committee last month, said the company could stay alive in the long term with reasonable concessions, a $7 billion bridge loan and $6 billion more out of the $25 billion Congress allocated to develop new fuel-efficient technology.

The Bush administration provided a $4 billion loan. Now, Chrysler is counting on an additional $3 billion in aid for its financing arm, Chrysler Financial.

Some lawmakers say automakers need time to wring out the concessions, and point out that the recession and nearly frozen credit markets are at least partly to blame for poor sales.

"You could make a car that could run on air or could fly and people wouldn't buy it," said Senate Banking Chairman Christopher Dodd, D-Conn. "I'm hoping that we may see some of that investor consumer confidence come back.''

Chrysler, based in Auburn Hills, Mich., and Ford Motor Co., in nearby Dearborn, are also waiting on a decision from the Federal Deposit Insurance Corp. on whether they can become industrial loan corporations. That would mean the government could guarantee their debt, making it more appealing to investors, whose cash Chrysler could use to make more car loans at better terms.

Some lawmakers have noted that foreign automakers, including Japan's Toyota Motor Corp. and Germany's BMW AG, have the industrial banks, placing the domestic auto industry at a disadvantage.

Sen. Carl Levin, D-Mich., whose state is home to Chrysler, GM and Ford, said much will depend on how the Obama administration executes the terms of the auto bailout.

In his presentation to Congress, Nardelli used charts that showed Chrysler could post an operating profit of $400 million this year if Americans buy about 11 million light vehicles overall. But in this economy, analysts predict the figure will come in smaller.

Nardelli said Chrysler will improve fuel economy on 19 models this year, about three-quarters of its product line. Besides the electric car, it also has a deal with Nissan to produce a Chrysler subcompact in 2010.

Last month, Chrysler showed off prototypes of a new 300 sedan, Charger performance car and Jeep Grand Cherokee, as well as new, more luxurious interiors under development for nearly all of its products.

The problem, says Bragman, is that significant new products don't arrive for another year. And Chrysler may not make it until then.

"The good stuff doesn't come in time," Bragman said. "They don't have any help coming really for 2009.''

Associated Press Writer Ken Thomas reported from Washington. AP Economics Writer Martin Crutsinger in Washington also contributed to this report.

The sputtering Navistar truck plant in Chatham is cutting another 200 jobs, raising worker concerns that it could close altogether.

The reduction on March 1 will jack up the number of workers on layoff at the plant to more than 1,000 and has left union leaders questioning the plant's future now that there are fewer than 200 workers remaining.

"It's a pretty serious situation," said Bob Chernicki, a senior Canadian Auto Workers official. "In view of the level of production there, we want to know what it means for the future of that facility."

Union officials will meet with management of the plant's operating company, International Truck and Engine Corp., and U.S. parent Navistar International Corp. next Wednesday in Windsor to press them on long-term intentions.

The downturn in the U.S. economy and soaring fuel prices have hammered the heavy truck industry in North America and caused major cuts in production and jobs during the past two years. Furthermore, it has adversely affected many suppliers who provide parts and services.

Industry volumes fell to 30-year lows in 2008 and Navistar is forecasting flat business in the first half of this year, with some improvement in the second half.

Last fall, Daimler AG stunned the nearby city of St. Thomas by announcing it would permanently close the Sterling Trucks plant and wipe out 1,300 jobs in March.

The Navistar plant in Chatham, which faced closure in 2003, has already laid off about 330 production and office workers. It plans to lay off another 489 on Jan. 31.

"No one thought we would be running into any more layoffs after the last one," said Joe McCabe, a CAW staff representative for the plant. "People thought they were safe but after what the company just announced for March 1, it has left them shaking their heads and concerned about whether the company will survive in Canada.

"They saw what happened at the (Sterling) plant in St.Thomas."

Union officials charged that Sterling will simply consolidate its St. Thomas production into a Mexican operation.

Navistar spokesperson Roy Wiley would not comment on the possibility of a closure of the Chatham plant, which opened 60 years ago.

"I never speculate," he said at the company's headquarters in Warrenville, Ill. "Who knows. There could be a pick up in orders."

The current contract between the CAW and Navistar, which expires June 1, compels the company to produce an average of 35 trucks daily in the first quarter of this year at the Chatham plant.

It is producing about 100 ProStar and LoneStar Class 8 long-haul trucks daily but that will drop below 35 a day when the March 1 layoffs take effect.

Chernicki, assistant to CAW president Ken Lewenza, said the union wants answers on why output is falling at the St. Thomas plant but rising at a Navistar operation in Escobada, Mexico.

However, Wiley countered the Mexican plant has also curbed production and jobs because of deteriorating demand. Navistar also operates one truck and two school bus manufacturing plants in the U.S.

In 2002, Navistar indicated it would close the Chatham plant but the company reversed the decision the next year after the union negotiated concessions and the federal and provincial governments provided $65 million in aid.

At that time, Navistar also said it would invest $270 million over the next decade. It has built a new paint shop that improved production capacity significantly.

Canada's auto market crashed during the holiday season, one more piece of evidence of a deepening recession.

Despite incentives, consumers put away their wallets and showroom sales plunged 21.2 per cent or more than 25,000 vehicles to 94,423 in December from the same month in 2007, manufacturers reported yesterday.

The results marked the worst decline in auto sales for any month since 2003. It was also the lowest level for a December in 12 years.

The bleak December pulled down overall 2008 sales in Canada by 1.1 per cent or more than 17,000 to 1.653 million cars and trucks. That followed three years of annual increases.

Analysts are forecasting more big dents in the first half of this year before the market shows some signs of a recovery.

"I predict double-digit declines for the next six months before things to start improve," said industry watcher Dennis DesRosiers.

DesRosiers and analyst Carlos Gomes said overall sales should tumble another 9 to 10 per cent for the year.

Gomes, an auto specialist at Scotiabank Group, also said his company expects business to remain weak in the first half and is forecasting annual sales of 1.475 million new vehicles in 2009 – the lowest level in 11 years.

Canada isn't alone in experiencing the auto industry's blues. Six of the biggest automakers in the U.S. posted declines of more than 30 per cent each last month to end a disastrous year. Sales in Japan, Italy, France and other European countries have also slid sharply.

Most auto plants in Canada are idle this week. Last night, Toyota announced it is shutting down all of its plants in Japan for 11 days in February and March.

Automakers are also desperately trying to spark sales. For example, Hyundai will cover the depreciation on any returned leased or financed vehicle for the first 12 months for buyers who find themselves unable to make car payments in the U.S.

Canada escaped the startling slide in the U.S. auto market for most of 2008 and showed signs of a solid annual sales gain until stalling in August. After recovering slightly, conditions changed dramatically when sales tumbled 10.3 per cent in November and plunged again last month as the impact of the slowing U.S. economy spread north.

It pulled down overall 2008 sales in Canada by 1.1 per cent or more than 17,000 to 1.653 million cars and light trucks. That followed three years of annual increases.

"It was bound to happen," said DesRosiers, regarding the effect of the U.S. recession on Canada's economy.

The subprime loan crisis in the U.S., plummeting housing prices, deteriorating financial markets and sagging consumer confidence sent the American economy into a recession in late 2007.

It has triggered some of the biggest declines in auto sales in half a century and led to billions of dollars in emergency loan packages by the U.S. and Canadian governments to keep giant General Motors and Chrysler alive.

Meanwhile in Canada, the offshore-based manufacturers exceeded the Big Three North American automakers in market share for the first time. They raised their share to 51.9 per cent from 48.3 per cent while GM, Ford and Chrysler slipped to 48.1 per cent from 51.7 per cent.

"Until they can turn their market share losses around they will continue to be in trouble and there is absolutely nothing in these sales numbers that indicate they have the ability to turn their market share losses around," said DesRosiers. "Losing market share in a declining market is a disaster scenario."

The plunge in sales in Canada during the last two months overshadowed record annual performances by Toyota, Honda, Nissan, BMW and Mercedes-Benz here.

Toyota including the Lexus luxury brand also jumped into second place in sales in Canada from fourth spot ahead of Chrysler and Ford.

Its sales rose 11.3 per cent to a record 224,158 in 2008 from 2007. But in December, Toyota's sales plunged 35.4 per cent because of a huge drop in Camry sales.

Honda Canada, which sells the country's most popular vehicle, the Civic, reported that its 2008 sales including the Acura luxury brand inched up 0.6 per cent to a record 171,358 vehicles. However sales crashed 40.8 per cent in December.

BMW Group Canada said its sales including the Mini brand, climbed 1 per cent to a record 28,149 in 2008. But sales tumbled 15 per cent last month.

Nissan Canada, including the Infiniti brand, broke its sales record as business climbed 8.7 per cent to 83,451 vehicles in 2008. But sales also slid 16 per cent last month.

Sales at GM of Canada, the industry leader, slid 11.1 per cent to 358,902 last year. In December, sales plunged 19.5 per cent.

Chrysler Canada's sales slipped 4.8 per cent to 222,996 in 2008. Last month, business tumbled 35.7 per cent.

Business at Ford Motor Co. of Canada dropped 5.9 per cent to 211,060 in 2008. Sales decreased 5.8 per cent in December.

Several automakers posted huge declines in U.S. sales during December. Chrysler's sales collapsed 53 per cent; Toyota's deliveries plunged 37 per cent; Honda's business slid 35 per cent and Ford's volumes fell 32 per cent. Sales at GM and Nissan also dropped 31 per cent south of the border in December.

Ken Lewenza has jumped from the proverbial frying pan into the fire.

After running the big Canadian Auto Workers local in Windsor and wielding significant power in the city for 14 years, Lewenza replaced retiring Buzz Hargrove, the union's high-profile national president, last September.

A fiery speaker who has slammed his share of bargaining tables, Lewenza had already felt the human misery in Windsor caused by the economic firestorm that has swept through the North American auto industry the past few years – a firestorm that will only intensify in 2009 as Lewenza settles into the top job at the CAW's national office in North York.

The CAW is facing the toughest period in its history. A deepening recession in Canada and the U.S. will likely hammer a reeling auto industry even harder as well as other industrial sectors. Job losses will pile up. One or more automakers could close.

The 54-year-old, chubby-cheeked Lewenza, who earns about $155,000 annually, knows the workdays will be even longer in Toronto. But the decisions he makes will now be more gut-wrenching and affect hundreds of thousands of people.

Instead of maintaining its status in the labour movement as the country's trail-blazer, negotiating the best contracts in the once-richest industry, the CAW will be under intense pressure to accept concessions to save jobs.

"Without question, these are the toughest economic times for our union," says Lewenza. "We will try to control what we can and influence what we can't control."

The learning curve won't be that dramatic for Lewenza, who was president of the CAW's national council or parliamentary body for a decade, and head of the union's bargaining committee at Chrysler for even longer.

He has also worked closely with Hargrove, a master negotiator and strategist who almost never slipped into a difficult situation without knowing how to get out.

Lewenza, who started at Chrysler installing mufflers in 1972, gained a reputation for militancy and hard-nosed tactics in his Windsor days. But in his first few months as CAW president, he has shown signs of caution and discipline in view of the difficult economic conditions, according to union watchers.

At the same time, Lewenza has never veered from a staunch commitment to the union, workers and social causes, says Bob Chernecki, a senior CAW executive.

"With Ken, what you see is what you get," says Chernecki.

Lewenza acknowledges he suffers from high blood pressure and diabetes, but quickly notes they're controlled with medication.

He plans to divide his off time between a house in Windsor, where he lives with his partner, Laurie, a purchasing agent for the Greater Essex County District School Board, and a condo in downtown Toronto. One of his two sons is a Windsor city councillor.

He says that in recent months, his life has been nothing but the union.

"I haven't had any time to go to the track and play the ponies."

There'll probably be even less time this year.

Chrysler gets $4 billion U.S. government loan

NEW YORK, Jan 2 (Reuters) - Chrysler LLC on Friday received an initial $4 billion emergency loan from the U.S. government, two days after the government completed a parallel payout to its larger rival General Motors Corp. "This initial loan will allow the company to continue an orderly restructuring," Chrysler Chief Executive Bob Nardelli said in a statement.

U.S. Treasury Department spokeswoman Brookly McLaughlin confirmed that the government had sent the $4 billion in funds to Chrysler on Friday.

General Motors Corp received $4 billion in emergency loans on Wednesday. Both Chrysler and GM have said they need the infusion of government cash to meet payouts to suppliers at a time when a plunge in auto sales has drained their cash holdings.

Officials have not spelled out why the loan to GM and a separate $6 billion funding for its affiliated finance firm GMAC were completed ahead of the Chrysler transaction.

In an email to employees, Nardelli suggested that the complexity of the deals had delayed the first payout to Chrysler, which had been expected to be completed before the end of the year.

"The Treasury Department has been working to complete the multiple, complex financial arrangements quickly and sequentially. The magnitude of these discussions was significant," Nardelli said.

When major automakers release results on Monday, December auto sales are expected to show that industry-wide sales fell to the lowest full-year level since 1992.

Under terms of the government bailout, Chrysler and GM will have to submit restructuring plans by mid-February and demonstrate that they are viable by the end of March.

Chrysler is controlled by Cerberus Capital Management, and as the only privately held of the Detroit-based automakers it faced the most scrutiny in congressional hearings on the proposed bailout for the industry.

Cerberus also owns 51 percent of GMAC.

The Bush administration approved a $17.4 billion bailout for the auto operations of GM and Chrysler in December.

Of that total, GM has been promised another $9.4 billion in government loans under that program in addition to the $4 billion payment made on Wednesday. The final $4 billion of the bailout approved for GM will require Congress to approve the funding.

Chrysler was given $4 billion by the U.S. government after asking for $7 billon. The bailout represents the second U.S. government rescue of Chrysler in 28 years.

Visteon workers get
cut in hours, pay

The Associated Press

Jan 02, 2009

VAN BUREN TOWNSHIP–Automotive supplier Visteon Corp. says it will shift more than 2,000 workers to a four-day week and cut pay by 20 per cent as tight credit and collapsing sales cause huge industry losses.

The Detroit Free Press reports Friday the moves next week will affect 2,000 workers at Visteon's headquarters in Wayne County's Van Buren Township and 50 at a testing center in Plymouth.

Spokesman Jim Fisher says the cuts reduce operating costs while minimizing layoffs. The four-day schedule will be evaluated at the end of the month.

Visteon, which was spun off from Ford Motor Co. in 2000, recently announced 800 job cuts on top of 2,000 that already had been eliminated.

The company makes satellite radios, instrument displays, electronic climate controls and other parts.

Toronto Star