Toronto Star Editorial on Chrysler

May 1, 2009

The negotiations went right up to yesterday's deadline, but the trans-boundary bailout of Chrysler has now been agreed to by one foreign firm (Fiat), two unions (UAW and CAW), and three governments (U.S., Canada and Ontario). Everyone, that is, except the shameless hedge funds, which pushed Chrysler into bankruptcy (in the U.S.). But the expectation is that the automaker will emerge from bankruptcy as a viable company within two months.

Under the deal, the U.S. government will put up $10.5 billion (U.S.) in financing for Chrysler and the Canadian governments $2.42 billion (U.S). The U.S. government will own 8 per cent of the restructured company and the Canadian governments 2 per cent between them.

A similar deal is expected to be concluded with General Motors in another few weeks, with the U.S. government becoming the majority shareholder of the company in that case.

The ownership aspects of the deal were met with calls of "socialism" and "nationalization" from the usual suspects on the far right. But, as Prime Minister Stephen Harper pointed out yesterday, "I don't think any of us really desires to own an automobile company." Rather, the equity stakes are meant to protect the taxpayers' investments.

Furthermore, said Harper, if Canada had not agreed to join in the bailout, there would have been a "serious risk" of auto sector jobs flowing en masse to the U.S.

Echoed Premier Dalton McGuinty, standing beside Harper: "(This deal) ensures that Ontarians will continue to make cars and Ontario families will continue to have jobs in that sector."

But one has to ask how much of the sector has been saved. In GM's plan, which has yet to be approved by the governments, there would be just 4,400 Canadian production jobs left in five years – down from 10,300 last year and from 40,000 two decades ago. There would also be proportional cut in jobs at GM's dealerships and parts suppliers.

As for Chrysler, all Harper and mcGuinty would say yesterday is that it would emerge as a "smaller" company.

In the end, the Ontario economy will be far less dependent on the auto sector than it has been. Some may see that as a positive development as we move to a "knowledge economy" or a "green economy." But we may find those old high-paying auto sector jobs are harder to replace than those slogans suggest.

Official Letter sent to Chrysler Employees today from Bob Nardelli

April 30, 2009

Dear Chrysler Employees:

This is a historic day for Chrysler. As a result of the comprehensive restructuring plan agreed to by many of our stakeholders, I am very pleased to report that Chrysler LLC and Fiat S.p.A. have reached an agreement in principle to establish a global strategic alliance. This agreement creates a new, competitive, global car company that will take over a majority of Chrysler’s operations. With the completion of this alliance, Chrysler will be repositioned for long-term success, validating the great efforts and sacrifices that you have made to help us get to this momentous point.

In addition to the alliance news today, I announced to Chrysler’s Board of Management and our senior leadership as well as the U.S. Treasury that I plan to leave the company and return to Cerberus Capital Management as an advisor. With the U.S. government approval of our viability plan and the completion of an agreement in principle for the alliance, this is an appropriate time to let others take the lead in transformation of Chrysler with Fiat. I will work closely with all of our stakeholders to complete the restructuring and see that this new company swiftly emerges with a successful closing of the alliance.

This alliance will enable Chrysler to move forward as part of a new company with significant strategic advantages, including access to high quality, fuel-efficient small and compact vehicles, as well as platforms, powertrain technologies and components that will be produced at Chrysler manufacturing sites. Together, Chrysler and Fiat will bring a range of exciting, new fuel-efficient vehicles to North American consumers, helping stimulate growth in this segment. The alliance also will allow Chrysler and Fiat to fully optimize our respective manufacturing footprints and global supplier base. Each company will gain access to new markets, including distribution of Chrysler vehicles to areas outside of North America, and potential distribution of Fiat vehicles through Chrysler’s dealerships in North America.

As you know, Chrysler initiated discussions with Fiat more than a year ago to develop plans for a global product alliance. Chrysler and many of its stakeholders worked tirelessly to agree upon concessions that will result in a significantly lower cost base and enable fulfillment of a broader strategic alliance. Despite substantial progress on many fronts, we were not able to obtain the necessary concessions from all of our lenders. As a result, under the direction of the U.S. Treasury, Chrysler LLC and 24 of its wholly owned U.S. subsidiaries today filed voluntary petitions under Chapter 11 of the U.S. Bankruptcy Code in U.S. Bankruptcy Court for the Southern District of New York.  

Even though total agreement on concessions was not possible, I am truly grateful for all that has been sacrificed, on the part of many of Chrysler’s stakeholders to reach an agreement in principle with Fiat. My number one priority has been to preserve Chrysler and the livelihoods of thousands of people who depend on its success.  While I am excited about the creation of the global alliance, I am personally disappointed that today Chrysler has filed for Chapter 11. This was not my first choice.

It’s very important to make clear that, because of the amount of work we’ve already done prior to filing for Chapter 11, this will be a very different kind of process than you may have seen with other companies. With this “structured bankruptcy” filing, we will submit a motion under Section 363 of the Bankruptcy Code requesting the court to swiftly approve the agreement with Fiat and the sale of Chrysler’s principal assets to the new company we are forming with Fiat. The benefit of this type of filing is speed. It will allow a leaner new company to emerge in a matter of 30 to 60 days, well positioned for long-term viability. It’s also very important to note that Chrysler’s Canadian, Mexican and other international operations are not part of any bankruptcy filing.

The substantial majority of Chrysler’s assets, operations, plants and people will be transferred to the new company, while assets and liabilities that are not consistent with our business plan will remain with the old company for disposition. Under the supervision of the court, and with the cooperation of the U.S. Treasury, the new company will quickly emerge from bankruptcy as a restructured and financially healthy organization. The old company and its remaining assets will proceed through a Chapter 11 process during which these assets may be sold or otherwise liquidated. Chrysler is in the process of identifying and finalizing the list of assets that will be disposed of through this process. Once this is complete and we are asked to share it with the court, we also will share it with you.  

Chrysler also will file “First Day” motions with the court, seeking relief to honor obligations to pay employees, suppliers and dealers as an essential component of preserving the value of our business in the time period pending the sale. We expect to receive approval for these motions within the next few days, and we will provide you with regular updates.
During the restructuring process, the government will provide sufficient debtor-in-possession (DIP) financing to allow continuation of “business as usual.”  The company will seamlessly honor warranty claims, pay suppliers and keep our dealer body operating to continue to serve our valued customers.

Throughout this time, Chrysler and our dealers will continue to sell and service all vehicles and honor warranties. We will continue to supply parts to our dealers to ensure that vehicles can be serviced without delay. We are committed to serving our customers throughout this process and to producing quality vehicles over the long term under the Jeep®, Dodge, and Chrysler brands, as well as parts under the Mopar® brand.  As part of the restructuring and with the backing of the U.S. Treasury, we have reached an agreement in principle with GMAC to become the preferred lender for Chrysler dealer and consumer business. This is very good news as GMAC will be able to offer the best long-term finance options for Chrysler dealers and customers with standard rate installment products.

As a part of the restructuring, most manufacturing operations will be temporarily idled effective Monday, May 4, 2009.  Normal production schedules will resume when the transaction is completed, which is anticipated within the next 30 to 60 days. Hourly employees will receive unemployment benefits, as well as supplemental pay that will amount to most of their base wages.

Keep in mind that during the period when facilities are idled, all company-sponsored healthcare and other insurance coverage will continue. All qualified employee pension and 401(k) funds are protected by federal law from Chrysler’s creditors; these funds cannot be used by the company to meet any other obligations. Upon approval of the transaction, the new company is expected to continue relationships with most employees, dealers and suppliers.

There is no question that this process involves deep sacrifices from many Chrysler stakeholders, including the UAW and CAW, employees, dealers and suppliers. We also want to recognize the Administration, U.S. Treasury, The President’s Auto Task Force, as well as Members of Congress and representatives at the state and community level and Canadian Federal and Ontario Provincial governments for their energy and efforts in helping to move our company forward. With the strong support of the Cerberus and Daimler, these stakeholders came together to make concessions that today give us a clear view of a promising future. To be sure, there will be many changes as we move forward to implement our plans.  But today, from many great parts, we begin to build a vibrant new company with less debt, a stronger balance sheet, richer product portfolio, supported by a well-positioned finance company.

We understand that you will have many questions throughout this transition process. Further information will be available on a continuing basis at scoop.chrysler.com, www.chryslerrestructuring.com, or by calling our toll-free restructuring information line at 1-877-271-1568 (United States and Canada) or 1-503-597-7708 (International). These sources will be updated regularly to address your ongoing questions.

We are profoundly grateful for the support of the thousands of people across the United States and worldwide who have contributed to our effort to restructure for long-term viability.  We take enormous pride in the contributions we have made to our industry, are honored by the trust our customers have placed with us for more than 80 years and look forward to continuing to serve them for many years to come.

Again, I thank you for your years of service and commitment to Chrysler LLC and look forward to working with you through the restructuring to build a stronger new company for the twenty-first century.

Bob  Nardelli
Chrysler Chairman

Chrysler files for bankruptcy

Canada and Ontario to have 2 per cent equity stake in restructured auto manufacturer; company forms partnership
with Fiat and will be eligible for billions in U.S.
and Canadian government aid

SEE VIDEO

Apr 30, 2009

Staff Reporters

Ontario's Dalton McGuinty and Prime Minister Stephen Harper are joining with U.S. President Barack Obama in a $14-billion bailout of Chrysler, which filed for U.S. Chapter 11 bankruptcy protection this afternoon.

Ontario and Ottawa are jointly putting up $3.8 billion of the loan package and will take a combined 2 per cent ownership stake in the new, restructured U.S. corporation and its Canadian subsidiary, federal and Ontario officials said today.

"This is another step we need to take, together, that gives Chrysler the best possible opportunity for success and gives Ontario taxpayers the best possible protection as we join forces with the federal government and President Obama's administration," said McGuinty at a joint press conference with Harper in Toronto.

"And it ensures, above all, that Ontario will continue to produce cars and Ontario families will continue to have jobs in that sector."

Earlier, Obama confirmed in a press conference that Chrysler's negotiations between Italian carmaker Fiat Group SpA have been fruitful and the two firms will enter into a partnership.

But the gruelling efforts by Chrysler to come up with a restructuring strategy that meets with government approval in Canada and the U.S. ran into a last-minute stumbling block. A group of about 40 hedge funds owed money by the automaker opposed a plan that would cut Chrysler's $6.9 billion (U.S.) of secured debt. After talks with the lenders broke down last night, Chrysler was forced to file for bankruptcy protection today.

But Obama expressed hope that Chrysler will come out of the bankruptcy proceedings as a more viable operation with "a new lease on life."

"No one should be confused about what a bankruptcy process means," Obama said. "This is not a sign of weakness, but rather one more step on a clearly charted path to Chrysler's revival."

Harper took the unusual step of issuing a combined written statement with the U.S. president. "Thanks to our joint efforts, there is now a road ahead to a stronger Chrysler and a stronger industry in the future on both sides of the border," it said.

In exchange for financial support from Ottawa and Queen's Park, Chrysler has agreed to maintain 20 per cent of its production in Canada, government officials said in a background briefing for reporters.

The $3.8 billion in support committed by Harper and McGuinty includes $1 billion already promised to the automaker. Of that, $750 million has already been drawn down.

Chrysler has up to 8 years to pay back the various loans and is being charged competitive interest rates of at least 7 per cent annually, officials said.

"Let no one suggest that the money that we are giving today is a gift," Harper said.

Part of the deal is the appointment of a new, 9-person Chrysler board of directors. There will be 3 Fiat appointees, 4 from the U.S. government, 1 from the United Auto Workers, and 1 appointed by governments in Canada. The Canadian board person will be a "business person with relevant experience," officials said.

The U.S., Canada and Qntario will own their shares until at least Jan. 1, 2013 unless someone buys them out. Fiat has right of first refusal to buy the governments' shares.

Harper said its "not a perfect decision" but is "far better than the alternatives."

Harper and McGuinty thanked each other for their cooperation on this issue and offered their appreciation for the concessions made by the Canadian Auto Workers to enable Chrysler's restructuring to proceed.

The United States will have 8 percent of the equity of the restructured auto company.

BARRIE MCKENNA

“We have a union that feels like it has no choice,” explained John Revitte, a professor of industrial relations at Michigan State University in East Lansing, Mich.

“This is spinning out of control and [union leaders are] basically … hoping they have more influence with the Obama administration than they would with a bankruptcy judge.”

Under a deal hashed out between Chrysler and the UAW, workers would give up the right to strike until 2015.

They'll also do without automatic yearly cost-of-living raises, several holidays and significant overtime. If the company and its workers can't agree on a new contract when the current one expires in 2011, an arbitrator must base the company's labour costs on a rate comparable to Chrysler's U.S. competitors, including foreign-owned manufacturers.

In return for the concessions, Chrysler would put stock into a health care trust fund the UAW will manage for its retired workers. Workers would also get a seat on the company's seven-member board – not enough to exert day-to-day control, but plenty to have a seat at the table and share in a potential industry recovery.

“GM and Chrysler can't be compared with Google, but both auto makers could prove to be viable and prosperous some day,” said Harley Shaiken, a professor and labour relations expert at the University of California at Berkeley. “And if they do, UAW workers will share in that.”

Chrysler workers don't have the luxury of time to consider this life-altering change in their situation. They are slated to vote on the deal Wednesday.

UAW president Ron Gettelfinger acknowledged the “painful” sacrifices, but pointed out that jobs, health care and wages are on the line.

It isn't the first time unionized workers have assumed ownership in the face of hardship, and it's unlikely to be the last. The grim choice of ownership versus unemployment is similar to what U.S. steel workers confronted in the late 1980s, and it may be the future of many newspaper workers, Prof. Revitte suggested.

“Let's see what those unions do with their choices,” he said. “[Labour's accumulated gains are] all disappearing very quickly.”

Union clout, and membership, has been in steady decline for a generation now, tumbling to just 7.5 per cent in the United States from 35 per cent at the end of the Second World War. UAW membership at the Detroit Three has fallen more than 40 per cent since 2003, and is headed lower in the wake of recent layoffs.

The contract concessions at Chrysler are “very significant,” Prof. Revitte said. But he added: “In comparison to it all disappearing, what choice do they have?”

Turning auto workers into owners isn't just fraught with financial risk. It also may drag the UAW into potentially messy conflicts of interest.

“Having majority ownership of a corporation may sound from the outside like great union power, but it puts the UAW in a difficult position because they're wearing two hats – representative of the workers and quasi-owners of the company,” explained Gary Chaison, an industrial relations professor at Clark University in Worcester, Mass.

So many decisions in collective bargaining are in direct conflict, such as whether to strike or determining a company's ability to pay, according to Prof. Chaison.

“They really have to argue with themselves,” he said. “There's going to be a confusion of roles here. The union has to watch itself very carefully. This is not what unions do. Unions represent workers in dealings with employers. Unions do not also try to act as employers.”

Nor will it be easy to sell workers on the concept. “They don't like the position of being the junior partner in success and the senior partner in failure,” Prof. Chaison said.

And yet employee ownership, even in unionized workplaces, is not unprecedented. Consumer products giant Procter & Gamble has been employee-owned since the 1890s. Formal Employee Stock Ownership Plans have been around since 1974 and now cover roughly 11,000 companies and 11.5 million workers.

Auto workers took their first step toward ownership in 2007, when they allowed GM and Chrysler to escape billion of dollars worth of health care obligations in return for creating union-controlled trust funds, known as Voluntary Employee Beneficiary Associations. Those carefully managed trust funds, aimed at keeping the retiree health care system funded, will now control labour's ownership stake.

Amid troubles facing the steel industry in the late 1980s, Republic Steel successfully emerged from bankruptcy protection as an employee-owned company in a deal brokered by the United Steel Workers of America. The company is now owned by Industrias CH of Mexico. Republic became a model for several employee takeovers in the steel industry.

Prime Minister Stephen Harper and Premier Dalton McGuinty will today announce that Canadian taxpayers will own a tiny piece of a restructured Chrysler LLC, the Star has learned.

Sources said last night that the federal and Ontario governments will jointly hold a 2 per cent equity stake in Chrysler, which will likely reveal a partnership today with Fiat Group SpA of Italy.

Terms of a tentative plan call for Fiat to own up to 35 per cent of the new company.

The United Auto Workers would take a 55 per cent interest in Chrysler after the union agreed to cut more than half of the company's $10.6 billion (U.S.) obligations to a retiree health-care trust fund.

Harper and McGuinty are agreeing to the unusual arrangement in a bid to assure taxpayers that their bailout "investment" in the carmaker is protected by loan equity.

Despite the new ownership, the teetering American automaker will probably still end up under bankruptcy court protection, at least briefly.

The company and stakeholders are racing toward a midnight deadline for resubmission of restructuring plans to governments in Canada and the U.S. so it can get approval for billions of dollars in loans.

But details of the rescue plan began leaking out late yesterday.

Fiat chief executive officer Sergio Marchionne told the Canadian Auto Workers earlier this week that a brief bankruptcy filing in the U.S. remains likely, as a means to deal with some creditors opposing repayment conditions.

However, he also indicated Chrysler's Canadian subsidiary could avoid bankruptcy court protection here because its plants are in better shape financially.

U.S. President Barack Obama will probably announce aid and a temporary bankruptcy move today rather than cut Chrysler off, which would push the auto icon into liquidation.

Obama told a White House news conference that Washington does not want to be in the auto business as a shareholder for very long.

It remains unclear how long Ottawa and Queen's Park would hold their ownership in the automaker.

Federal and Ontario politicians have publicly deflected questions about what type of security the Canadian governments would get in exchange for up to $2.9 billion (Canadian) in loans.

The two governments have already approved $750 million in loans to the company.

In December, Ottawa and the province said that in exchange for loans, they would receive warrants for non-voting common shares equal to about 20 per cent of the total financing from both countries.

Ontario Economic Development Minister Michael Bryant said Chrysler and the government south of the border continue to wrangle with creditors.

"The last piece of this is going to be determined by the creditors," he told reporters. "Some banks have signed on to (Obama's) plan, some have not, so will the debt be addressed inside or outside of bankruptcy? That's yet to be determined. I wouldn't be surprised if it goes down to the wire."

Unlike the UAW, the CAW won't take a stake in Chrysler because the company doesn't have the same health-care obligations in Canada.

Fiat won't invest any money for its stake in Chrysler but will share small car and engine technology.

Chrysler has operated for years without a strong small car in its lineup.

In the past year, this niche-market hole has hammered the company, as soaring fuel prices drove buyers to more fuel-efficient compacts and subcompacts.

Under the partnership, Fiat would sell some European-made models in North America through Chrysler dealerships and sell Windsor-made minivans and other models abroad .

Sources familiar with the company's plans say Marchionne, who grew up in Toronto and graduated from the University of Windsor, wants to produce cars in North America, but none of Fiat's existing or future models would fit in Canadian assembly plants.

Turin-based Fiat is considering the production of its hit subcompact Fiat 500 at either the former Chrysler Sebring factory in Sterling Heights, Mich., or the Jeep Patriot/Compass plant in Belvidere, Ill., according to the sources.

In the U.S., the sources added, Fiat is also examining the possibility of making the coming Alfa Romeo 149 sports hatchback and the new Alfa Romeo 169 sedan in some under-used Chrysler operations.

Building any of these in Canada would involve hundreds of millions of dollars to retool assembly plants in Windsor and Brampton.

However, Marchionne suggested to CAW president Ken Lewenza at a dinner earlier this week that Canadian operations are safe because of their productivity and the significant union concessions that were made to keep them competitive.

In the U.S., Obama told a town hall meeting just outside St. Louis that the government doesn't want to remain a shareholder.

"We're hoping that you can get a merger where the taxpayers will put in some money to sweeten the deal but, ultimately, the goal is we get out of the business of building cars, and Chrysler goes and starts creating the cars that consumers want," he said.

In the early 1980s, the U.S. and Canadian governments bailed out Chrysler with loans and earned a profit on temporary shareholdings when the company experienced a quick, remarkable turnaround.

The restructuring talks, which have involved numerous stakeholders, including the governments in both countries, cleared a major hurdle on Tuesday when four big banks holding 70 per cent of Chrysler's $6.9 billion (U.S.) in secured debt agreed to a deal that would erase it for $2 billion in cash.

However, more than 40 hedge funds that hold the remainder were still balking last night.

If those funds don't settle, Chrysler could move to a short bankruptcy process in court where smaller lenders would have little power to stop a restructuring, since the banks with most of the debt have supported the plan.

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

Chrysler is plotting an ambitious and unusual bankruptcy strategy for the Canadian subsidiary, which operates three plants and employs about 9,400 people in Ontario. According to people familiar with the discussions, the company's executives and advisers want to keep the Canadian operations outside of bankruptcy-protection proceedings to allow the head office to have more control over the restructuring process. Canadian subsidiaries typically file for CCAA protection to shield their operations while refinancing under court supervision.

Chrysler, sources said, is concerned that the CCAA process may erode Detroit's influence over its branch plant because Canadian laws, unlike those in the United States, give enormous powers to court-appointed monitors to steer a restructuring on behalf of such Canadian stakeholders as creditors and employees. A full CCAA filing could also trigger cross-border fights between creditors.

To sidestep the need for a traditional Canadian court restructuring process, people familiar with the discussions said Chrysler will seek court approval for what one person described as a streamlined or "skinny" CCAA filing. Chrysler is expected to ask an Ontario court to approve a so-called Section 18 filing that will put the Canadian operations under partial court supervision, while the Detroit parent runs the overall process. Typically an information officer, rather than a monitor, is appointed under this type of filing and Canadian operations are not shielded from creditor claims.

"Chrysler has a small footprint in Canada, so this could be a very elegant solution," said one person familiar with the plan.

Chrysler's plan cannot work in Canada, sources said, unless it wins support from suppliers and creditors. It is understood the company intends to meet each of its creditor groups to outline its plans to pay all of its bills in the short term. Over the longer term, the company is seeking to sharply reduce its supplier group.

The Canadian branch plant has little debt, but one of its biggest creditors is a group of 450 dealers who sell its cars across the country. In recent days the dealers have formed a committee and hired a law firm to represent them. "The dealers have clout and they are something to be afraid of," said one person close to the group.

If the dealers or other creditors oppose the plan for a streamlined CCAA filing, legal experts said the company could be forced to file for full CCAA protection, which would slow Detroit's plans to transform the company.

U.S. President Barack Obama is scheduled to make an announcement on Chrysler this morning. The Wall Street Journal reported that one speech outlined that Chrysler would be placed in bankruptcy protection while another said the company has been able to complete its restructuring outside bankruptcy protection.

"We're hoping that you can get a merger where the taxpayers will put in some money to sweeten the deal but, ultimately, the goal is we get out of the business of building cars, and Chrysler goes and starts creating the cars that consumers want," he said.

The U.S. and Canadian governments set today as the deadline for Chrysler to come up with a survival plan that includes the alliance with Fiat and agreements with the Canadian Auto Workers and United Auto Workers unions to dramatically slash hourly labour costs.

Prime Minister Stephen Harper, Industry Minister Tony Clement and Ontario Premier Dalton McGuinty are holding a news conference this afternoon that officials say will be about Chrysler. Members of the CAW work force at Chrysler Canada's three plants approved concessions on Sunday. UAW members in the U.S. overwhelmingly ratified a settlement deal on concessions with Chrysler last night.

DETROIT – Three people briefed on the deal say Italian automaker Fiat Group SpA will sign paperwork by Thursday to become a partner with Chrysler LLC.

The partnership is the last piece of a huge restructuring plan needed to keep Chrysler alive.

The U.S. government has lent Chrysler US$4 billion and gave it until Thursday to get concessions from unions, reduce debt and take on a partner or face liquidation.

The United Auto Workers union is expected to ratify a cost-cutting contract tonight, and major banks have agreed to reduce Chrysler's debt.

The people briefed on the deal say Chrysler could still go into a short bankruptcy if about four dozen smaller lenders don't sign onto the banks' agreement.

The people did not want to be identified because the deal has not been made public.

Fiat SpA chief executive Sergio Marchionne didn't see any horns coming out of the head of union leader Ken Lewenza at the dinner table the other night.

Marchionne, who is racing to complete a merger with Chrysler LLC by the end of tomorrow, quietly flew into town Monday to dine and personally thank Lewenza and his union for accepting significant concessions critical to saving the sputtering auto giant.

"He wanted to see if the CAW and I have horns in our heads," Lewenza, president of the Canadian Auto Workers, said with a chuckle. "I think he left knowing there were none but they could come out any time if we're backed into a corner."

Marchionne, Chrysler president Tom LaSorda, Lewenza and four top union officials dined on steak and veal Parmesan for about two hours at Topiary's Steak and Seafood Restaurant near Pearson International Airport.

Marchionne, 56, was born in Italy, raised in Toronto and graduated from the University of Windsor. He recently described the CAW as "rigid" and vowed to walk away from merger talks if the Canadian union and the United Auto Workers in the U.S. did not accept concessions deeper than those ratified earlier by General Motors employees.

Lewenza said he mildly "challenged" Marchionne on the comment and reminded him Chrysler workers in Canada are efficient, produce top-quality vehicles and would do anything to remain competitive.

Lewenza also broached the issue of more future investment here but a visibly tired Marchionne, who could soon be running the Italian automaker and Chrysler, said he didn't want to think that far ahead given more critical talks with U.S. lenders and government negotiators in the next two days.

"He told me to take a deep breath and let's just try to get through Thursday because it isn't a done deal yet. He was open but very cautious and conservative on where the industry would go in a recovery."

Lewenza found it extremely "respectful" of Marchionne to take time in the middle of talks in Washington to see the union here.

"He looked worse than I did last week," said Lewenza about the "torturous'' around-the-clock negotiations for concessions here.

In turn, union officials thanked Marchionne and Fiat for emerging as potential saviours of Chrysler and thousands of Canadian jobs.

Who paid for the meal and drinks?

Lewenza didn't know for sure but emphasized one point.

"It wasn't me."

The United Auto Workers could soon hold a majority of teetering Chrysler LLC, but their Canadian counterparts won't own any shares under the company's survival plans.

Ken Lewenza, president of the Canadian Auto Workers, said yesterday his union is not in the right circumstances, nor does it have the financial resources to take an ownership position as the company races to qualify for a merger and more public aid.

Under the terms of a tentative concessions deal, the UAW in the U.S. says it will eventually own about 55 per cent of Chrysler and, in exchange, the company would no longer be liable for significant obligations under a multi-billion-dollar retiree health-care fund. The company's Canadian subsidiary and the CAW do not have a similar plan.

Under the new ownership structure, Italian automaker and merger partner Fiat SpA would hold another 35 per cent, while the U.S. government and lenders would own the remainder.

That leaves the question how much of a stake, if any, the federal and Ontario governments would take in exchange for almost $3 billion in loans.

In December, Ottawa and Ontario revealed they would receive warrants for non-voting common shares equal to a 20 per cent share of the government loans issued by both countries to the U.S. parents of Chrysler Canada and General Motors of Canada Ltd.

Chrysler needs to submit a new restructuring plan to U.S. and Canadian governments, including a deal with a merger partner and lenders, by midnight tomorrow. GM faces a deadline to submit a plan for more aid at the end of May.

GM said its restructuring plan considers the U.S. government holding 50 per cent under a debt-for-equity exchange, and the UAW 39 per cent. Bondholders would own about 9 per cent, while existing shareholders would get less than 1 per cent.

But government leaders in Canada have been cagey about ownership stakes in the two companies.

"It's certainly something that is an option in the United States," Ontario Economic Development Minister Michael Bryant said yesterday. "Regardless, any equity stake held by Canada or Ontario would be very, very, very small and the main purpose of it would be to provide supervision, so that the taxpayer dollars are spent wisely."

Lewenza said Ottawa and Ontario never talked about the issue of equity stakes when they recentlypressed the union for more concessions at Chrysler.

"The idea of equity was never presented (by the company or governments)," he said. "It was never an option for us."

Lewenza added that Chrysler Canada was never burdened with having to negotiate down significant obligations regarding a retiree health-care fund, as was its parent U.S. company. GM Canada is in a similar position with the CAW, he added.

Last weekend, Chrysler Canada workers ratified major concessions that will slash so-called "all-in" hourly labour costs by $19 to $57, so the company can compete with Honda and Toyota.

The CAW said the concessions will save Chrysler Canada about $240 million annually.

Lewenza also revealed that Fiat chief executive Sergio Marchionne suggested to him earlier this week that if Chrysler gained bankruptcy court protection in the U.S., the Canadian subsidiary could avoid it here because of healthy operations.

Lewenza noted that if Chrysler slipped into court protection for further restructuring in Canada, there is an understanding with the company that its autoworkers would not have to face further concessions.

The landmark Chrysler deal was forged at the demands of the Obama administration, which required that equity fund at least half of Chrysler's $10.6-billion obligation to a union-run retiree health care trust. The deal will slash retiree benefits in the U.S., and hand control of the company over to the union, though perhaps only in the interim. Chrysler stock eventually will be traded publicly again, as there are mechanisms for the UAW to sell shares to fund the trust, the summary said.

Chrysler workers will vote to ratify the deal, a process the union hopes will be done by Wednesday, one day before Chrysler's government-imposed deadline to restructure.

In the GM deal, the company's top executive cast it as a plan to remake the company in one fell swoop.

"We need to take this as an opportunity to restructure, and restructure General Motors once," Fritz Henderson, GM's chief executive officer, said Monday as he outlined the demise of Pontiac and a bond exchange that offers reluctant debt holders shares in GM for their $27-billion (U.S.) in debt.

The plan needs to be approved by government and bondholders, who are likely to be unhappy about receiving just 225 shares of GM in return for every $1,000 worth of bonds.

A senior Canadian official said Ottawa is also looking at taking an ownership stake in GM, which on Monday promised to slash its Canadian production and cut work force by an additional 1,000 jobs. The plan would accelerate job losses in Canada, shrinking to about 5,500 employees by 2014 from more than 20,000 just 15 months ago.

"There's a menu of options we're looking at," the federal official said. "We know the United States is looking at that [equity-for-debt] option quite seriously and we have to see whether that might work for us."

Asked whether Ottawa would take an ownership stake in GM, Industry Minister Tony Clement said: "We've got another 30 days to go [before the GM deadline]. There's a lot of proposals on the table. We have not made any conclusions at this point."

The GM announcement kicked off what is likely to be the most significant week in the history of the Detroit auto makers with the guiding hand of the U.S. Treasury Department on the steering wheel.

GM officials indicated on Monday, for example, that the Treasury Department said it would not support the GM plan if debt holders ended up owning more than 10 per cent of the company after the debt-for-equity swap.

The Canadian and U.S. governments have intervened because a failure by GM would wipe out hundreds of thousands of jobs across the continent. "It would trigger a catastrophe in the economy, if that were to happen," noted David Cole, chairman of the Center for Automotive Research, an industry think tank in Ann Arbor, Mich.

"I have a hard time putting my finger on another [such critical time] unless it was 1941 when the industry just stopped making cars and made guns and planes," added Gerald Myers, a former chairman of American Motors Corp. and now a professor at the University of Michigan.

Some of the restructuring pain is being imposed by governments, which are seeking to ensure that the companies they bail out with long-term loans can survive. "It will take severe restructuring, there's no doubt about it and the job losses are terrible," Mr. Clement said outside the House of Commons.

GM will slash its Canadian dealer network in half, to between 395 and 425 outlets by 2010 from 705 outlets now. That's a deeper and faster cut in its retail operations than was in a plan unveiled in February that called for a reduction to between 450 and 500 dealers by 2014.

GM Canada is negotiating with Ottawa to secure a $3-billion bridge loan to carry it until the end of May, and the company said the two sides are "close" to agreement. It is also looking for $7.5-billion in long-term loans from Ottawa and the province of Ontario to keep it alive until North American car sales pick up.

General Motors of Canada spokesman Stew Low said the company remains committed to Canada and that its plan here is largely unchanged, save for the elimination of a planned third shift in Oshawa next year to build the Impala. The company now has to begin negotiations with the Canadian Auto Workers union in an effort to extract the same concessions that the union provided to Chrysler in a deal ratified on the weekend.

GM said it expects to reduce its unionized work force to 4,400 by 2014, mostly through already announced closings at its truck plant in Oshawa next month and Windsor transmission plant in the summer of 2010.

"The landscape is going to shrink dramatically and it's going to have a negative impact right across our communities," said Chris Buckley, president of CAW Local 222 in Oshawa.

The loss of auto jobs is already devastating communities in Southern Ontario that rely on the assemblers and their parts suppliers for high-paying manufacturing jobs. Parts suppliers are warning of a cascading effect as the manufacturers cut back and parts makers face bankruptcy.

GM's survival plan includes slimming down to just four brands, compared with the eight it now offers. The lineup will consist of Chevrolet, Buick, Cadillac and GMC. The auto maker's Saturn, Saab and Hummer brands will be gone by the end of the year.

The plan calls for GM to break even financially in the worst vehicle markets such as that being experienced during the current U.S. downturn and to generate lots of profit when the market returns to healthier levels next decade.

General Motors of Canada, once the mightiest industrial enterprise in the country, will become a tiny shadow of itself within a few years by slashing jobs, shuttering dealerships and eliminating the iconic Pontiac brand.

In an aggressive update of a "viability plan," GM disclosed yesterday that the company will chop an already-diminished workforce by 6,000 jobs, or almost 60 per cent within five years; slash its dealer network by about 300 retailers, or 42 per cent; and eliminate the 83-year-old Pontiac.

Industry officials said in addition to the 6,000 direct job losses, another 14,000 eventually will disappear at dealerships and a further 18,000 will be out of work in the parts sector.

The shrinking auto giant said it is moving "faster and deeper" on restructuring plans so it can qualify for short-term government bridge loans here. The federal and Ontario governments rejected an earlier survival plan from GM, which is seeking between $6 billion and $7 billion in aid.

In Ottawa, Industry Minister Tony Clement described the job cuts as "terrible and unfortunate but necessary to secure public aid and keep the company viable.

GM said in a statement the latest plan "will speed the reinvention of the company's operations into a more customer-focused, leaner and more cost-competitive auto maker."

It also confirmed the phase-out of the Pontiac brand – which created models like the Bonneville and the GTO, the first performance car – to concentrate on four core names: Chevrolet, Buick, GMC and Cadillac. Pontiac holds about 4 per cent of the market.

The company said in the update that it will employ only about 4,400 production workers in 2014, down from 10,300 last year.

That's far below the go-go years of the late 1980s when GM had a production workforce of almost 40,000 at three assembly plants in Oshawa, two more in suburban Scarborough and Ste.-Thérèse, Que., and sprawling parts operations in St. Catharines and Windsor.

The Scarborough and Ste.-Thérèse operations closed long ago; a truck plant in Oshawa shuts down permanently next month and the transmission factory will end output next year.

With files from Les Whittington

Letter To Retirees from Frank Marek

April 18, 2009

Dear Retirees:

In the fall of each year CAW Loc.584 invites all our retirees and their spouses, to our annual Thanksgiving Dinner. This event becomes more and more successful every year but still there are a number of you that do not participate, I guarantee if you attend you‘ll be thoroughly delighted with meeting friends from the plant that you haven't seen in a while or just re-new past acquaintances (I hesitate to use old). Participation as a group is what it’s all about.These are times of celebration and like now, times of crisis and survival.

Hopefully you have been keeping pace lately with the crisis in the economy, more specifically the Auto Industry. And surely by now you must realize retirees have become the latest scapegoats for the Corporations, the Federal and Provincial governments and let’s not leave out the fence sitting media.

Now imagine, the spokespersons for the corporations who have millions stashed away in offshore accounts from the hours we toiled for the past 30-40 years and they will get millions more when they leave. Then you have the likes of Harper, Clement, McGuinty and Flaherty, people who have held office for short periods of time with good wages and lucrative expense accounts, and after two terms in office (6yrs.,) will receive indexed pensions for LIFE worth more than you were making working overtime. Now they are sticking their noses in the collective agreement process the parties agreed upon. These nervy conceited politicians are doing everything possible to crush unions. They want to steal what benefits we have left, and drive our pension income into poverty levels.

What concessions did they demand when the banks and the financial communities were getting billions of your tax dollars? No (they say) we will go back and we’ll kick the working class again, the pensioners, they're vulnerable, pushovers. Watch the news, everyday you see Lewenza and his CAW leadership fighting to keep our industry alive, making sure retirees, their spouses, partners, and surviving spouses maintain what income and benefits we have left, yet still work out some compromise suitable to get this economy back on its feet.

In my 30-40 years of involvement, no CAW or UAW leader has ever been faced with a crisis of this magnitude, this new young courageous leader and his peers who inherited this mess, need to know that WE will be there for them on APRIL 23/09 We all have a responsibility to participate and support our cause, call your friends neighbors, car pool to the buses.

We need your participation now and let’s show them that our pensions can’t be touched.

Call or e-mail if you can attend. Contact Chris at cwilski@rogers.com or Frank at frank@3ringstudios.com or phone 519 534-1776

Fraternally,  
Frank Marek 
Vice Chair
Loc.584 Retirees               

April 27, 2009

TORONTO — An overwhelming majority of workers at Chrysler Canada have accepted a labour concession deal reached between their union and the beleaguered automaker that will save the company $240 million a year in hopes of protecting their jobs.

The deal was approved by 87 per cent of the thousands who turned out in Toronto, Mississauga, Ont. and Windsor, Ont. to vote over the weekend.

Canadian Auto Workers president Ken Lewenza announced the agreement late Friday night and union members quickly showed their support, despite some major concessions that were made to seal the deal.

The agreement finds cost savings totalling $19 an hour through cuts to workers' benefits but maintains base wages.

"Our members understand better than anyone the current turmoil of the domestic auto industry," Lewenza said in a release.

"The high acceptance of this agreement is a recognition that although workers did not cause this crisis, we all have an interest in maintaining good jobs and ensuring the auto industry remains central to the overall Canadian economy."

The agreement reduces paid relief time, cuts some supplementary unemployment benefits, increases prescription drug fees, eliminates semi-private hospital coverage and gets rid of the employee car purchase and tuition rebate programs, among other things.

The salaries of new workers will also increase more slowly than they do currently, and more room will be made for part-time and contract workers in Chrysler plants.

Chrysler said it "deeply appreciated" the union's efforts to cut its labour costs to a competitive level. Those efforts are central to the company putting a viable restructuring plan forward.

It has to come up with such a plan to get bailout loans from the federal and Ontario governments.

The concessions workers accepted are in addition to cuts already agreed to with General Motors in an deal reached last month.

That agreement freezes wages until 2012, reduces paid time off by 40 hours per year, scraps an annual $1,700 bonus, cuts company contributions to union-sponsored programs and requires CAW members to contribute $30 a month to their health benefits.

Breaking from the pattern set with GM is a substantial departure for the CAW, which usually negotiates similar deals between all three of the Detroit-based automakers.

The company now has until the end of the month to negotiate a partnership with Italian automaker Fiat and to reach deals with its U.S. workers, bondholders and other stakeholders in order to receive long-term bailout loans from governments in Canada and the U.S.

Without a restructuring plan that governments deem acceptable, Chrysler will likely be forced to file for bankruptcy protection or even liquidate its assets.

Lewenza said Chrysler told him it plans to split into two parts if it files for bankruptcy protection: one that will continue to operate with the help of an alliance with Fiat, and another that will liquidate its assets.

He said he has been assured that all of Chrysler's Canadian plants will continue to operate under such a scenario.

Chrysler also guaranteed the CAW that it will not ask for further concessions if it finds itself in bankruptcy court.

The CAW will now negotiate similar deals with Ford and GM to maintain fairness and competitiveness among the Detroit Three automakers.

Chrysler Canada employs about 10,000 hourly workers and 1,000 white collar employees at its assembly plants in Windsor, Ont., and Brampton, Ont., and a casting plant in Toronto. 

The results by location are as follows:
   
CAW Local 1459, Etobicoke
    Production: 92% in favour
    Skilled Trades: 76% in favour
    Office: 100% in favour
    Combined total: 88% in favour
   

CAW Local 1285, Brampton
    Production: 76% in favour
    Skilled Trades: 91% in favour
    Office: 100% in favour
    Combined total: 79% in favour
   

CAW Local 444, Windsor
    Production: 90.5% in favour
    Skilled Trades: 88.9% in favour
    Combined total: 90.3% in favour
   

CAW Local 1498
    Office: 97% in favour
   

CAW Local 195
    Security: 100% in favour
    Combined Totals:
    Total Production: 86% in favour
    Total Skilled Trades: 89% in favour
    Total Office: 99% in favour
    Total Security: 100% in favour

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

WINDSOR, Ont. - With 90.3 per cent support, Windsor Canadian Auto Workers members on Sunday ratified a tentative agreement with Chrysler that contains concessions totalling $240 million per year but preserves existing base wages and pensions.

"We had to make the necessary compromises to live to fight another day," CAW president Ken Lewenza told the more than 5,000 workers and retirees who crowded into the University of Windsor's St. Denis Centre to hear details of their contribution to Chrysler's survival plan.

Under the deal, which expires in 2012, workers will get no cost of living increases and they give up their one-time, $3,500 vacation buyout. They will give up their $1,700 Christmas bonus and the money will go into a fund to pay for retirees' health care benefits. They will now have to contribute $30 per month toward their health-care coverage ($15 for retirees over the age of 65) and that money will go into that same retirees' health-care fund. Their copayments for drugs will increase by $20 per year and they will lose coverage for semi-private hospital rooms.

Gone as of January are special employee discounts on vehicle purchases and tuition reimbursements.

The agreement meets the reduction of $19 per hour in labour costs insisted on by Chrysler to secure government loans to keep the company afloat. The reduction in labour costs was also demanded by Fiat, the Italian automaker considering a merger with Chrysler.

CAW economist Jim Stanford told the crowd the agreement will guarantee the continued existence of the company's Canadian operations even if Chrysler files for bankruptcy protection in the United States. The company's assembly plants in Windsor and Brampton, Ont., and casting plant in Etobicoke, Ont., will be considered "good assets" and become part of the new company's operations.

If the CAW didn't agree to the deal, Chrysler's Canadian plants would be considered "bad assets" and would be liquidated, Stanford explained. "Talk about a gun pointed to our head."

Lewenza, his voice hoarse from addressing so many crowds of members in recent days, said the concessions will have ramifications throughout the community.

Capped under the new agreement are tuition reimbursements for dependent children, prescription dispensing fees and dental coverage.
"The CAW has made every dentist rich," said Lewenza. Under the new agreement, the benefits plan will pay the 2008 fee schedule for dental work. The union vowed to provide members with a list of local dentists who will work for the 2008 rates.

"Do you think it's coincidental that there's a pharmacy every two blocks?" Lewenza continued. Under the new deal, the benefits plan will pay $9 for dispensing fees, down from $11. Lewenza had a message for pharmacists who will charge his members the $2 difference. "Drop your fees or we'll put a not-for-profit pharmacy office in our plants."

Lewenza predicted Windsor hospitals will have to increase fundraising with the loss of semi-private room coverage for CAW members. And the professors at the University of Windsor who are quick to criticize the union need to realize what tuition reimbursements have contributed to the institution's bottom line.

After Off Year, Wall Street
Pay Is Bouncing Back

April 26, 2009

The rest of the nation may be getting back to basics, but on Wall Street, paychecks still come with a golden promise.

Workers at the largest financial institutions are on track to earn as much money this year as they did before the financial crisis began, because of the strong start of the year for bank profits.

Even as the industry’s compensation has been put in the spotlight for being so high at a time when many banks have received taxpayer help, six of the biggest banks set aside over $36 billion in the first quarter to pay their employees, according to a review of financial statements.

If that pace continues all year, the money set aside for compensation suggests that workers at many banks will see their pay — much of it in bonuses — recover from the lows of last year.

“I just haven’t seen huge changes in the way people are talking about compensation,” said Sandy Gross, managing partner of Pinetum Partners, a financial recruiting firm. “Wall Street is being realistic. You have to retain your human capital.”

Brad Hintz, an analyst at Sanford C. Bernstein, was more critical. “Like everything on Wall Street, they’re starting to sin again,” he said. “As you see a recovery, you’ll see everybody’s compensation beginning to rise.”

In total, the banks are not necessarily spending more on compensation, because their work forces have shrunk sharply in the last 18 months. Still, the average pay for those who remain — rank-and-file workers whose earnings are not affected by government-imposed limits — appears to be rebounding.

Of the large banks receiving federal help, Goldman Sachs stands out for setting aside the most per person for compensation. The bank, which nearly halved its compensation last year, set aside $4.7 billion for worker pay in the quarter. If that level continues all year, it would add up to average pay of $569,220 per worker — almost as much as the pay in 2007, a record year.

“We need to be able to pay our people,” said Lucas van Praag, a spokesman for Goldman, adding that the rest of the year might not prove as profitable, and so the first-quarter reserves might simply be “sensible husbandry.”

Indeed, last year, when Goldman lost money in the fourth quarter, it did not pay out some of the compensation it had set aside when earnings were stronger.

At other banks, pay scales tilt in favor of particular units. JPMorgan Chase, for example, is setting aside what would total $138,234 on average for workers. But in the bank’s trading and investment banking unit, if revenue stays at first-quarter levels, workers are on track to earn an average of $509,524 over the year. That figure was $345,147 in 2006.

To try to blunt criticism of high pay, some banks have introduced reforms to take back bonuses from individual workers whose bets later lose money. Moreover, executives say that for many well-paid bankers, a good portion of their bonus compensation is in stock, whose value can decline if the performance of the bank lags.

Representatives of several of the largest banks said much of their compensation budget covered expenses other than bonuses, like salaries, health care, pension plans and severance.

Still, the compensation expense is the only publicly disclosed figure related to pay at the banks, and it is the best figure for calculating pay per worker.

This expense includes money for year-end bonuses. For high earners, bonuses can account for three-quarters of pay.

Compensation is among the most cited causes of the financial crisis because bonuses were often tied to short-term gains, even if those gains disappeared later on. Still, as profits return, banks do not appear to be changing the absolute level of worker pay — or the share of revenue dedicated to compensation.

Historically, investment banks have paid workers about 50 cents for every dollar of revenue. The average is lower at commercial banks like JPMorgan Chase and Bank of America, because they employ more people in retail branches where pay is lower.

But every dollar paid to workers is a dollar that cannot be used to expand the business or increase lending. Some of that revenue, too, could be used by bailed-out banks to pay back taxpayers.

Wall Street, of course, has a long history of high wages. Not all that long ago, most investment banks were private partnerships, and the workers were also typically the owners. Even when those firms began listing their shares on public stock exchanges, a standard was set in which half of their revenue was paid out to workers.

Their argument is that such lofty pay retains the best employees, who help earn more money, ultimately benefiting shareholders. The set-asides in the first quarter for pay can also help raise morale within the banks.

Some shareholders, however, contend that the earnings pie should be reapportioned. They argue that shareholders have lost a lot of wealth as bank stocks spiraled, so as revenue picks up, more money should be returned in the form of dividends.

“The money should go to shareholders,” said Frederick E. Rowe Jr., a member of the pension board in Texas and the president of Investors for Director Accountability, a nonprofit group. “The fact that the compensation as a percentage of revenue has not gone down is an indication that the root problem has not been addressed.”

Some analysts point to Morgan Stanley as an example of the compensation conundrum. The bank had a dismal quarter, losing $578 million, but still put aside $2.08 billion for compensation. That amount, though lower than the compensation at Goldman, was 68 percent of revenue.

Mr. Hintz, the analyst, said the bank could have avoided losing 57 cents a share if it had reserved less revenue for compensation.

In an interview, Colm Kelleher, Morgan Stanley’s chief financial officer, said the compensation set-aside was based on the bank’s full-year earnings expectations, not just the first quarter. And Morgan could drop its compensation expense only so low, he said, because much of it consists of fixed expenses, like salaries.

“The number of fat cats making loads of money is much less than you think,” he said.

If shareholders do not like compensation policies at banks, they can simply sell their shares. Still, several banks cut bonus pools last year, as losses mounted. And the government is restricting certain pay at banks that received bailout money.

The rule, which applies only to the most highly paid workers, has prompted some banks to try to return the government money as fast as possible.

Executive recruiters in the sector say prospective recruits are still being offered pay packages on par with those of earlier recruits. Some banks that received taxpayer help are even offering guarantees to recruit workers.

Part of the way banks are supporting high pay for their workers is by shrinking their work forces. Citigroup, for example, has dismissed 65,000 people since the start of 2007. That has left Citigroup paying the same amount on average to its remaining workers, though the quarterly cost to Citigroup is down by 25 percent, to $6.4 billion.

Canadian Auto Workers members mulled over a tentative deal with Chrysler yesterday that would save the company $240 million a year and perhaps protect their jobs – at least for a little longer.

Working, laid-off and retired CAW members said they knew the additional sacrifices being considered would offer no ironclad guarantees to protect their jobs and pensions, but some seemed willing to accept the deal as the best and only option in such dire economic times.

Union president Ken Lewenza was emotional as he announced the agreement Friday night and called it a victory, despite some major concessions that were made.

The deal finds cost savings totalling $19 an hour through cuts to workers' benefits. Base wages will be maintained.

Accepting the deal won't relieve his worries for the future and the concessions are "painful" to accept, said auto worker Julian Layne. But there's a recognition among members that everyone must suffer a little, he added.

"There is no such thing as guaranteed jobs," Layne said after workers voted on the deal.

"Our jobs depend on the marketplace. Our jobs depend on people buying vehicles. And if people are not buying vehicles at the end of the day, there are no jobs."

Retiree Mike McCue thought the deal could have been much worse.

"Anybody who's been reading the newspapers over the last six or seven months should realize conditions are tough," he said.

The agreement reduces paid relief time, cuts some supplementary unemployment benefits, increases prescription drug fees, eliminates semi-private hospital coverage and gets rid of the employee car purchase and tuition rebate programs, among other things.

Chrysler said it "deeply appreciated" the union's efforts to cut its labour costs.

Votes were scheduled for yesterday and today in Toronto, Mississauga and Windsor, with the result expected sometime tonight.

Chrysler reaches deal with CAW

Struggling automaker meets goal of
slashing expenses by $19 an hour

Apr 24, 2009

Business Reporter

Chrysler and its union have broken historical pattern bargaining in the auto industry with a tentative deal for deep worker concessions to help keep the teetering company alive here.

In around-the-clock, high-stakes bargaining, negotiators agreed on a deal Friday night for much more concessions than what workers accepted at General Motors, another reeling automaker, last month.

Ken Lewenza, president of the Canadian Auto Workers, also revealed if Chrysler slips into bankruptcy court protection in the U.S. and Canada, operations here would not be liquidated and remain among the company's "good" operating assets. Workers would also not face further concessions if there is a bankruptcy, he said.

Lewenza, who described the negotiations as "torturous and unfair," said the deal would lead to about $240 million in annual savings for the company but not reduce wages and pensions.

"We will live to fight for another day," he said.

He also disclosed that the company and the CAW will work to develop a retiree health care trust fund which will eventually transfer responsibility of costs to the union. It would be similar in concept to a U.S. plan at Chrysler.

The union would not disclose how much the savings represent in so-called "all in" labour costs but officials said privately the concessions meet company demands of reducing expenses by $19 an hour.

Among the concessions beyond an earlier deal at GM, Chrysler workers will lose semi-private hospital coverage, tuition programs, Christmas bonuses, savings on vehicle purchases, some drug dispensing fee protection and partial pay during layoffs.

The union also agreed to reduce relief time in plants, allow more flexibility in use of part-time workers and transfer to a new manufacturing system if Chrysler merges with Fiat SpA of Italy.

-"We are extremely grateful to the CAW leadership and to its hard-working members for their openness in this challenging environment to create a new strategy that will lead this company on a path to success. We also want to recognize the Canadian Federal and Ontario governments for their energy and efforts in helping to move this great company forward," said Chrysler president Tom LaSorda.

Chrysler workers, who earn an average of $35 an hour, will vote on the deal this weekend and the union said it will negotiate similar concessions at GM and Ford in Canada

Chrysler and its U.S. parent must submit restructuring plans to governments in both countries by a deadline next Thursday to receive billions of dollars in loans.

Those plans must contain concessions from numerous stakeholders including bondholders, suppliers, dealers and workers. Chrysler is seeking about $2.9 billion and has already received $750 million.

In addition, Chrysler must complete a merger with Fiat. Fiat has also demanded concessions by stakeholders in both countries.

If the plans don't get government approval, Chrysler will likely slip into bankruptcy in one or both countries.

That would allow Chrysler to reorganize its operations under protection from creditors and emerge as a stronger company. But some parts of the company would likely be sold.

Bankruptcy could also further erode consumer confidence at a time when industry sales are at 30-year lows in the U.S. and sliding here.

In Canada, the federal government pressured the CAW to break a decades-old practice of pattern bargaining where the union traditionally negotiated a contract with one of the big three North American-based auto makers and forced the other two companies to accept it or face a strike.

That would allow the union to negotiate the same improvements for workers at all three companies and not give one of them a competitive edge.

The union initially resisted breaking the pattern deal at GM which will reduce labour costs by about $7.25 an hour by 2012 if the company gets government aid. GM is seeking between $6 billion and $7 billion here.

But Chrysler said it needed cuts in labour costs totalling $19 an hour to compete with Toyota and Honda in Canada.

In the U.S, parent Chrysler LLC and Treasury Department officials are still driving for deals to keep the automaker out of court.

The Treasury Department is also working on a Chapter 11 bankruptcy filing for Chrysler LLC that could come as early as next week.

The department has an agreement in principle with the United Auto Workers union, whose members' pensions and retiree health-care benefits would be protected as a condition of a bankruptcy filing., according to some reports.

Fiat could also complete its merger with Chrysler while the company is under bankruptcy protection in both countries. A merger is a condition for government aid in both countries.

The federal and Ontario governments had set a "deadline" for reaching a tentative deal on concessions at midnight on Wednesday but talks dragged on the health care trust issue.

Chrysler had sought cuts in health-care benefits, shift premiums, life insurance and child care that would trim labour costs by more than $8 an hour. In earlier negotiations, the union has rejected most of those proposals.

If there is a bankruptcy, a question remains about what happens to Chrysler's lenders, who hold $6.9 billion (U.S.) in company debt.

The U.S. Treasury is also working with GM to prepare a possible bankruptcy case. Some industry watchers have questioned whether the Treasury's actions to prepare a bankruptcy case is an attempt to put more pressure on lenders.

While Chrysler faces an April 30 deadline from the U.S. and Canadian governments, GM doesn't need to submit a plan until June 1.

Under the most probable scenario, the U.S. Treasury will provide the financing Chrysler needs to operate while under bankruptcy protection.

Ottawa will also likely provide aid if the company operates under court protection here.

Earlier Friday, Premier Dalton McGuinty sounded a bittersweet note about the worker concessions by expressing concern that they could spread to union members in other sectors.

"We've always proceeded under the assumption that you would do better than your dad and your kids would do better than you - each succeeding generation would enjoy a higher standing of living and a better quality of life," said McGuinty.

"That's been the great Canadian dream ... and there's been a reset right now. I have not given up on that dream and I don't think Ontarians should either.

"I think what it means is these wages will be reset and that will serve as a new foundation, a new base, and then working together we can make sure that we drive up our productivity, drive up the value added dimension of the work that we do so that we can resume the progress that we continue to make."

McGuinty noted he has also written to Prime Minister Stephen Harper to request a national summit on pension reform in the wake of some of the concerns about the serious shortfalls of pension plans at GM and Chrysler.

With files from Robert Benzie

thestar.com

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

CAW Reaches Tentative Agreement with Chrysler, Voting this Weekend

April 24, 2009

(Toronto) – The CAW has reached a tentative agreement with Chrysler Canada Ltd. on a new collective agreement, as part of the North American auto industry’s restructuring process.

The agreement will result in over $240 million per year in annual cost savings for Chrysler’s Canadian operations, as a result of a combination of benefit reductions, compensation changes, and increased productivity through operational improvements.  CAW members perform 12.5 million hours of work per year for Chrysler Canada.  The agreement therefore meets the benchmark for negotiations which was established by the federal and Ontario governments as a condition of their continuing support for the two companies.

The agreement includes all of the cost-saving provisions originally included in the contract negotiated with General Motors Canada in early March.  It also contains some additional provisions, including:

o       The elimination of semi-private hospital coverage.
o       The elimination of a 1-time $3,500 vacation buyout negotiated in 2008.
o       The elimination of clawback reimbursement through the SUB program.
o       The elimination of employee car purchase and tuition rebate programs.
o       An increase in the waiting period for sickness & accident benefits.
o       A reduction in the maximum dispensing fee for prescriptions.

The agreement also contains several operational changes that will further enhance productivity and efficiency in Chrysler’s Canadian operations (which are already the most productive for Chrysler in the world).  These provisions include the adoption of the “World Class Manufacturing” operating system that is used by Fiat in its global production operations.  (Fiat is anticipated to merge with Chrysler through the restructuring process.)

Finally, the agreement also contains measures aimed at providing retiree pension and health benefits (so-called “legacy costs”) in a more cost-efficient manner.  The pension contribution timetable is adjusted in line with provisions announced by the Ontario government in its 2009 budget, and the CAW and Chrysler have agreed to establish a Canadian Health Care Trust (HCT) to provide retiree health benefits.  This initiative will be similar to U.S. VEBA arrangements, although with several important differences; the details of this plan will be worked out over the next month.

CAW President Ken Lewenza indicated that the bargaining of the agreement was extremely challenging, but expressed his support for the solidarity which CAW members have demonstrated through the past difficult weeks.

“CAW members supported their union right through this process, rather than allowing themselves to be intimidated by crude threats. That has allowed us to bargain the very best agreement possible, imposing the minimum possible sacrifice on our members and their families, despite the incredibly tough times.”

CAW members working at Chrysler in Windsor,Brampton and Etobicoke will vote on the new contract in a series of meetings held over the next two days. Members of the media are welcome. Results of the ratification votes will be released late Sunday night via Canada News Wire (CNW).

The ratification schedule is as follows:

Saturday, April 25, 2009

Etobicoke - Local 1459   10 a.m.                           
Royal Canadian Legion 101                                                                                 
3850 Lakeshore Blvd.                                                                                    
Toronto, ON

Windsor - Local 195   7 a.m., 1 p.m. & 3 p.m.      
CAW Local 195 union hall
3400 Somme Avenue                                 
                                               
Sunday, April 26, 2009

Brampton - Local 1285   9 a.m.                              
Versailles Convention Centre
6721 Edwards Blvd.
(Hwy 10 & Derry Rd)
Mississauga

Windsor - Local 444  2 p.m. 
University of Windsor
 - Local 1498
St. Denis Hall 
401 Sunset Ave.
Windsor, ON

His pension from General Motors is $2,800 a month – but retiree Chuck Murchie of Whitby is wondering how long it will stay that way if the troubled automaker seeks bankruptcy protection.

Another GM worker, a toolmaker at the Oshawa car plant, is concerned there won't be much of a pension at all when he's eligible to retire in two years.

"It's on your mind a lot of the time," said John, a 58-year-old who declined to give his last name. "I'll probably have to go out and look for a job eventually ... my wife doesn't have a job."

The men were two of an estimated 6,000 retirees and Canadian Auto Workers union members from across the province who filled the front lawn of the Legislature yesterday for a rally.

Chanting "protect our pensions," they urged Premier Dalton McGuinty to use taxpayer money to top up the provincial Pension Benefits Guarantee Fund, which is too small to meet GM's massive pension obligations.

"My RRSPs are going down the toilet and I'm getting it double here," said Murchie, 52, who retired from GM three years ago after 30 years at the old Scarborough van plant and the Oshawa complex.

Economic Development Minister Michael Bryant acknowledged retirees fear they could see their benefits trimmed, but suggested it's more likely future retirees could feel a pinch if GM chooses to seek court-ordered bankruptcy protection from creditors to restructure its operations and cut costs.

"The retirees' pensions are safe. ... While they could be possibly reduced by a court in a bankruptcy filing, the court has not done that before," Bryant told reporters.

As for current workers, pension levels are subject to negotiation between the union and management.

The pension guarantee fund was created in 1981 to backstop company pensions, providing up to $1,000 a month if a pension plan can't muster the full payouts promised to workers. But the fund, fuelled by company contributions, is now worth $100 million and would be overwhelmed if GM seeks court protection because the automaker is an estimated $6 billion short of meeting its pension obligations.

McGuinty has refused to bail out the fund, saying it would be "unfair" to the 65 per cent of Ontarians who have no pensions, noting the government has already offered $1.3 billion to rescue the province's domestic automakers in addition to $500 million spent to improve their plants since 2003.

Apr 24, 2009

Business Reporter

Negotiators for Chrysler and its union are still working on a deal for concessions today that could help keep the company alive and protect workers' pensions and retiree health benefits if it slips into bankruptcy court protection in Canada.

Sources confirmed last night that the Canadian Auto Workers and Chrysler had cut labour costs significantly, so the company can compete with Honda and Toyota in Canada and qualify for about $2.9 billion in government loans.

Furthermore, the sources noted the union had received assurances that workers' pensions and retiree health-care benefits would be saved if the company gains protection from creditors under the federal Companies' Creditors Arrangement Act.

"But we're hoping that's not the case," CAW president Ken Lewenza said about a possible CCAA filing.

The assurances came as the U.S. Treasury Department prepared a Chapter 11 bankruptcy filing for Chrysler LLC that could come as early as next week.

The New York Times reported yesterday that the Treasury Department has an agreement in principle with the United Auto Workers union, whose members' pensions and retiree health-care benefits would be protected as a condition of the bankruptcy filing.

Moreover, Fiat SpA would complete its merger with Chrysler while the company is under bankruptcy protection in both countries, according to the newspaper. A merger is a condition for government aid in either country.

The federal and Ontario governments had set a "deadline" for reaching a tentative deal on concessions at midnight on Wednesday but talks dragged on into yesterday.

Lewenza told reporters the union is working diligently to meet the "requirements" of Fiat so a merger can proceed.

Workers still need to ratify any deal for concessions by April 30, which is another deadline set by the U.S. and Canadian governments for submitting new restructuring plans. Chrysler also needs concessions from other stakeholders.

Lewenza signalled earlier this week that the union would accept more concessions at Chrysler and break a "pattern deal" for cuts identical to those General Motors workers ratified last month.

GM workers accepted labour cost cuts totalling about $7.25 an hour by 2012.

Chrysler, which urged the union to scrap the GM pattern deal, had insisted it needed concessions totalling about $19 an hour to compete with Toyota and Honda.

Chrysler had sought cuts in health-care benefits, shift premiums, life insurance and child care that would trim labour costs by more than $8 an hour. In earlier negotiations, the union has rejected most of those proposals.

Among other things, sources said the union has agreed on a decrease in relief time for workers in Chrysler's plants and a reduction in job classifications.

The moves would cut costs and give the company more flexibility in human resources but it is unclear by how much.

Regarding a possible bankruptcy filing in the U.S. and Canada, the only major question that remains unresolved is what happens to Chrysler's lenders, who hold $6.9 billion (U.S.) in company debt.

A bankruptcy filing by Chrysler would be the first among Detroit's struggling automakers, who are fighting for survival because of the crash in North American auto sales since last fall.

The U.S. Treasury is also working with GM to prepare a possible bankruptcy case. Some industry watchers questioned whether the Treasury's actions to prepare a bankruptcy case were an effort to put more pressure on lenders.

While Chrysler faces an April 30 deadline from the U.S. and Canadian governments, GM doesn't need to submit a plan until June 1.

Under the most probable scenario, the U.S. Treasury will provide the financing Chrysler needs to operate while under bankruptcy protection.

Ottawa will also likely provide aid if the company operates under court protection here.

Last month, the White House told Chrysler it would provide up to $6 billion in financing if Chrysler and Fiat could complete a deal by the end of this month.

In Canada, the governments have already provided Chrysler with $750 million (Canadian).

Although the two companies have been holding merger talks, the Times said a bankruptcy case would allow Fiat to more easily select the assets of Chrysler that it wants to keep such as dealerships, factories and the company's product development operations.

Meanwhile, GM announced it will idle nine assembly plants in the second and third quarters for as long as nine weeks in some locations because of continuing slow sales and heavy inventories.

The move won't affect GM's car plant in Oshawa or joint venture operation with Suzuki in Ingersoll.

Toronto Star

U.S. Is Said to Prepare Filing for Chrysler Bankruptcy

DETROIT — The Treasury Department is preparing a Chapter 11 bankruptcy filing for Chrysler that could come as soon as next week, people with direct knowledge of the action said Thursday.

The Treasury has an agreement in principle with the United Automobile Workers union, whose members’ pensions and retiree health care benefits would be protected as a condition of the bankruptcy filing, said these people, who asked for anonymity because they were not authorized to discuss the case.

Moreover, Fiat of Italy would complete its alliance with Chrysler while the company is under bankruptcy protection.

The only major question that remains unresolved is what happens to Chrysler’s lenders, who hold $6.9 billion in company debt. The government’s most recent offer, presented Wednesday, would give the company’s lenders about 22 cents on the dollar, or $1.5 billion, and a 5 percent equity stake in a reorganized Chrysler. Earlier this week, a steering committee of the lenders proposed that they receive 65 cents on the dollar, or $4.5 billion, and a 40 percent equity stake.

If no agreement is reached between the government and Chrysler’s lenders, a nasty legal fight could emerge in bankruptcy. The creditors’ claims are backed by most of the company’s collateral, including plants, brands and equipment, and the senior lenders will argue that they have first claim on those assets — even over and above the government’s debt.

"In a negotiation like this, everything is speculation until there’s a deal,” said an administration official who did not want to be named because the talks are private. “It should surprise no one that the administration is planning on contingencies, but we remain focused on the goal and engaged with all stakeholders to bring Chrysler and Fiat to a working partnership.”

A Treasury spokeswoman declined to comment.

A bankruptcy filing by Chrysler would be the first among Detroit’s troubled automakers, who have been mired in a devastating sales slump since last fall. Treasury is also working with General Motors to prepare a possible bankruptcy case, and the terms of a Chrysler filing might offer a glimpse into the shape of G.M.’s own filing.

Some analysts questioned whether the Treasury’s steps to prepare a bankruptcy case were an effort to put more pressure on lenders, with which it has exchanged proposals meant to reduce Chrysler’s debt. Chrysler faces an April 30 deadline from the Treasury, while G.M. faces a June 1 deadline in its own efforts to draft a new restructuring plan.

Under the most likely assumptions, Treasury will provide the financing that Chrysler needs to operate while under bankruptcy protection. The Canadian government is also expected to participate in backing the company.

The Globe and Mail of Toronto reported the Canadian government’s role on Thursday.

Last month, the Obama administration told Chrysler it would provide up to $6 billion in financing if Chrysler and Fiat could complete a deal by the end of this month. Fiat originally agreed to take 35 percent of Chrysler, but the stake was subsequently reduced to 20 percent. The administration said it would provide up to $6 billion in financing if the two companies agreed, on top of $4 billion in federal assistance that Chrysler has already received.

Although the two companies have been holding discussions on an out-of-court agreement, a bankruptcy case would allow Fiat to more easily select the assets of Chrysler that it wants to preserve, such as dealerships, factories and the company’s product development operations, these people said. The approach, which relies upon Section 363 of the federal bankruptcy code, is somewhat similar to what the government is planning in the case of G,M..

Then, Chrysler could sell or jettison any assets it does not want to keep, and cancel franchise agreements with superfluous car dealers.

The U.A.W., Chrysler and Treasury have reached agreements in principle that would protect workers’ benefits, these people said, and a similar agreement is expected to be reached as soon as this weekend with the Canadian Auto Workers union.

Once Chrysler emerges from bankruptcy protection, it would largely be owned by Fiat, the U.A.W., the Treasury and its lenders, these people said. A bankruptcy filing would likely wipe out existing equity stakeholders, notably Cerberus Capital Management, which took over the carmaker from Daimler in 2007.

Ron Gettelfinger, the U.A.W.’s president, issued a statement on Wednesday saying that the union was “continuing to work toward an agreement that will be in the best interest of Chrysler workers, retirees and the communities where the company does business.”

People close to the talks said Wednesday that the U.A.W. had tentatively agreed to accept Chrysler stock to finance half of the company’s $10.6 billion obligation to the health care trust. The balance would be paid in cash over the next decade. That money presumably could come from either the Treasury, or from Chrysler’s profits, once it emerges from bankruptcy protection.

Chrysler has a $9.3 billion pension shortfall, or 34 percent of its total liability, according to the Pension Benefit Guaranty Corporation. The agency said earlier this month that it would assume $2 billion of the shortfall in the event Chrysler terminates its pension plans.

If that happened, retirees would receive sharply lower benefits than they normally would expect. But Chrysler is not obligated to terminate its pension plans while in bankruptcy, particularly if it received federal assistance to fund them.

It was not clear Thursday where Chrysler would file its bankruptcy case. On Wednesday, Mike Cox, the attorney general of Michigan, urged General Motors and Chrysler to consider filing in the state, rather than Delaware or New York. He said a locally administered case would be more convenient for creditors in Michigan.

Cutting wages won't solve auto industry's problems

Direct labour accounts for just 7 per cent of the total
cost of producing and selling automobiles

Apr 23, 2009 04:30 AM

As North America's troubled auto industry lurches toward its latest do-or-die restructuring deadlines, huge public pressure has been focused on the CAW's negotiations with Chrysler and General Motors. A steady stream of corporate executives has lined up to make a familiar threat: workers must deeply cut their wages and benefits, or plants will close and the jobs will be lost.

The executives have also been joined, arm in arm, by senior government officials. Federal Industry Minister Tony Clement has rubber-stamped the demands of the companies, saying that government will not provide emergency loans to the industry unless the union accepts compensation cuts of 30 per cent or more.

Seeing our government echoing the painful demands made on hard-working taxpaying Canadians by the executives of multinational corporations is deeply troubling. Worse yet, by so obviously taking sides in private negotiations between an employer and a union, Clement emboldens the company to keep asking for more – and thus makes it harder to reach a deal.

I have seen the blogs and heard the call-in radio shows. I know there's a lot of finger-pointing and populist rancour directed against autoworkers and their union today. Much of that comes from hard-working Canadians who have been tempted (perhaps by ideology or perhaps by envy) to turn their anger and frustration over the economic crisis against a group of workers who enjoy better-than-average wages and benefits. Like other workers, autoworkers have also suffered because of the present world financial crisis, and getting angry at someone who makes a higher wage is hardly going to solve anything.

Meanwhile, corporate executives and anti-union politicians will rush to exploit those populist sentiments. They are taking advantage of the fear and uncertainty caused by soaring unemployment to attempt something they have long wanted anyway: namely, to historically roll back the influence of unions (already on the defensive after years of globalization and anti-union labour laws).

There are many reasons why wage cuts won't solve the auto industry's problems. And even worse, many reasons why wage cuts risk much greater damage to Canada's overall economy.

Here are just a few:

The widespread claim that autoworkers make $70 or more per hour is completely false. It's a lie that has been deliberately spread by corporate executives and anti-union analysts. Autoworkers start at $24 per hour. With seniority, they work their way up to $34 per hour. Skilled trades workers make $40. Those wages are good, no doubt about it – but they are justified by autoworkers' enormous productivity ($300,000 in value added per worker per year).

More important, our wages are small potatoes in the big picture of the auto industry's costs and revenues. Direct labour, including pensions and benefits, accounts for just 7 per cent of the total cost of producing and selling automobiles. Arithmetically, wage concessions cannot make any meaningful difference to the survival of these companies.

The fate of these companies is being decided in high-stakes negotiations occurring in Washington between the U.S. Treasury, the companies, bondholders and other financial investors. They will decide whether the companies can avoid filing for bankruptcy protection, or whether (as seems increasingly likely) the whole matter will be referred to the courts. Nothing we do in Canada can influence that outcome.

A true turnaround for North American automakers will require a deeper rethink of both the business model and the policy context for our industry. First and foremost, we need consumers to start buying cars again, or else the companies will remain on life support. Other countries (like Europe and Asia) have implemented generous sales incentives to spur consumers back to life. North America has not.

One of the greatest dangers of a deep recession is generalized deflation: prices and wages spiral downward causing bankruptcies and financial collapse. We learned the hard way in the 1930s that cutting wages – while it may seem sensible for an individual company – actually makes things worse for the whole economy.

From the onset of this crisis in 2008, the CAW has committed to being part of the solution – not part of the problem. We negotiated two new contracts in 10 months (in May 2008, then again in March 2009) to help the industry adjust to the credit freeze. Those contracts are saving hundreds of millions of dollars.

We have also committed to ensuring that Canadian plants remain fully competitive with the broad constellation of international competition we face – and most importantly that they remain attractive relative to the U.S. plants that are our main competition for investment.

Independent data verify that CAW plants today are the most productive in North America. And our hourly labour costs are significantly lower than in the U.S. We understand the sands are shifting quickly in this industry. And we commit to ensuring that, at the end of the day, the Canadian advantage is still there.

But the executives and politicians who are holding a gun to the workers' head today are looking for something quite different. They want unions out of the way so that the costs of the current crisis can be shifted onto the shoulders of those with less power – including workers, the unemployed and pensioners (who are perhaps the most innocent victims of all). That precedent will affect all workers and retirees, not just autoworkers. And that's why we're refusing to be blackmailed.

Business Reporter

Bleary-eyed Chrysler and union negotiators moved closer to a critical deal on concessions here early today that could help save the teetering auto maker.

Talks continued past a government midnight "deadline" for agreement on labour cost cuts that parent Chrysler LLC says it needs to forge a merger with Italian auto giant Fiat SpA and qualify for about $2.9 billion in public loans.

"We're pushing," said Ken Lewenza, president of the Canadian Auto Workers, which represents more than 8,000 Chrysler workers. "We're not going to leave the table."

"We continue to work around the clock with the CAW in order to reach an agreement that meets the guidelines set before us by the Canadian government which includes immediately closing the competitive gap with Canadian transplants Toyota and Honda," added Al Iacobelli, Chrysler's chief negotiator, in a statement.

Union negotiators reported some progress last night after talks had drifted for most of the day. However, they cautioned that a lot of work remained.

Ottawa told Chrysler and the union a few days ago that it wanted a deal with significant cuts in labour costs by midnight last night because a merger between Chrysler and Fiat partially hinges on it.

The federal and Ontario governments and the Obama administration say they won't provide any more aid to Chrysler unless it clinches a merger before April 30.

However, governments here want the company to resolve labour issues and other outstanding items for an acceptable survival plan earlier. Workers also need time to ratify concessions.

The governments in both countries want more concessions from other stakeholders including the United Auto Workers in the U.S., dealers, suppliers and bondholders.

Furthermore, Fiat has indicated it would walk away from a merger without more concessions from all parties and government aid.

Chrysler has already received about $750 million from Ottawa and the province and $4 billion (U.S.) from the American government.

If Chrysler doesn't succeed in getting a partner and more aid, it would likely slip into bankruptcy court protection or face liquidation.

That could trigger turmoil throughout the North American industry and economy because many companies who supply Chrysler and other automakers would also fail.

Lewenza indicated earlier this week for the first time that the union would accept more concessions at Chrysler than at General Motors where workers ratified labour cost cuts totalling $7.25 an hour last month.

Chrysler, which urged the union to scrap the "pattern" deal at GM, says it needs concessions totalling about $19 an hour to compete with Honda and Toyota, otherwise it will no longer invest in Canada.

Sources say the union had agreed on a reduction in relief time for workers in Chrysler plants and a decrease in job classifications. The moves would cut costs and give the company more manpower flexibility.

Both sides would not disclose how much those measures would save the company in hourly labour costs.

Chrysler negotiators have also sought cuts in health care benefits, shift premiums, life insurance and child care that would trim labour costs by more than $8 an hour. The union had resisted most of those proposals.

Union officials have also been watching any progress in talks for concessions south of the border. Chrysler and the UAW in the U.S. have not released any details on negotiations which accelerated this week.

thestar.com

Goldman upgrades U.S. auto
sector; raises Ford to buy

April 22 (Reuters) - Goldman Sachs upgraded the U.S. auto sector to "neutral" from "cautious," citing the likelihood of a bottom in auto sales, and also raised its rating on Ford Motor Co to "buy" as it expects the company to benefit the most from structural changes within the sector.

Shares of Ford were up more than 9 percent to $4.15 in trading before the bell Wednesday after Goldman said Ford shares were worth $6, and added the stock to its Americas conviction buy list. Goldman previously had a "neutral" rating on the stock.

"With General Motors Corp and Chrysler likely to file for bankruptcy in coming weeks... we think the stage is set for a sea change in the structure of the US auto industry," Goldman analysts, led by Patrick Archambault, wrote in a note to clients.

The analysts expect this structural change in the sector will significantly alter the competitive and economic landscape by paring down industry capacity and retracing market shares through a diminished presence from GM and Chrysler.

"We believe the best way to capitalize on this upside opportunity lies with Ford, which (we) think will avoid bankruptcy," they said.

Ford is well positioned to capitalize on a more than 50 percent decline in Chrysler share and the reduction of GM's product portfolio, they added.

The analysts said Ford, which has not asked for government aid, has sufficient liquidity to make it through to 2010 without additional funding.
They raised their 2009 auto sales estimate to 11 million units from 10 million units to reflect the likely impact of a scrappage plan -- a program that offers incentives to owners for turning in older vehicles.

"The prospects for a scrappage plan endorsed by the Obama administration has the potential to add between 750,000 to 1 million units to new vehicle sales," the analysts said. Shares of Ford closed at $3.80 Tuesday on the New York Stock Exchange.

“It's certainly not our intention to put more money into the pension guarantee fund,” Mr. McGuinty said. “It was never meant to be the kind of fund that was supported by the government.”

But shortly after the premier made those comments, he said during Question Period that the province reserves the right to top-up the pension guarantee fund.

He earlier said it would be unfair to ask Ontarians to rescue pensioners of GM, because many of them do not have pensions of their own. Many seniors have seen their retirement nest eggs plunge in value, following the onset of the recession, he added.

“If we look to those without pensions to restore vitality to those who benefit from those pensions, I'm not sure that's fair,” he said. “We're all in this together.”

He also said GM Canada is not the only company grappling with a shortfall in its pension plans. There are real concerns about a number of pension funds, particularly smaller ones, when it comes to shortfalls.

Stung by public perceptions that auto workers receive big pay and should accept deep concessions at teetering Chrysler Canada, their union has pushed back with its own reality check.

In an unusual move, the Canadian Auto Workers released a report yesterday attempting to debunk the view that union members get more than $75 an hour at Chrysler.

The real pay figure is actually closer to $44 an hour for the highest paid production workers and that includes current benefits and pension costs, according to the 11-page CAW report.

"Some of it could be an innocent misunderstanding," said CAW economist Jim Stanford, who wrote the report. "Some of it is deliberate to mislead people about our true compensation. Either way, there is an incredible misunderstanding out there that we have to correct."

The union and Chrysler have engaged in a war of words during current tense negotiations for concessions that the automaker is seeking so it can survive and qualify for about $2.9 billion in loans from the federal and Ontario governments.

Chrysler says it needs much deeper concessions than the union negotiated earlier at General Motors, which itself is requesting between $6 billion and $7 billion.

In its negotiations, Chrysler indicated last month that "all-in active labour costs" totalled about $76 an hour and it needed to slash them by $19 so it could compete with Toyota and Honda here.

Some media commentators, analysts and many readers interpreted the $74 figure as hourly pay of workers and harshly criticized them for it and the union's opposition to Chrysler's position.

Stanford said the $74 figure is a "very unusual or a bizarre way" of measuring labour costs and insisted that it doesn't come close to calculating compensation.

In the report, the union said production technicians earn $34 an hour plus another $10 in benefits such as health care. But the "all-in" hourly labour costs that Chrysler uses also includes overtime, shift premiums, holidays, layoffs, pensions, plant downtime and even taxes, the union said.

Stanford also noted that in its calculations, the company uses a much smaller base of hours relating to actual work, which jacks up the number instead of a standard of 2,080 hours a year.

"Even more far-fetched is the notion that time away from work resulting from illness or plant shutdown should also be reflected in your `hourly wage,'" he added.

Furthermore, the company includes so-called legacy costs such as post-retirement benefits for retirees in the current hourly number, said Stanford who described the practice as "entirely inappropriate."

Meanwhile, negotiations continued here last night in efforts to narrow the gap and reach a tentative deal that workers would accept before a government deadline of April 30.

Among other things, Chrysler officials explained what Fiat SpA, its potential merger partner, expects in changes at Canadian operations.

Pension costs weigh
heavily on autoworkers

Are greedy autoworkers all that stand in the way of a successful Chrysler makeover? In essence, that's the argument of both Chrysler management and the federal government as they pressure the Canadian Auto Workers for more concessions.

"The CAW has to recognize that in order for Chrysler to survive in this country, that Chrysler has to be competitive with the rest of the Canadian market," Industry Minister Tony Clement said last week.

The automaker says its labour costs are a whopping $76 an hour – $19 more than competitor Toyota Canada pays. Italian automaker Fiat says it won't merge with Chrysler unless those labour costs come down. And the federal government says it won't help Chrysler stay solvent if the merger with Fiat falls through.

It all sounds straightforward: If Chrysler workers want their jobs, they'll have to cut their labour costs back from $76 an hour – which to most people would seem a exceedingly rich wage.

And perhaps the matter would be straightforward if Chrysler workers did earn that. But they don't. As a Chrysler spokesperson explained this week, when the company uses that $76 figure, it is talking about "all-in labour costs" – which includes not only wages and benefits paid current employees but pensions owed to retirees.

In fact, the top union wage for Chrysler workers is about $34 an hour – a good rate but one which, according to University of Windsor auto analyst Anthony Faria, is at most $5 above that paid by Toyota.

Adding in the cost of non-wage benefits such as dental care pushes the Chrysler hourly figure to $42. As well, there are other bits and pieces that add to the pay packet of a current employee, plus costs (such as those associated with temporary shutdowns) that burden the company without benefiting workers. The CAW calculates that together, these push the all-in costs to about $60 an hour.

But after wages, the biggest single piece of the all-in figure is what Chrysler calls its "legacy costs."

Put simply, these are monies – over and above amounts already put aside – that are owed to Chrysler's 13,000 pensioners.

For accounting purposes, the auto company chooses to consider them as a labour cost. But in any meaningful way, they are no more the responsibility of the current workers than of anyone else.

Indeed, given that Chrysler's pension woes have been caused in large part by the collapse of the stock market, it could be argued that the Ontario and federal governments, which have relaxed their rules on where pensions can invest, bear much of the responsibility.

Yet the workers take the rap. Perversely, as they become more productive, and the per worker burden of these legacy costs rises, they are criticized even more.

In 1996, Chrysler Canada employed 13,000 workers over which it could spread the costs of its retirees. Now, a leaner and more efficient company is spreading these costs over just 9,400 employees.

As for Toyota, it should come as no surprise that its legacy costs are lower. A relative newcomer to Canada, it has far fewer retirees. (While Toyota is reluctant to part with any information, auto analyst Faria estimates the number of its pensioners at less than 1,000.)

None of this means that Chrysler's costs aren't real. It does owe money to its pensioners. To renege would be singularly unfair.

But that doesn't make these obligations the sole responsibility of Chrysler's current workforce. The company itself is charged with funding its pension plan. The federal and Ontario governments purport to regulate such plans.

They, too, have a role in this. They are not just innocent bystanders.

Thomas Walkom's column appears Wednesday and Saturday's Star.

The Canadian Auto Workers union has signalled for the first time that it would consider more concessions at Chrysler to keep the company competitive.

Softening a hardline stance against any extra concessions at Chrysler Canada Inc., CAW president Ken Lewenza said yesterday the union would look at more pay and benefit cuts than were contained in the recent General Motors of Canada Ltd. contract because of growing pressures for additional reductions at the same teetering automakers in the U.S.

That would break its own pattern contract for labour cost cuts negotiated with GM.

"The (GM) pattern is on the table unless we lose our competitive advantage for investment in Canada," Lewenza said in an interview.

The union, which represents about 8,000 production workers and skilled trades people at Chrysler, had said for weeks it would match but not exceed concessions that members accepted at GM.

GM and Chrysler need cuts in labour costs so they can qualify for between $9 billion and $10 billion in loans from the federal and Ontario governments to stay alive and recover from the crash in the North American auto market.

The federal and Ontario governments and Washington have rejected restructuring plans from the two companies and told them to submit new proposals.

Chrysler and GM are seeking up to $39 billion (U.S.) from Washington.

Despite not gaining approval for its plan here, Chrysler has already received about $750 million (Canadian) from Ottawa and the province. The governments say they can call back the loans.

In the U.S., the Barack Obama administration wants Chrysler to find a merger partner and get further concessions from unions, bondholders and other stakeholders by the end of the month or face restructuring under bankruptcy court proceedings. Washington has also instructed GM, which cut another 1,600 white-collar jobs yesterday, to resubmit a better restructuring plan by May 30.

Negotiators for the union and Chrysler expected a resumption in bargaining here after talks stalled more than two weeks ago, but by early evening they had not met. Both sides have been waiting for developments in the U.S., where the United Auto Workers union is wrestling with demands for more concessions from the Detroit-based parents of Chrysler and GM and the government.

The UAW got a cost-cutting deal with Ford Motor Co. earlier, but it's not enough for GM and Chrysler or U.S. government officials.

"As we speak, (the UAW is) meeting with GM and coming up with an agreement that's different than the Ford pattern established in the U.S.," Lewenza said. He also suggested the possibility of GM of Canada workers voting on additional concessions in the near future.

"If our members at General Motors are being put at a disadvantage then we'll obviously have to look at it too (changes). What frustrates all of us is that the goal posts keep moving."

GM of Canada workers voted overwhelmingly in March for concessions that will reduce the company's labour costs by about $7.25 an hour to $63 by 2012. Meanwhile, Chrysler Canada and Ford of Canada, which is seeking a line of credit if necessary, have indicated the GM contract doesn't make them competitive.

Chrysler has also raised the stakes by suggesting it would no longer invest in Canada because of the competitiveness issue unless it gains up to $19 an hour in concessions. That would put Chrysler labour costs near $57 an hour, the same level as Honda and Toyota operations here, according to the company.

Federal Industry Minister Tony Clement said Chrysler workers can either accept more concessions or lose their jobs. "People are not interested in a union protecting its entitlements that have been garnered over a period of time," Clement said. "I feel badly for workers who are put in these situations, of course. But ... the alternative is no job at all and taxpayers expect everybody to be at the table if taxpayer dollars are going to be at risk."

Chrysler Canada and its union begin negotiations today in a final attempt to reach an agreement that could save the company from bankruptcy or even liquidation.

The two sides have never been farther apart.

And with both federal Industry Minister Tony Clement and potential Chrysler partner Fiat saying the company will have to lower labour costs by $19 an hour to remain competitive, Chrysler has little room to manoeuvre.

Because of this, the Canadian Auto Workers' insistence that they will stick to the pattern established in a deal reached with General Motors Canada in March, which reduces that company's labour costs by about $7 an hour, may seem futile.

But analysts say the union does have some wiggle room.

Chrysler Canada has been given until the end of the month to reach an agreement with the CAW and provide the federal and Ontario governments with a viable restructuring plan in order to receive long-term government bailout money.

Chrysler has threatened the union several times by saying it will pull out of Canada or go out of business entirely if it can't reach an agreement, most recently in a letter from president Tom LaSorda and CEO Bob Nardelli to employees on Friday.

But Charlotte Yates, a labour analyst and dean of social sciences at McMaster University in Hamilton, said Chrysler needs the CAW just as much as the CAW needs Chrysler.

"Chrysler itself needs this deal to survive," Yates said in an interview. "At the moment it seems all the momentum is against the union, but the company actually needs the union."

Workers just want to keep their jobs, and many CAW members are wholeheartedly entrusting their union to negotiate the best possible deal for them.

Bob Stewart, an employee of Chrysler's minivan plant in Windsor for 25 years, said he feels like workers already gave up a lot in a contract negotiated with the Detroit Three companies a year ago. That contract froze wages until 2011 and cut paid time off by a week a year, among other things.

But he said he'd be willing to give more if the union thinks it's for the best.

"It seems like the leadership in the union seems to believe we might be overdue to contribute to some of the prescription drug costs and some of that, so maybe it is time," Stewart said in an interview from the Windsor plant.

"I don't get to look at the numbers and do the math like economists do, so I put it in the hands of the leadership of this union. If (CAW president) Ken Lewenza and his team think it's good for me, I wholeheartedly believe that it's good for me because I know the guy's in it when it's hard and the guy loses sleep for every guy that's outta here, laid off."

Stewart criticized Chrysler and the government for placing all of the company's problems on the backs of its workers.

"I can't see how taking the money away from the labourers is really going to solve the issues when the people who make the multi-million-dollar cheques are the ones who make all the decisions. We're just soldiers in an army that they actually run," he said.

"And I'm not too impressed with the Canadian government taking sides in these issues whereas Mr. Clement's not taking a pay cut or a pension cut or anything to that effect. This man works for the people, which is all of the people that work in this factory, not a corporation that's based in another country."

Mostly, though, Stewart just wants to keep his job.

"I feel like my world is crumbling down from every direction," he said. "It's extremely stressful for me."

The company and governments have said many times that Chrysler needs to slash its labour costs to remain competitive, but no one seems to agree about who exactly the company needs to be competitive with. Is it UAW plants in the United States? Or non-unionized Honda and Toyota plants in Canada? Or is it non-unionized plants in the U.S?

Yates said the CAW should push Chrysler to define who exactly their competitors are. GM CEO Fritz Henderson has said more than once that his company's deal with the CAW is competitive with non-unionized plants in Canada, and the union has used this claim as its primary reason why it shouldn't have to give more to Chrysler.

Another factor affecting competitiveness is the Canadian dollar. If Chrysler is comparing its Canadian plants to facilities in the U.S., unionized or not, it needs to factor in the exchange rate, which increases the competitiveness of Canadian plants as long as the loonie stays low, Yates said.

"Why should the company reap all the benefits of a lower Canadian dollar?" she asked.

Chris Piper, a business professor at the University of Western Ontario in London, suggested the union ask for a stake in the company in exchange for long-term concessions.

"Give them so many shares per dollar that they earn based on the current price of the share or even a discounted price of the shares, and that way you're going to benefit in the long-run if the company survives," he said.

But Piper said this only works if the union thinks Chrysler will survive.

"If you don't believe that the company will survive, then that's a whole other story, then you really ought to be making wage concessions to make sure that at least for the short-term you're able to at least have a job and not nothing," he said.

He added that the state of the auto industry may dictate that the union has to give more if it wants to keep production in Canada.

"All the terms that are used, 'We've already made sacrifices and we're giving back,' that's not the point. The point is you're working for a bankrupt company that nobody will lend money to except possibly the government and then only maybe," Piper said.

But former CAW leader Buzz Hargrove said he wouldn't change a thing about the way the union has handled this crisis.

"They've met every responsibility and obligation so they shouldn't have to do any more. If I was them, I wouldn't move an inch," Hargrove said in an interview.

He said the union has already made "historic" concessions and Chrysler will eventually have to give in to the pattern established with GM if it wants to stay alive.

Chrysler has until April 30 to negotiate labour deals with both the CAW and the UAW and to submit finalized restructuring plans, including a concrete plan for an alliance with Fiat, in order to receive long-term government bailout loans in Canada and the U.S.

Chrysler spent several days in intensive labour negotiations with the CAW at the end of March, but those talks broke off after governments rejected its original restructuring plans.

The federal and Ontario governments have already lent $750 million to Chrysler Canada out of $1 billion promised, and more could be forthcoming if the company produces an acceptable restructuring plan by the end of April.

Chrysler employs about 10,000 hourly workers at assembly plants in Brampton and Windsor and at a casting plant in Toronto.

The economics ... and politics ... of auto workers' wages

Jim Stanford Globe & Mail

April 20, 2009

Economist with the Canadian Auto Workers union

The auto industry is in crisis around the world, due to an unprecedented collapse in sales. And governments around the world (from Europe to Asia to the Americas) have moved quickly to keep the industry in business.

Only in North America, however, has this restructuring been sidetracked by an ultimately phony confrontation over auto worker wages. Auto workers are well paid everywhere - after all, that's a key reason governments chase auto investments in the first place. But only in Canada and the United States have governments made auto assistance contingent on union concessions. That's not the case in Germany or Japan (where auto workers make more than they do in Canada), nor in Brazil or Korea (where they make less). Only here has the future of the industry been linked to a frontal attack on unions.

This union-bashing took a dangerous turn last week. Successive business and political leaders stepped up to point a gun at the head of the Canadian Auto Workers union. Fiat's chief executive Sergio Marchionne, Industry Minister Tony Clement and Chrysler chief executive Robert Nardelli all threatened to pull the plug on Chrysler without CAW concessions of up to $19 per hour.

Their argument is dressed up in the language of "competitiveness," "viability," and "realism." But ultimately it's about politics, not economics.

Economically, wage cuts are irrelevant to the future of Chrysler and any other auto maker. Whether these companies live or die depends on bondholders, on government, and - most importantly - on consumers. Direct labour accounts for 7 per cent of total auto costs: less than capital, less than materials, less than dealer margins. Cutting that to 6 per cent won't sell a single car or truck.

Indeed, the demand flies completely in the face of Fiat's own successful restructuring. Fiat went from basket case in 2004 to success story by 2007. Was that because of wage cuts? No ... because there weren't any. Rather, Fiat's turnaround reflected successful efforts to develop new products (like its trendy Cinquecento), to rebuild domestic market share, to boost foreign sales through exports and joint ventures and to implement leaner, dynamic management. That's what we need in North America - not wage cuts, which will only undermine auto sales as other employers follow the lead.

The true economic constraint on wages is that they be validated by productivity, and remain broadly competitive with competing locations. Canadian auto workers meet both tests: productivity (averaging $300,000 value-added per worker per year) is the world's best, far exceeding compensation, and labour costs are below-average among the various suppliers feeding the North American market.

So the attack on auto workers isn't about economics. It's about politics.

How else to explain the arbitrary hook on which Clement and Co. have hung their hats? They're demanding that CAW costs be cut to match non-union plants in Canada. (By the way, accounting for demographics and capacity utilization, the true difference between union and non-union auto plants in Canada is more like $5 per hour, not $19.)

Canadian non-union plants account for just 4 per cent of North American sales. What about the other 96 per cent of the competition? Why not demand that CAW costs be cut to the level of unionized auto workers in Korea, say, or unionized workers in Mexico - both of which pose greater competitive threats than non-union Canadian plants? Because the demand is not about being competitive. It is about challenging the legitimacy and survival of unions. It aims to exploit the wedge, in an anti-union political culture, between workers who've managed to win a little more - and those who have yet to do so.

Finance Minister Jim Flaherty tried a similar stunt last November, in his infamous economic update. He tried to capitalize on fears of recession to snatch away the legal right to strike from federal employees (who also enjoy good wages and pensions). It was an opportunistic, mean-spirited act, driven by politics, not economics. It was defeated by the united opposition parties.

The same government is now trying the same thing with auto workers: capitalizing on economic fear to challenge the fundamental right of unions to exist and to bargain.

Chrysler letter to CAW workers

April 17, 2009
Dear Employees,

Today, we are at a crossroads in the history of Chrysler.

Let's take a look at what's happened in the past few weeks. On February 17 and February 20, Chrysler submitted its Viability Plan to the U.S. Treasury and U. S. Administration; and to the Canadian governments, respectively. On March 30, U.S. President Barack Obama stated that Chrysler's Viability Plan was unacceptable.

"It's with deep reluctance but also a clear-eyed recognition of the facts that we've determined, after careful review, that Chrysler needs a partner to remain viable." He went on to state: "I'm committed to doing all I can to see if a deal can be struck in a way that upholds the interests of American taxpayers. And that's why we'll give Chrysler and Fiat 30 days to overcome these hurdles and reach a final agreement -- and we will provide Chrysler with adequate capital to continue operating during that time. If they are able to come to a sound agreement that protects American taxpayers, we will consider lending up to $6 billion to help their plan succeed.

But if they and their stakeholders are unable to reach such an agreement, and in the absence of any other viable partnership, we will not be able to justify investing additional tax dollars to keep Chrysler in business." U.S. President Obama has made it clear that our company must attain competitive labour rates: "Now, what we're asking for is difficult. It will require hard choices by companies. It will require unions and workers who have already made extraordinarily painful concessions to do more … It will require efforts from a whole host of other stakeholders, including dealers and suppliers."

Also on March 30, the Honourable Tony Clement, Minister of Industry, said, "While the restructuring plans represent progress, they do not go far enough to ensure the long-term viability of these companies. Therefore, we are not certifying their proposals. Together with our U.S. counterparts we believe that further fundamental changes are needed."

Just this week, Fiat CEO Sergio Marchionne has made it clear that an alliance is contingent on the UAW and CAW meeting transplant all-in labour rates: "Absolutely, we are prepared to walk. There is no doubt in my mind," Marchionne was quoted as saying. "We cannot commit to this organization unless we see light at the end of the tunnel."

The Canadian government has been very supportive of our viability, providing a loan of $1 billion (CDN, $750 million drawn to date), with an agreement to provide additional support in proportion to the loans received from the U.S. Treasury. On April 14, the Canadian governments, both federal and provincial, invited the CAW and Chrysler to attend a meeting in Toronto where they laid out four specific guidelines that must be met for providing further financial support.

Their "asks" were: 1. That labour costs be reduced to a level equal to those of Toyota Canada. We believe that a Canadian benchmark is the appropriate one for you to achieve. We ask that you jointly demonstrate to us that the agreement you reach attains this benchmark. 2. That Chrysler complete an alliance with Fiat that, in return for equity participation gives Chrysler access to Fiat management, Fiat technology, Fiat sales and distribution outside of NAFTA, and distribution of Fiat products inside NAFTA. 3. That Chrysler and Fiat submit revised plans to Canadian governments and U.S. Treasury based on appropriate assumptions that show clearly Canadian production, product mix, capital investment and R&D. 4. That Chrysler and Fiat commit to maintain Canada's proportion of North American production and to invest over the medium term that same share of total capital investment and R&D expenditure in Canada.

Let's keep in mind, the all-in labour costs at Chrysler Canada are $76 per hour while the Toyota Canada all-in rate is approximately $57 per hour. While we have made some progress with the CAW, it falls significantly short of closing the $19 gap.

And yet, as recent as Wednesday this week, the CAW continues to ignore this clear mandate from the government stating that they will not go any further. This unwillingness to work within the government's guidelines jeopardizes the future of Chrysler and our operations in Canada. We have made several proposals to the CAW to offset these costs, without affecting base wages and pensions.

Some specific examples include: Prescription drug dispensing fees, by eliminating the cap results in estimated savings of $2.16 per hour. Elimination of out-of-province health care coverage (snowbirds), with employees and retirees assuming responsibility for any coverage results in a cost savings of $1.00 per hour.

The change from semi-private hospital room coverage to "ward" coverage saves an estimated $0.97 per hour. Elimination of life insurance for current and future employees results in a cost savings of $1.54 per hour. The reduction of shift premiums to 2.5 percent results in a cost savings of $.80 per hour. By increasing health care premiums would save an estimated $1.04 per hour.

The elimination of non-traditional benefits such as child care, legal services, tuition reimbursement, dependant scholarships and extended health care coverage (chiropractic services, massage therapy, naturopath, orthotics, etc.) results in a cost savings of $0.73 per hour. Unfortunately, the CAW has been opposed to these solutions — however, we are open to alternative ideas.

Next week, we plan to meet with the CAW to attempt to reach an agreement that is acceptable to Fiat and the Canadian government. The clock is running. Without labour concessions, Chrysler Canada's manufacturing operations will not survive long-term. Thousands of good-paying jobs are in jeopardy, as well as the economic health of communities such as Windsor and Brampton. Canada has always been an important manufacturing and sales market for Chrysler LLC.

It represents the largest vehicle sales market for Chrysler outside of the U.S. and no other vehicle manufacturer has a larger portion of its total manufacturing in Canada than Chrysler. However, these are not normal business circumstances and all Chrysler constituents have been asked to "break pattern" — employees, retirees, dealers, suppliers and others. Time is very short.

We have only two weeks before a final decision must be made.

Let me be clear, our negotiations are about saving Chrysler Canada. We are coming down to the wire in the fight for our company's survival — and we need your support.

Bob Nardelli

Tom LaSorda

Federal Industry Minister Tony Clement says he wants workers at Chrysler to accept deeper pay cuts than their counterparts at General Motors otherwise the company won't get billions of dollars in public aid.

The decades-old concept of "pattern" contracts, whereby Canadian workers get the same deal at all Detroit-based vehicle makers, can no longer apply in the current fight for survival, Clement said yesterday.

"I think we're beyond that now," he told reporters. "We're talking about competitiveness. If everyone is saying, and they are saying, that Chrysler, in order to be competitive has to go beyond the pattern in terms of cost reductions and cost competitiveness, I believe the CAW has to have regard for that."

In responding to a question about whether his government was pushing for more concessions at the two companies, Clement focused on Chrysler, and not GM.

Sources close to GM also confirmed that, unlike Chrysler, the federal and Ontario governments have not pressed company or union negotiators for more reductions in labour costs.

"We have not had any discussions on that in our work to complete a short-term loan agreement," one insider said.

GM is seeking up to $3 billion in short-term loans from the two governments in efforts to stay alive in Canada. However, the amount could eventually increase to between $6 billion and $7 billion.

Workers at GM overwhelmingly ratified a contract last month that will reduce their wage, benefit and pension packages by about $7.25 an hour to less than $63 by 2012. They had already accepted concessions of more than $5 an hour last year.

GM Corp. executives, including new chief executive officer Fred (Fritz) Henderson, have indicated that the concessions will make the company competitive.

But Chrysler, whose parent is negotiating a merger with Italian auto giant Fiat SpA, has said it needs more concessions to be competitive in Canada against Honda and Toyota. Chrysler has also indicated it would pull out of Canada if it didn't get concessions totalling about $19 an hour.

The deputy industry ministers for the federal and Ontario governments urged Chrysler LLC president Tom LaSorda, Chrysler Canada chief executive officer Reid Bigland and top officials for the Canadian Auto Workers on Tuesday to negotiate deeper cuts because the merger with Fiat hinges on lower labour costs in Canada and the U.S.

Clement said Ottawa, like the U.S., will not provide loans to Chrysler unless it can get a merger partner. Ottawa has already provided Chrysler with $250 million in emergency financing and the company is seeking about $2.9 billion.

"If there is no deal in place, there is no deal with the Canadian government," Clement said. "I can tell you that much."

CAW president Ken Lewenza, who attended the meeting with the deputy industry ministers, said the union would not break the pattern and accept more concessions than GM workers because it would give Chrysler a competitive advantage.

"He (Clement) likes to blame the workers," Lewenza said. "But we're not going to let Tony Clement use this global financial crisis to exploit the hard-fought gains of our members and retirees."

The union has noted that labour costs represent only 7 per cent of production on an assembly line.

Negotiations between Chrysler and the CAW resume next week. Sources familiar with the talks here say the two sides can still reduce labour costs without breaking the pattern GM contract by making changes to local plant agreements and addressing productivity and efficiency issues.

U.S. President Barack Obama has set an April 30 deadline for Chrysler to reach a deal with a merger partner so it can get aid. Canada has followed with a similar deadline.

"The clock's ticking," Clement said. 

Canada says autoworkers
must make more concessions

TORONTO, April 16 (Reuters) - The Canadian Auto Workers union must make more concessions to ensure a proposed cooperation deal between Chrysler and Italian auto company Fiat goes through, Industry Minister Tony Clement said on Thursday.

He said the union and Chrysler must forge a new agreement within two weeks to allow the Fiat deal to go ahead. If there is no agreement, Ottawa has the right to call its loans to Chrysler, he told reporters.

Clement said he understood Fiat's demand that the union cut costs further.
"We expect that the CAW has to recognize that in order for Chrysler to survive in this country that Chrysler has to be competitive with the rest of the Canadian market," he said.

Chrysler has until the end of the month to forge an alliance with Fiat to qualify for long-term U.S. and Canadian government aid. Labor talks between the company and the CAW are due to start next Monday.

"There has to be a CAW-Chrysler deal in the next two weeks -- the clock is ticking -- in order to allow for Fiat to continue with its partnership with Chrysler," said Clement.

"With April 30 looming very closely on the horizon, the CAW has to do its part. ... This is not an easy thing, but the alternative is, there's no deal in place, and if there's no deal in place, there will not be long-term funding arrangements with the government of Canada, and in fact we have the right to call our loans."

**Editors Note - The more Chrysler is forced to give up the more Ford will want in cuts "to be competitive". They are in the background waiting to pounce like a jackal in the night.

Ford banks on its rivals' misfortune

Thursday, April 16, 2009

Daniel Howes

Ford Motor Co.'s newest idea is using the "B" word to undermine the competition, quietly.

Is it akin to kicking a brother while he's down, in this case Chrysler LLC? Of course it is. But it's also seizing a business opportunity -- yet one more example showing how Ford is driving an increasingly tight line between exploiting its advantage and joining a pile-on that could engulf the automaker if things economic don't go just right.

Rival General Motors Corp. could be weeks from bankruptcy, nationalization or both. Chrysler is rushing to complete an alliance with Fiat SpA of Italy. GM and Chrysler are living off a federal lifeline while Ford goes it alone, an advantage in bailout-weary Bailout Nation. And Ford, with two consecutive quarters of retail market share gains, is fielding its strongest lineup in a decade or more.

Why not step on the gas at the Glass House, despite a) the money it costs and b) the risk that Ford could find itself lobbying the feds for loans should the U.S. car market stay in the doldrums deep into this year? An answer can be found in an April 9 e-mail addressed to "New York Region Dealers and Managers."

Blue Oval dealers there now have $1,000 in "conquest cash" they can use to woo the owners of Chrysler, Dodge or Jeep vehicles out of their rides and into a Ford SUV, pickup or crossover -- but not a car -- between now and July 31. Would-be Denver and Phoenix customers are eligible, too.

"Domestic intenders for Chrysler and GM have been defecting to Ford and Lincoln Mercury products in great numbers since the beginning of the year," Amanda DeMouthe, marketing manager for Ford's Boston, New York, Philadelphia and Washington regions, wrote dealers in an internal memo.

"And as media continues to speculate on the possibility of bankruptcy, those defections will surely continue. Please be sure your teams are aware of this new incentive. It is stackable with Customer Cash, Bonus Cash and 0% APR!"

Like I said, Ford's driving a tight line -- exclamation point and all. This also is a company that lost $17.3 billion last year and is burning cash with the rest of them even as it has successfully restructured its debt, renegotiated its union agreements, cut production and has the share price appreciation to prove it.

"They could theoretically be in the same boat as us if things don't turn up in the next three to six months," Jonathan Grant, a principal in Central Avenue Chrysler Jeep in Yonkers, N.Y., told me Wednesday. "How can they be thumping their chest when they lost $17 billion? From my vantage point in New York, Ford is a non-entity. Our issue is the imports."

Maybe, maybe not. But it's a truism in business that there's opportunity and many potential beneficiaries in just about every crisis. The one bearing down on two of Detroit's three automakers should favour the opportunistic risk-takers, because points of market share theoretically are up for grabs and Ford is better positioned than any time in the past decade to claim some.

GM's Saab, Saturn, Hummer and Pontiac are likely to downsize or disappear from the U.S. market. Chrysler's Dodge and Chrysler cars likely would be winnowed or morphed into something completely different in a Fiat alliance.

For Ford, that's opportunity, as galling as that may be to folks in Auburn Hills or GM's RenCen (who'd be doing the same thing if the roles were reversed). It could be worse: An old Ford, populated by warriors of a different age, likely would have already used direct mail to contact GM and Chrysler owners because their company was "going bankrupt."

Which is a harbinger of the future should GM, Chrysler or both end up in the bankruptcy that seems increasingly likely. If so, the automotive cannibalism would intensify, eating away at already declining revenue. Just ask Grant, the New York dealer:

Fiat to Chrysler: Cut
costs or we walk

CEO says auto maker prepared to scrap last-chance merger
unless unions agree to match competitors' low labour costs

ERIC REGULY AND GREG KEENAN

From Wednesday's Globe and Mail

April 15, 2009 at 12:00 AM EDT

ROME and TORONTO — Fiat SpA will abandon Chrysler LLC, leaving it to fend for itself in bankruptcy court, unless Chrysler's Canadian and American unions agree to substantial labour-cost reductions by the end of the month, Fiat CEO Sergio Marchionne says.

For Chrysler, which is subsisting on cash borrowed from the U.S. and Canadian governments, the deal with Fiat is the last chance to avoid a bankruptcy filing and possible liquidation.

But Fiat is prepared to scrap the deal and look elsewhere for an international partner if the unions do not agree to match the lower labour costs of Japanese and German plants in the United States and Canada, Mr. Marchionne said in an exclusive interview with The Globe and Mail at the Italian auto maker's headquarters in Turin.

“Absolutely we are prepared to walk. There is no doubt in my mind,” he said. “We cannot commit to this organization unless we see light at the end of the tunnel.”

Mr. Marchionne, 56, said Chrysler workers on both sides of the border have to end their sense of entitlement if the wrecked auto maker is to have any chance of repairing itself.

“The minute you talk to me about historical entitlement in an organization that is technically bankrupt, it's a nonsensical discussion,” he said.

“There is no wealth to be distributed.”

The administration of U.S. President Barack Obama has given Fiat and Chrysler until the end of the month to negotiate partnership terms.

If the deal is done, the U.S. and Canadian governments would prop up Chrysler with about $7-billion(U.S.) in loans to sustain its operations while Fiat overhauls the company and fills its dealerships with Fiat-derived models.

Because of the lack of progress on labour negotiations, especially on the Canadian side, there is only a 50-50 chance the partnership will be formed, Mr. Marchionne said.

“From what I can tell from a distance, the CAW may have taken more rigid positions,” he said.

“The dialogue is out of sync. I think they need to see what state the industry is in. Canada and the U.S. are coming in as the lender of last resort.

“No one else would put a dollar in. This is the worst condemnation of the viability of this business.

“We are not anti organized labour. No one wants to remove the UAW or the CAW from the table. But it will happen if a bankruptcy process drags on. …The UAW and the CAW have a unique opportunity here to change the framework of the discussion.”

Hourly labour costs vary among the plants operated by Japanese and German auto makers in the United States – mainly in such southern states as Kentucky, Alabama, Georgia and Tennessee.

At a mature plant such as the Toyota Motor Corp. assembly operation in Georgetown, Ky., hourly labour costs are in the high $40 (U.S.) range, Toyota spokesman Mike Goss said yesterday.

Costs at Honda Motor Co. Ltd. and Nissan Motor Co. Ltd. plants in the United States are estimated to be about $40 an hour.

Chrysler has already demanded that the CAW trim hourly labour costs by $19 (Canadian) to $55 to match what it pays UAW workers at its U.S. plants.

The CAW has refused to go that far, offering Chrysler the same $7 to $7.25 an hour it has already given General Motors of Canada Ltd. in overall cost cuts, plus agreeing to reduce break times at Chrysler plants in Brampton, Ont., and Windsor, Ont., which would reduce hourly costs by what the union says is several more dollars an hour.

Fiat, with the backing of the White House, has proposed taking a 20-per-cent stake in Chrysler, which is currently 80-per-cent owned by Cerberus Capital Management LP and 20-per-cent by Daimler AG of Germany, owner of Mercedes-Benz.

Upon reaching certain milestones, such as the rollout of Chrysler vehicles based on Fiat platforms, Fiat's ownership would rise in stages by 5-per-cent increments to 49 per cent.

Fiat could raise its stake above 49 per cent only if Chrysler repays its bailout loans to the U.S. Treasury.

At the end of March, the U.S. auto task force gave Chrysler 30 days to complete an alliance with Fiat or face a cut-off of its government funding that could force its liquidation.

Yesterday, Mr. Obama said it is his “fervent hope that in the coming weeks, Chrysler will find a viable business partner.”

Mr. Marchionne, who was educated in Canada, started his career here and holds dual Italian-Canadian citizenship, has vowed to put no Fiat money into Chrysler and plans to save the company through technology transfers and a corporate overhaul modelled on the one that rescued Fiat from oblivion in the middle part of this decade.

Short of injecting funds into Chrysler, Mr. Marchionne said Fiat will do whatever it takes to revive Chrysler, including offering himself up as CEO. “Fundamentally, that's possible, but the title isn't important,” he said. “What's important is that they hear me. It's possible that I will have to divide my time between running Fiat and running Chrysler.”

As the April 30 Fiat-Chrysler partnership deadline approaches, the chances of Chrysler's failure appear as high as ever.

Earlier this month, Moody's Corporate Finance said Chrysler's risk of a bankruptcy filing was greater than 70 per cent.

Mr. Marchionne would not offer odds on a Chrysler bankruptcy, other than to say that a Chapter 11 bankruptcy-protection filing “is an option” in the absence of a partnership agreement. He wouldn't rule out a Chapter 7 filing – liquidation – meaning 85 years of Chrysler history would come to an end.

In the short term, some of Chrysler's 30 plants would be closed – the Fiat boss would not say which ones would be targeted. Chrysler's headquarters in Auburn Hills, Mich., would be thinned out.

“Fiat has an incredibly flat management structure,” he said. “Chrysler needs a flat management structure.”

A deal with the UAW and the CAW would mean substantially lower labour costs. Chrysler as a brand might be downgraded so the stronger Dodge and Jeep brands could be developed.

Mr. Marchionne said the Fiat Cinquecento (Italian for 500), the hot-selling car launched in 2007 and credited with ensuring the revival of Fiat, would be introduced in North America as early as next year.

It would be built in North America, but would probably carry the Fiat badge because the company considers the Cinquecento a brand in its own right.

Chrysler would launch its own small car based on the Cinquecento platform, as Ford has done in Europe with the new Ka. “Chrysler needs its own Cinquecento, meaning a model that is the remaking of Chrysler,” Mr. Marchionne said.

Alfa Romeo, Fiat's sporty, upscale brand, would produce Alfas in either Canada or the United States, Mr. Marchionne said. Last year the Ontario government tried to convince Mr. Marchionne that he should build the Alfa in Ontario. He said Ontario Premier Dalton McGuinty tried to “sell” him an auto plant. The new Alfa 149, to be unveiled next year, would be built in North America, as would the successor to the larger Alfa 159.

Cliff Jones has passed Away



Our Deepest Condolences to his Family

At the Grey-Bruce Health Services in Southampton with Marie and his sister Marllee at his side on Monday, April 13th, 2009 at the age of 79 years, Cliff Jones of Port Elgin and formerly of Brampton, Best friend of Marie St. Aubin. Dear brother of Marllee Reeder of Fergus. Father of Jeff and Marty, both of Brampton, and brother of Bill Jones and his wife Thelma of Uxbridge.

Private family arrangements are in the care of the W. Kent Milroy Port Elgin Chapel.

Inurnment at Sanctuary Park Cemetery columbarium.

Memorial contributions to the Saugeen Memorial Hospital Foundation would be appreciated as expressions of sympathy.

Cliff retired from Ford on Nov 1, 1994 with 30.4 Years.

GM moved millions
from Canada to U.S.

Apr 15, 2009 Toronro Star

General Motors Corp. said it moved almost $600 million from a Canadian unit to the U.S. as part of a deal with banks to strengthen U.S. operations and win government bailout money.

GM, operating with $13.4 billion U.S. in loans, is seeking additional aid from the U.S. and Canadian governments to avoid bankruptcy.

"In order to facilitate significant infusion of public funds from the governments of the United States and Canada," GM struck a deal with creditors confirming assets of General Motors Nova Scotia Finance Co. could be used to secure debt owed by it or the parent company, GM said in response to a suit filed March 2 in Nova Scotia. Aurelius Capital Partners LP, Appaloosa Investment LP I and five other funds sued to have the money returned to the GM unit in Nova Scotia, claiming parent GM is either insolvent or on the brink of insolvency and knows it won't be able to honour obligations to noteholders.

U.S. directs GM to plan for bankruptcy by June 1

San Francisco Business Times

General Motors Corp is believed to be preparing to file for bankruptcy by June 1 after being directed to plan for a filing by the U.S. Treasury Department, according to a report Sunday by the New York Times.

The Times, quoting unidentified sources, said the Treasury Department has directed officials at General Motor's (NYSE: GM) to lay the groundwork for a "surgical" bankruptcy filing that could last as short as a few weeks for portions of the company. Those portions would be the "good" parts of the company, and the "less desirable" parts of the company would remain in court for much longer and possibly be liquidated, according to the Times.

The parts of GM that may get bogged down in a lengthy court restructuring or liquidation include the "unwanted brands, factories and health care obligations," sources said in the report.

A report by the Wall Street Journal on Sunday said that any attempt at a "quick" bankruptcy for GM could face legal challenges from bondholders of the company.
GM has accepted $13.4 billion in federal bailout funds and has asked for at least $16 billion more. However, President Barack Obama rejected GM's initial restructuring plan and forced former CEO Rick Wagoner to resign before setting a new deadline of the end of May for the company to come up with an acceptable new plan.

Fritz Henderson, the new CEO of GM,said last week in an interview on NBC's "Meet the Press" that while GM was not ruling out bankruptcy, it was not inevitable.
Chrysler LLC also has accepted billions in government bailout funds, but Ford Motor Co  is the only one of the Big Three automakers from Detroit not to take federal funds.

On Friday, Standard & Poor's Rating Services lowered its debt ratings for Chrysler and GM, and added that bankruptcy is likely and could lead to the break-up of Chrysler.

The S&P said in its warning that it was lowering the debt ratings because of the increased possibility of bankruptcy if the two automakers don’t meet deadlines set by President Barack Obama’s administration, according to numerous media reports.

Cars a Canadian cash cow: CAW

Union says GM, Chrysler made $37-billion 1972-2007;
urges aid for 'profitable sector'

GREG KEENAN - Globe & Mail

April 13, 2009

Chrysler Canada Inc. and General Motors of Canada Ltd. GM-N, the two auto makers seeking a bailout from Ottawa and Ontario, racked up an estimated $37-billion in profit between 1972 and 2007, according to a paper on auto profitability by Canadian Auto Workers economist Jim Stanford.

Automobile manufacturing as a business has generated profits every year in Canada since 1972, except 2002, Mr. Stanford said, with the pool of black ink at GM Canada reaching an estimated $31.75-billion, while Chrysler turned $4.95-billion in profit.

"And even in the years from 2005 through 2007, when the U.S. auto industry slid deeply into red ink, the Canadian industry remained profitable," Mr. Stanford said.

The study shows that assisting the industry is essential "if Canada wants to reap the benefits of this uniquely profitable sector into the future," he said.

Mr. Stanford's analysis of the companies' profits was made by combining data they publicly released before 1996, with figures since then extracted from Statistics Canada data for the whole industry.

It comes as the two governments grapple with how much money to lend GM Canada and Chrysler, or whether to give them any money at all beyond the $250-million Chrysler has received.

The debate over bailing out the companies reached a new level of urgency last week when Ontario Premier Dalton McGuinty said the province's pension insurance plan, the Pension Benefit Guarantee Fund, doesn't have enough money to cover pensions if one or more of the auto makers fails.

If that happened, it would mean workers who helped generate billions of dollars in profits for the companies would be denied compensation they effectively deferred until retirement, Mr. Stanford said.

"It is painfully ironic that the retirees who worked during the auto industry's 'golden age' should now be targeted for major reductions in income and benefits," he said.

GM Canada stopped releasing financial results publicly after racking up a profit of $1.4-billion in 2005.

That was only the second time any company in Canada had reported a profit in excess of $1-billion, although some Canadian banks now report profits of that size in a single quarter.

Mr. Stanford figures GM has posted annual profit in excess of $1-billion eight times since 1972.

GM Canada's $31.75-billion in profit over 35 years "surely ranks GM Canada as one of the most profitable companies operating in Canada over that time period," he said.

David Paterson, vice-president of corporate and environmental affairs for GM Canada, said the auto maker has not been profitable for the past several years in this country.

It has been offered $3-billion in loans by Ottawa and Ontario but has still not reached final agreement on the terms of the loans. GM has been given until June 1 by the two governments to improve the restructuring plan it submitted in February.

Chrysler began receiving a portion of its allotted $1-billion two weeks ago and has been given until May 1 by the Canadian governments to come up with a better restructuring plan and to reach a final deal with Italian auto maker Fiat SpA on a strategic alliance.

***

By the numbers

$37-billion

Combined GM Canada and Chrysler Canada profit between 1972 and 2007, according to a paper on auto profitability by Canadian Auto Workers economist Jim Stanford.

2002

The only year in that time period that Canada's automotive business did not generate a profit.

$31.75-billion

GM Canada's profit between 1972 and 2007.

$4.95-billion

Chrysler Canada's profit between 1972 and 2007.

8

Number of times Mr. Stanford figures GM has posted annual profit in excess of $1-billion since 1972.

GM Pensions May Be ‘Garbage’ With $16 Billion at Risk

By Holly Rosenkrantz

April (Bloomberg) -- Den Black, a retired General Motors Corp. engineering executive, says he’s worried and angry. The government-supported automaker is going bankrupt, he says, and he’s sure some of his retirement pay will go down with it.

“This is going to wreck us,” said Black, 62, speaking of GM retirees. “These pledges from our companies are now garbage.”

As the biggest U.S. automaker teeters near bankruptcy, workers and retirees like Black are bracing for what may be $16 billion in pension losses if the Pension Benefit Guaranty Corp. has to take over the plans, according to the agency. As many as half of GM’s 670,000 pension-plan participants might see their benefits trimmed if that happened, an actuary familiar with the company’s retirement programs estimates.

The possibility that GM might dump its pension obligations is likely to intensify debate over the treatment of executives of companies that receive U.S. aid. GM Chief Executive Officer Rick Wagoner, ousted by the Obama administration last month, may receive $20.2 million in pensions, according to a regulatory filing.

“The core issue is fairness,” said Harley Shaiken, a labor professor at the University of California at Berkeley. “To have workers lose a significant amount of their pension after giving a lifetime to building a company is devastating under any circumstance. It’s made all the more worse by the symbolism of a $20 million payoff at the top.”

Issue for Obama

Measured by participants, GM’s pension plan would be the largest taken over by the PBGC, a quasi-government corporation created by Congress in 1974 to protect pension programs of bankrupt companies.

Dealing with pensions may be one of the thorniest issues facing President Barack Obama in a GM bankruptcy. Unions including the United Auto Workers rallied behind his candidacy, spending $52 million to help elect him last year, according to Washington-based OpenSecrets.org, which tracks campaign spending.

In an election-night poll conducted by Peter D. Hart Research Associates, union members identified protecting pensions and Social Security and reducing health-care costs as their top goals for the new administration.

“It’s going to be a very political decision,” said John Casesa, who follows the auto industry as managing partner of Casesa Shapiro Group, a New York consulting firm. “I’m not really sure how this will go.”

$20 Billion Short

GM’s pension system had a $20 billion shortfall as of Nov. 30, 2008, based on numbers the company provided the PBGC, said Jeffrey Speicher, a PBGC spokesman. By law, the agency would be able to make up only $4 billion of that, he said.

“The rest would be lost,” Speicher said in an interview.

GM fell 7 cents, or 3.5 percent, to $1.93 at 4:15 p.m. in New York Stock Exchange composite trading and has dropped 40 percent this year.

Current and future retirees of Chrysler LLC, the other U.S. automaker on life support, would forgo $7.1 billion, Speicher said. Chrysler’s plan is underfunded by $9.3 billion, and the agency would cover $2.2 billion, he said.

Chrysler’s plan, with 250,000 members, would be the second- largest taken over by the PBGC. The biggest to date was the 120,000-member United Airlines plan, absorbed by the PBGC in 2005. The agency had an $11.2 billion deficit itself as of Dec. 31.

The $16 billion that would be lost by GM workers and retirees is a “big deal,” said Frank Todisco, senior pension fellow at the American Academy of Actuaries in Washington. “That’s a significant haircut on one’s benefits.”

Maximum Amount

The maximum amount that PBGC can pay retirees 65 or older is $54,000 a year. They would lose anything they get over that amount. Beneficiaries under 62 would be likely to lose a supplement of $15,000 to $18,000 paid by the GM plans to bring pensions up to $36,000 annually, according to the actuary with knowledge of the plans, who declined to be identified discussing potential cuts.

GM declined to disclose pension benefits or discuss what might happen to them should it file for bankruptcy.

“We won’t speculate on the matter,” said Renee Rashid- Merem, a spokeswoman for Detroit-based GM, which has received $13.4 billion in U.S. aid and asked for as much as $16.6 billion more.

Obama on March 30 gave GM until June 1 to come up with deeper cuts in debt and labor costs than proposed by Wagoner to avert bankruptcy. He gave Chrysler until May 1 to form an alliance with Italy’s Fiat SpA.

“Our goal, of course, is to do everything realistic to protect workers and their pensions,” said White House spokesman Bill Burton.

Chrysler’s Plans

“We expect Chrysler’s pension plans to be nearly fully funded and have ample liquidity to continue benefit payments as required,” said Michael Palese, a spokesman for the Auburn Hills, Michigan-based company.

Christine Moroski, a United Auto Workers spokeswoman in Detroit, declined to comment.

Black, the former engineering executive, says he worked at GM for 34 years and for two years at Delphi Corp., the bankrupt auto-parts supplier formerly owned by the automaker.

“If GM loses the pensions, it would mean 25 percent of my source of income would evaporate,” said Black, who declined to say what his retirement pay is. “I would have to go back to work.”

Returning to work may not be an option for other GM retirees, Black said. “I’ve talked to lots of folks who would be devastated,” he said.

Not All Companies

Not all companies that go bankrupt dump their pension obligations, said Speicher, the PBGC spokesman. Northwest Airlines Corp. emerged from bankruptcy in 2007 without terminating its plans, he said.

GM’s plan also is in relatively better shape than others, because it’s about 87 percent-funded, according to the actuary, compared with the typical pension plan’s 60 percent to 70 percent funding.

“The question of whether GM’s pension obligations are too great to allow it to operate effectively is a complicated one, and far from obvious,” said Andrew Oringer, an employee- benefits lawyer at White & Case LLP in New York.

“Nobody really knows” what would happen with GM pensions in a bankruptcy, said Jack Dickinson, president of an advocacy group for GM retirees called Over the Hill Car People.

The “PBGC doesn’t want to touch it, they’ve got their own problems,” said Dickinson, 65, who worked for 34 years in sales and management at GM. “We’re just hoping they take a hands-off approach. We depend on that money; we earned it, and it’s part of our compensation.”

Ontarians need to have an “honest discussion” about “pension adequacy” in the wake of this portfolio-battering economic crisis, Finance Minister Dwight Duncan said in Windsor Friday, pointing out other provinces are mulling supplemental coverage.

“Is Canada Pension adequate? The provinces of Alberta and British Columbia have said ‘no,’ that there may be a need for supplementary Canada pension, whether it’s administered provincially or not,” Duncan said at his Lauzon Parkway office.

“Ontario hasn’t had that discussion and we’re going to have that discussion.… Whether you’re a retired CAW person who had an assurance from their company or you’re that person who saved hard all their lives and saw their savings wiped out or seriously diminished, we can’t avoid the conversation.”

Duncan made the comments after an hour-long meeting with CAW national president Ken Lewenza and local CAW leaders Mike Vince, Gary Parent and Rick Laporte, who represents Chrysler workers and more than 5,000 retirees as president of Local 444.

Duncan convened the meeting to discuss the province’s Pension Benefits Guarantee Fund — which has been woefully underfunded by corporations for three decades. It totals only about $100 million, which comes nowhere close to covering the multibillion-dollar pension liability of Ontario’s struggling automakers, let alone other corporations, like Nortel, that are flirting with bankruptcy.

The fund exists to provide workers stripped of their defined pensions with up to $1,000 per month, but the fund would quickly dissipate in the face of insolvencies affecting thousands of workers.

“Our message to the government is that you might have to borrow because one thing about any fund of government: you can borrow from the right hand to pay the left hand as long as you pay it back down the road somewhere,” said Lewenza.

“We just want the assurance from the province of Ontario that pensioners and their pension plans — whether it’s autoworkers, whether it’s Nortel workers, whether it’s public sector workers, whoever it is — they’re going to be protected as the legislation implies.”

Lewenza and Duncan concurred the best way to protect pensioners was to ensure the survival of the Detroit Three automakers.

“The government of Ontario is very much committed to keeping General Motors and Chrysler viable,” said Duncan. “We’re very much committed to ensuring pensioners are protected through all this.”

Duncan said his government will introduce legislation in the fall in response to a report on occupational pensions it commissioned from Harry Arthurs, the former president of York University. The report recommended more stringent pension funding regulations and boosting the monthly payout to $2,500 per worker.

“We have to make sure going forward it’s funded and it’s sustainable,” said Duncan.

The Arthurs report also highlighted the precarious retirement position of tens of thousands of aging Ontarians, whose nest eggs have been badly bruised by a plummeting stock market. That hit to RRSPs — as much as 40 per cent in some cases — could be devastating to the one in three Ontarians who don’t enjoy a workplace pension.

“We’re going to have to have a look at the issue of pension adequacy for all Ontarians and all Canadians,” said Duncan.

“This is not about autoworkers. This is about pension adequacy. This is about all of us.”

An expert panel on pensions struck by British Columbia and Alberta found that only 20 per cent of private sector workers in each province were enrolled in pension plans. It recommended establishing a new pension plan that “would be available to any employer, employee or self-employed person at a reasonable cost, enabling them to take advantage of the economies of scale afforded by pooling pension risks and assets as well as access to investment expertise and products not currently available to small pension plans and individual investors.”

Ontario Finance Minister, union meet to discuss auto pensions

The Canadian Press

April 11, 2009

WINDSOR, Ont. — Ontario's finance minister and the head of the Canadian Auto Workers met yesterday to talk about autoworkers' pensions.

The meeting in Windsor follows comments earlier in the week from Premier Dalton McGuinty that questioned whether autoworkers' pensions would be covered in the event of a bankruptcy.

CAW president Ken Lewenza says the pension fund needs a boost, even if the province has to borrow the money.

Finance Minister Dwight Duncan says this issue needs to part of a broader, national discussion of pension adequacy.

The autoworkers union is planning a large demonstration at the Ontario legislature in Toronto over the issue.

Mr. Duncan and Mr. Lewenza agree the best solution is to keep the auto companies in business.

“It was just a kind if clearing of the air and we indicated to him our retirees are incredibly stressed out as a result of what's going on in the auto industry,” Mr. Lewenza said of the meeting.

Mr. Duncan says it's not just about auto companies.

“It's not just about Chrysler and GM, it's about Nortel and other firms that have defined benefits pension plans and I think what the Premier said is we've got to talk about this,” Mr. Duncan said.

Ontario Premier Dalton McGuinty now expects retirees to pay for the financial industry's greed and the ensuing economic crisis but he faces a big surprise, says the leader of a major group of union pensioners.

Len Harrison, chair of the retired workers advisory executive for the Canadian Auto Workers union, said yesterday the McGuinty government will soon start feeling the heat for its "disgraceful" attitude toward seniors by not assuring the continuing backstopping of their pensions when companies fail.

The CAW plans a demonstration of grey power at Queen's Park on April 23 and is inviting all retirees, whether they belong to a union or not.

Harrison, a 74-year-old retired General Motors millright, added that public pressure on the government to fulfill its obligations to retirees won't end there.

Retirees, who say they are angry and worried, will soon be blitzing neighbourhoods and MPP offices to press the government about the need to properly fund the Pension Benefits Guarantee Fund.

It currently has about $100 million.

"All we really want is some justice," Harrison said at a news conference.

McGuinty said this week that although the government has a "political and moral responsibility" to workers who invested in company pension plans, the province's guarantee fund is "modest" and could never cover all corporate failures.

His comments came as reeling GM raised the possibility of bankruptcy court protection.

Such a process could lead a judge to reduce a company's pension obligations among other cost cuts so it can survive.

Finance Minister Dwight Duncan added yesterday that the fund has not received proper funding and the province needs to figure out how to address the problem.

"We have to have an honest discussion among ourselves about those issues, both in the context of GM and the broader context," he said.

The government doesn't want to abandon GM retirees and will work with the union to avoid it, Duncan said.

He also said the government's priority is to keep GM in business to avoid any issues regarding funding pensions.

In the past, when the government experienced potentially big claims in cases such as Massey-Ferguson and Algoma Steel, the province stepped in and loaned the fund money so it could pay back pension plan members.

However, the claims and number of teetering companies with pensions plans could be much higher now because of the deep recession.

Harrison, who represents about 80,000 union retirees and their spouses across the country, said greedy speculators created a worldwide financial crisis because of a lack of government regulation, but somehow workers now have to pay for it.

"It's always the greedy that are going to get away with it and it's always the poor that are going to get the blame," he said, echoing CAW president Ken Lewenza.

"We are going to get a lot of the blame now. But it shouldn't be happening.

"We've got to let McGuinty know that there is no free ride. We're not getting a free ride. He doesn't deserve a free ride."

Harrison noted the union signed contracts in which GM promised pensions and workers accepted less in wages so the company could meet those obligations.

"But now we're to blame even though we never created this crisis," he said about the company's huge pension shortfall.

Furthermore, the Ontario government also gave some companies, including GM, exemptions from rules regarding full funding of pension plans, which has led to the current situation.

Harrison said the government doesn't seem to recognize or appreciate the contributions of retirees for their long work with companies or as volunteers in their communities.

"If it wasn't for senior volunteerism, our medicare system would collapse," he said.

"And just imagine how many mothers couldn't go to work without the help of seniors. "We deserve some respect in the community."

There is not enough money in Ontario's pension plan safety net to support GM pensioners if the company goes bankrupt, Premier Dalton McGuinty warned yesterday.

"The money available in that is very, very modest," McGuinty said, noting the Pension Benefits Guarantee Fund totals about $100 million – not nearly enough to cover the billions of dollars involved in the automaker's pensions.

"That comes nowhere near meeting any liabilities – for example, for the auto sector alone, to say nothing of all the other sectors," McGuinty told reporters.

Nevertheless, he said Ontario has a "a political and moral responsibility, particularly to older pensioners who worked in the industry and played by all the rules (and) made their investments in their own pension plans."

But McGuinty said topping up the safety net may not be an option.

"We would never have all the money that would be needed to top it up to meet all the demands for all Ontarians who are experiencing troubles with their pension plans," McGuinty said.

Federal Finance Minister Jim Flaherty said the pension fund was tapped during Algoma Steel's difficulties when he was finance minister of Ontario.

On Tuesday, federal Industry Minister Tony Clement said Canadians need to be prepared for possible bankruptcy filings in the auto sector. He announced a $185 million program to guarantee warranties for cars purchased from GM or Chrysler and another $700 million for parts manufacturers to insure against non-payment from the troubled car firms.

The provincial safety net fund, meanwhile, has been underfunded since its inception, said Ontario Finance Minister Dwight Duncan. "General Motors, was given a `too big to fail' provision so they have not been contributing," he said.

"Even among the other companies, the premiums have never really covered the actual liabilities."

Since 1980, the pension fund has provided the province's retirees with up to $1,000 a month in the event a pension plan fails to provide its full benefit, or any at all.

Experts warned in February that the unique safety net was teetering on the edge of being wiped out and could fold if a large corporation were to go under.

Still, it is the retired autoworkers who are the innocent victims of the crisis, Canadian Auto Workers union president Ken Lewenza said.

The provincial government shares responsibility for the GM pension crunch because of a 1992 loophole (opposed by the CAW) in the Pension Benefits Act that allows GM to fund its pension to a weaker standard than other employers, he said.

Even when GM Canada was profitable in the 1990s, it underfunded its plan, Lewenza said.

McGuinty said the idea behind the pension safety net program was to transfer funds to employers of firms facing bankruptcy via the fund, rather than through government.

"What has happened," he said, "is the amount required to be paid into that fund by businesses was grossly inadequate."

And now, the automakers' pension funds don't have enough money to cover their potential liabilities because the stock market crash has decimated investments made with the pension contributions.

McGuinty will be walking a fine line if he's thinking about bailing out the GM or Chrysler pension plans given the shortage of funds in the province's pension guarantee fund, interim Progressive Conservative Leader Bob Runciman said.

That step "would be troublesome to the vast majority of people in this province," Runciman told reporters. "Most Ontarians don't have pension plans."

The government has painted itself into a corner because it has allowed companies to underfund pension plans without requiring the funds be topped up in good economic times.

"They should make sure any shortfalls are looked after," said Runciman, calling for a pay-as-you-go approach to making sure company pension plans are solvent so there is less risk of taxpayers being "left on the hook."

The government needs to step up to the plate to create a different type of protection plan in Ontario, said New Democratic MPP Paul Miller (Hamilton East-Stoney Creek).

Bankruptcy is devastating to workers, he added.

"It could create a terrible situation for their future, their savings, what they have worked all their lives for," Miller said.

With files from Rob Ferguson and the Star's wire services

OTTAWA–Most Canadians are opposed to giving taxpayer-funded loans to the troubled auto industry and believe North American companies should go under if they can't compete, according to an Angus Reid/Toronto Star poll released yesterday.

Fifty-one per cent disagree with the decision by the federal and Ontario governments to commit $4 billion in short-term loans to General Motors of Canada Ltd. and Chrysler Canada Inc.

And 63 per cent believe these companies should declare bankruptcy if they can't make a go of it in the global auto market.

Ottawa and Queen's Park have said interim loans of $3 billion for GM Canada Limited and $1 billion for Chrysler Canada will be advanced as necessary to assist the companies while they work on their restructuring plans.

In Ontario, where auto is king, respondents are split on the government assistance, with 46 per cent in favour and 48 per cent against.

The survey further shows that almost half or 48 per cent of Canadians believe the struggling automakers have received enough money and shouldn't get a dime more.

Between April 3 and 4, 1,002 Canadian were surveyed. The margin of error is plus or minus 3.1 percentage points, 19 times out of 20.

The poll results come at a time when Detroit-based General Motors is seriously contemplating entering bankruptcy protection in the U.S., allowing it to reorganize as well as re-open labour contracts.

Only 12 per cent of Canadians surveyed are onside with giving the companies more loans to keep them operating in the short term, and just 3 per cent would provide as much money as necessary to save the companies from bankruptcy.

Only 28 per cent say they would buy a car from a North American firm compared to 45 per cent who said their choice would be foreign.

In Ontario, those willing to buy a car from Ford, GM or Chrysler jumped to 35 per cent, while almost three in five British Columbians would buy a foreign vehicle.

KAREN HOWLETT and GREG KEENAN

Canada urged to beef up
"cash for clunkers" plan

TORONTO, April 7 (Reuters) - Ottawa's support for auto parts companies is a good step towards helping the auto sector in Canada, but a robust scrappage program would give the struggling industry an even bigger boost, the chief executive of Ford Motor Co's Canadian unit said on Tuesday.

David Mondragon told Reuters he supported the move by the government of Canada to increase the funding it will make available to insure money owed by manufacturers to auto parts suppliers.

"Our industry is very interdependent, as we all know, and we understand the fragility of some of the suppliers in Canada and in the U.S., so any support that can be offered to them is well supported ... by Ford," he said.

But he said what he would really like to see is a new scrappage program in Canada to replace the current model that gives consumers C$300 ($242) towards a new, more environmentally friendly vehicle when they get rid of their older ones.

"I think that less than a dozen people have taken advantage of that C$300 offer to scrap their vehicle," said Mondragon, pointing out that the average 10 year-old car is worth between C$3,000 and C$4,000.

Mondragon said he believes a "cash for clunkers" program that offers C$3,500 towards an new vehicle would help the industry, and the economy, claw back some of the losses brought on by five straight months of auto sales declines.

Germany, for example, said on Tuesday it would increase funds for its popular car scrapping subsidy to 5 billion euros ($6.77 billion) from 1.5 billion. The plan, which will run until the end of the year, offers consumers 2,500 euros for cars nine years old or older toward new, lower-polluting vehicles.

Reid Bigland, chief executive of Chrysler's Canadian arm, said in a statement he would also like to see a more aggressive scrappage program in Canada.

"Done right, these programs can provide a welcome economic stimulus , automotive sales stimulus, and help the environment at the same time by getting older vehicles off the road," Bigland said.

"Remember that the average 1987 model year vehicle emits 37 times the (greenhouse gas) emissions as a current model year vehicle."

Ford's Mondragon recommends the C$92 million budget in place for Canada's current scrappage program be put toward an expanded plan.

He would like to see all taxes generated from new vehicles bought under the more robust program put back into the plan to keep it running for six months, until the industry stabilizes .

The auto industry accounts for about 20 percent of all retail sales in Canada, from the vehicles themselves, to gasoline, car stereos and windshield wipers.

Mondragon said he met last week with legislators from the Conservative government, as well as the opposition, on the idea an expanded scrappage plan. He said that the response was strong, but the concept still needs a champion on Parliament Hill.

Over 6 million vehicles, more than 30 percent of the Canadian fleet, are over 10 years old and would qualify for the program.

"My fear is that we would do it and quite frankly, it would be over-subscribed in a big way," Mondragon said. "I think there's that much interest from average consumers in Canada."

Obama's GM/Chrysler Viability & Warranty Commitments Language

Click on each category:

Obama Administration New Path to Viability for GM & Chrysler

GM Viability Determination

Chrysler Viability Determination

Obama Administration’s New Warranty Commitment Program

Canada says must prepare for automaker bankruptcies

OTTAWA, April 7 (Reuters) - The Canadian government must be prepared for the possibility that General Motors Corp or Chrysler [CBS.UL] will go into bankruptcy protection, Industry Minister Tony Clement said on Tuesday after announcing new measures to back up Canada's auto sector.

Clement told a news conference that the government wants the two companies to restructure and survive, but added: "We have to ready ourselves for other options, including Chapter 11 in the United States and CCAA bankruptcy protection here in Canada."

CCAA, the Companies' Creditors Arrangement Act, is the Canadian counterpart of Chapter 11 of the U.S. Bankruptcy Code.

"There used to be a phrase in the auto sector -- too big to fail -- I don't think that phrase exists anymore," Clement said.

He said it is difficult to say whether Chrysler can survive and that the government has had discussions on that subject with Italy's Fiat SpA , with which Chrysler is trying to forge an alliance.

"Over the next two or three weeks, perhaps I'll be able to give you a better answer," he told reporters.

Clement announced the government would increase the amount of cash available to Export Development Canada by C$700 million ($569 million) to insure that auto parts suppliers can get money owed to them by struggling automakers.

He said the additional funding to EDC brings Canada's total exposure to C$1.25 billion, which is about 20 percent of the $5 billion U.S. auto supplier support program announced by the U.S. government on March 19, and proportional to Canada's share of the North American auto market.

Clement also said that from now on, warranties on new vehicles sold by Chrysler [CBS.UL] and General Motors Corp would be guaranteed by a C$185.3 million Canadian warranty commitment program, regardless of whether Chrysler and GM go into bankruptcy protection.

The program will be funded with cash contributed by the automakers and a loan from the federal government to pay for repairs covered by the automakers' warranties on each new vehicle sold until "the period of uncertainty" in the auto sector ends.

"It will help consumers know that they have confidence when they buy a vehicle from GM and Chrysler during this uncertain period, that their warranty ... will be there for them," Clement said.

"If GM or Chrysler does go bankrupt, this warranty is not affected by that."

Ken Lewenza on CBC on the Hour

This past September Ken Lewenza took over as head of the Canadian Auto Workers and it looks as though he's got his work cut out for him. New sales figures are out and things aren't looking good. General Motors sales are down 45 per cent. Ford - down 41 per cent. Chrysler - down 39 per cent. People are not buying cars, right now and the big three car companies are in big trouble. Major changes are coming and a lot of jobs on the line. Ken Lewenza is in the middle of it all and has some thoughts on the matter.

Get Video Here

Ford Motor Co. says it completed a tender offer announced last month, reducing its debt by $9.9 billion (U.S.).

About $4.3 billion in Ford's senior convertible notes were tendered. The automaker says it will pay $344 million in cash premiums for the offer and issue 468 million shares as a result of the conversion.

An offer to purchase notes from its financing arm produced $3.4 billion in securities tendered. Ford Motor Credit will use $1.1 billion to purchase that debt.

The Dearborn, Mich.-based company is looking to pare $25.8 billion in debt to weather the worst auto sales downturn in 27 years.

DETROIT – General Motors Corp. would still prefer to avoid bankruptcy protection while restructuring, but "if it's required, that's what we'll do," new CEO Fritz Henderson said yesterday.

President Barack Obama and his auto industry task force have indicated that bankruptcy protection "may very well be the best solution for the company to achieve these goals," Henderson told CNN's State of the Union.

That's why, "when you look at the situation, we said, `Okay, we'll spend the time to try to complete the work, more aggressive work, outside of the court process, but if it's required, that's what we'll do.'"

Obama had said GM's initial plans to become viable didn't go far enough. Last week, he told the company it had 60 days to make more cuts and get more concessions, or it would not get any more government help. The administration also forced out Rick Wagoner as CEO.

In Canada, both GM and Chrysler have also been told they haven't met requirements for long-term government bailout loans and that more concessions are needed from unions, creditors and others.

The federal and Ontario governments have demanded that the Canadian Auto Workers get back to the bargaining table with GM.

Ford cuts may break mould
Targets pensions

Nicolas Van Praet,  Financial Post
April 5, 2009 

In coffee shops across Ontario's ailing manufacturing belt, retirees such as Frank Taylor are having the same cold sober conversations.

Reminiscing about their glory days on the automobile assembly line and sharing their pride over building some of North America's iconic models has given way to hand-wringing over their once-secure futures.

As General Motors Corp. and Chrysler LLC veer toward bankruptcy protection and Ford Motor Co. tries to avoid the same fate, thousands of Canada's auto industry pensioners and those close to retirement are wondering how much they will have to give up to ensure the carmakers survive.

"[The companies] have got to get some things back, they've got to restructure," said Mr. Taylor, a GM retiree who lives near Peterborough. "But pensions? Retirees are already on a poverty wage. If they just retired and had nothing else but their pension, most people wouldn't hardly be able to get by on it. They shouldn't be touched."

Solving the problem of so-called "legacy costs," which includes the pension payments workers receive in retirement and all the other post employment benefits such as prescription drugs, has emerged as the Holy Grail in fixing the cost equation of North America's three domestic automakers.

For Ford, which has not asked for government loans, legacy costs are the main target in its effort to keep its two Ontario plants in Oakville and St. Thomas operating.

Ford of Canada has to sell 15,000 new cars and trucks each year just to cover the cost of funding its legacy liabilities -- the equivalent of roughly one month worth of sales volume. Its 11,820 hourly retirees outnumber its active workers two to one, outlining the scope of the challenge.

The maker of Edge crossover vehicles and Crown Victoria police cars believes legacy costs in Canada are not sustainable, people close to Ford said yesterday. The company is seeking a new labour deal with the Canadian Auto Workers but will not accept the same pattern agreement the union struck with GM of Canada last month because that deal would offer Ford too few savings, said one source.

"Ford's position on the GM-CAW agreement is that it really doesn't keep Ford's Canadian operations competitive in today's economy," said the source, who asked not to be named. Ford is stressing it needs its own deal with the union urgently and "can't wait until other events unfold" at GM or Chrysler before striking an agreement, the source said.

If it accepted the new GM-CAW deal, Ford would pay roughly US$10 per hour more to make a car in Canada, according to estimates.

Earlier this year, the CAW reopened its three-year contracts with the Canadian units of GM and Chrysler after the Ontario and Canadian governments said the companies had to lower labour costs to qualify for emergency loans. The union said it will renegotiate with Ford on the basis that none of the three manufacturers win a competitive labour advantage over another.

GM struck a contract with the CAW last month that it says will allow it to cut legacy costs by nearly $1-billion. Tony Clement, federal Industry Minister, said on Monday that wasn't enough. GM has to cut deeper to keep $3-billion in loans pledged by the Canadian and Ontario governments, he said.

Ford and Chrysler don't like the GM-CAW deal either. Ford believes it can save $300-million alone by cutting the living expenses for future retirees who need long-term health care without affecting their standard of living. The company is not eyeing cuts to pension pay directly.

The Canadian and U. S. governments have given GM 60 days to cut costs radically or face bankruptcy court. Chrysler has 30 days to finalize a deal with lenders and a commercial partnership with Italian automaker Fiat SpA or it could be liquidated.

What the Far right is saying - Very Intresting Article By Pat Choate The Director of the Manufacturing Policy Project

This article came out near the end of the Bush Adminsration

Over the past two decades, each of the Big Three has been through extensive management changes, downsizing, and layoffs. Chrysler even became part of the German company Daimler, which could not make the acquisition profitable and eventually sold 80 percent of its interest to Cerberus, a private investment fund.

It is difficult to teach an elephant to waltz, but it can be done. While the Big Three have been slow to change, they have adapted well enough that they still hold half the U.S. market share. It is an amazing turnaround.

Consider quality. In 2007, Ford won 102 quality awards, including Auto Pacific’s Best in Class for three models and Germany’s largest auto magazine’s Auto 1 of Europe Award for its S-MAX. Forbes awarded the 2008 Chrysler 300 “the highest-quality car in the near-luxury category” over the Audi A4, BMW 3 Series, Lexus IS, and Mercedes-Benz C Class. Of the 15 global finalists for the 2008 Motor Trend Car of the Year Award, the Big Three manufactured nine, the Japanese four, and the Europeans two. The 2008 winner was GM’s Cadillac CTS, which Motor Trend described as “proof that Detroit can still build a world-class sedan.”

As for innovation, General Motors, Ford, and Chrysler invest almost $12 billion annually on R&D, making them a major source of technology development. In 2007, the U.S. Patent and Trademark Office granted these three corporations 1,030 patents.

James E. Malackowski, CEO of Ocean Tomo LLC, a merchant bank that specializes in intellectual property products and services, recently compared four of the green, clean, and energy efficient patent portfolios held by the Top 15 global automakers—emission control, catalytic converters, and related chemistry; fuel cells; hybrid/electric vehicles, mostly motor and battery innovation; and emerging related technologies, including solar, wind, and other green inventions.

GM has higher average quality and newer green technology and patents than the other 14 auto manufacturers combined. Together with Ford it holds approximately one-third of all green-technology patents and the related value. Moreover, GM has 70 percent of the patents in the emerging-technology category. This domestic share increases to 85 percent if Ford is added. Finally, Ford owns 30 percent of all patents with a similar related-value measure in emission-control innovation. These Big Three technologies have great potential for stimulating overall U.S. economic and job growth and creating a greener and more fuel-efficient world.

There is much of value to be saved in this vital industry, but relief has been slow in coming. When Wall Street recklessly gambled with borrowed monies and lost, federal aid was characterized as a “bailout.” The present auto crisis was created by powerful economic forces, many beyond Detroit’s control. Federal efforts to save the U.S. auto industry would constitute a “rescue.”

The primary causes of the current U.S. auto-industry crisis are threefold: a financial freeze in which even well-qualified borrowers are denied credit to buy vehicles; fluctuating oil prices that have driven the price of gasoline from less than $2 per gallon to more than $4 and then back to $2, all in less than 10 months; and a consumer panic that has cut retail sales to 15-year lows.

The failure of the U.S. Treasury Department and Securities and Exchange Commission to monitor, let alone regulate, Wall Street has created today’s financial wreckage and the resulting consumer panic. And despite the obvious need for a far-sighted energy policy, the last four presidents and Congress have done little but encourage more drilling.

The longer-term inability of America’s auto industry to export competitive products has its origins in U.S. trade policies that accept closed foreign auto markets and the payments of massive export rebates by other governments to their automakers. How can U.S. automakers be expected to compete in a world where German producers get a 19 percent export subsidy on every vehicle sold in the United States, China undervalues its currency by up to 50 percent, Japan keeps its auto market tightly closed, and the U.S. government allows South Korean automakers to sell more than 700,000 subsidized vehicles in this market annually, but tolerates Korea’s restriction of U.S. imports so tightly that fewer than 7,000 American-made vehicles are sold there each year? The Big Three and the UAW are not at fault for these distortions of competition.

The three overarching questions that President-elect Obama and the 111th Congress face are: what will happen if the Big Three are not saved, how much will it cost, and what is the best way to execute the rescue?

As to the first question, federal inaction would be costly and destructive in ways America has not experienced since the Great Depression. The Center for Automotive Research—appropriately, CAR—projects that a 100 percent closedown of the Big Three auto producers would result in the loss of almost 3 million U.S. jobs in the first year. The majority of those losses would be Main Street jobs distributed across the country that depend on spending by the Big Three—steel, glass, and rubber producers and the 20,000 dealers, who are major purchasers of advertising in local newspapers, radio, television, and other small business services provided by lawyers, accountants, real estate contractors, and landscapers.

A 50 percent reduction in the Big Three’s operations would be almost as costly. CAR estimates that 2.47 million jobs would be lost in the first year, 1.5 would still be unfilled in year two, and slightly more than 1 million in year three. The lost revenues from either scenario would devastate federal, state, and local budgets, creating further economic upheavals. CAR estimates that a 100 percent shutdown would cost $156 billion in lost tax receipts and increased transfer payments. A 50 percent shutdown would cost $108 billion.

Job loss is only part of the risk. The U.S. defense industrial base would be greatly weakened if the Big Three failed. The collection of machine tools, robots, production lines, and skilled workers of the auto industry gives the United States the capacity to shift quickly from domestic production to the manufacture of tanks, airplanes, and other war materiel as happened in World Wars I and II. The foreign auto transplants are not a substitute, for they are mostly facilities for putting together kits manufactured abroad.

As for the cost of the auto rescue, it is impossible to estimate the final number. Certainly, $38 billion for an operational bridge loan is too little and will require supplements. GM alone has a cash-burn rate of $2 billion per month, and will use its portion of the first loans within months. Yet the earliest that GM says that it can produce its new line of vehicles is 2010. Inevitably, the automakers will be back for more, much like the banks and insurance companies.

As CAR has documented, however, the costs of inaction will also be great. Its estimates of a collapse, moreover, do not include the costs of shifting more than $100 billion of Big Three pension liabilities to the Pension Benefit Guaranty Corporation, which is currently operating with a $10 billion deficit. Only about a quarter to a third of the Obama administration’s proposed stimulus of massive investment infrastructure expenditures will be felt in 2009, half in 2010, and the remainder thereafter. As presently defined, it will have little effect on the Big Three.

They need more sales now. The fastest and surest way to stimulate such activity is for the federal government to give a massive one-to-three-year tax deduction for sales of U.S. vehicles with a high U.S. or North American content, such as 70 percent. This would help clear the dealer backlog and immediately put people to work. It also would allow taxpayers to get great bargains on new vehicles.

Some have suggested that Chapter 11 is the only viable option for the Big Three. But it would create an economic avalanche in which dozens, if not hundreds, of suppliers and dealers would be forced into bankruptcy. No institution other than the federal government is now able to provide the billions of dollars necessary for the industry to operate during reorganization. And at the very moment that these auto giants need to act quickly and be flexible, they would be constrained by a federal judge and trustees to get approval for even the most basic decisions. Those who advocate bankruptcy need only look at the cumbersome and costly Delphi experience, which is now in its fourth year.

But rescuing the American auto industry will require more than vast sums of public monies. Basic policy changes in trade and tax laws are essential. One of the most difficult, but unavoidable, challenges will be to end the Value Added Tax discrimination faced by the Big Three in both their domestic and foreign markets. Soon after World War II ended, U.S. trade negotiators agreed to allow the rebate of Value Added Taxes on their exports and the imposition of VAT equivalents on their imports of U.S. goods and services. Europe was rebuilt decades ago, but 153 nations now have a VAT, and its average rate is 15.5 percent. Japan has a 5 percent VAT, China’s is 17 percent, Germany’s is 19 percent, and France imposes 19.6 percent. The economic consequences to the Big Three and other U.S.-based manufacturers have been devastating.

When a German automaker exports a vehicle into the U.S. that costs $50,000, for instance, it receives from the German government a 19 percent VAT export rebate, worth about $9,500. But when one of the Big Three exports a $50,000 vehicle to Germany, it must pay the German government a 19 percent, $9,500 VAT-equivalent tax at the dock. Thus the Big Three products are price disadvantaged in both markets. Moreover, these discriminatory VAT rules provide a powerful incentive to outsource production from the United States. In the Tokyo, Uruguay, and Doha trade negotiations, the U.S. Congress instructed American trade negotiators to eliminate this tax disadvantage, but other governments refused to discuss the issue.

In addition to pressing for the adoption of new global trade rules to end VAT discrimination against U.S. manufacturers, the incoming administration should focus on eliminating the many protectionist national tariff and non-tariff trade barriers crippling the Big Three. India, for example, imposes a 100 percent tariff on imported U.S. vehicles. China’s tariff rate is 25 percent. Korea has long-run national anti-import campaigns that include targeting for tax audits anyone who buys a foreign car.

Unless foreign economic protectionism is confronted immediately and at the highest levels of the U.S. government, the American auto industry cannot survive.

Three other principles are essential to the rescue. First, taxpayers should receive substantial equity in these ventures, plus long-term warrants, whose purchase price is set at today’s stock values. After all, we are taking the risk. When any public loans are repaid, the terms and conditions should require a sale of those stocks, hopefully at a substantial public profit. Taxpayers made almost a 30 percent profit on the Chrysler loans three decades ago.

Second, demands for a reduction in worker pay should be eschewed. The UAW and its members have already made massive wage and benefit concessions in recent negotiations. Delphi is only one example. Almost a century ago, Henry Ford paid his workers a then unheard of $5 per day so they could buy the products they were making, and the auto industry led the way in creating an American middle class. This rescue should not undermine broader efforts to provide secure jobs and benefits, nor should it allow the pitting of well-paid American workers against the penny-wage labor of other countries.

Without question, the UAW has often been smug, arrogant, and inflexible. But rather than punishing it by requiring reduction in its members’ pay, we should expect the union to contribute to the rescue. It should enter into a no-strike agreement until the federal loans are paid and invest its $1 billion “rainy day” reserve, commonly called its “strike fund,” in the preferred stock of the Big Three until the loans are satisfied. The rainy day has come, and if taxpayers are putting up money to save UAW jobs, so should the union.

While U.S. antitrust laws allowed the UAW to target one company at a time, those same laws prevented the Big Three from negotiating together on an industry-wide contract. Any rescue should permit the Big Three and UAW to negotiate an industry wage and benefit package.

Third, executive pay at the Big Three should be capped at some simple multiple of the average annual pay of Big Three workers, such as 10 or 15 to 1, with any bonuses being provided in corporate stock, at least until any federal loans are paid off. Also, the Big Three executive pension funds should be required to have at least a majority of its capital invested in Big Three stock. The goal, of course, is to create a common incentive for labor and management to work together.

As of mid-November 2008, the U.S. Treasury and the Federal Reserve had advanced $2 trillion to salvage the financial wreck created by Wall Street. In late November, the FDIC announced that it was ready to loan another $1.4 trillion to stabilize the banks. The  administration and Congress seem to have no limits to their concern about Wall Street.

The Big Three automakers, their suppliers, and dealers are on Main Street. They employ millions of workers and provide essential goods for American consumers. If the Big Three fail, an economic tsunami will quickly roll across the United States, destroying jobs, incomes, and national confidence at historic levels. The challenges faced by the new administration at that point would be similar not to those faced by Franklin Roosevelt, but to those that confronted Herbert Hoover in the first years of the Great Depression.

Pat Choate is director of the Manufacturing Policy Project. His most recent book is Dangerous Business: The Risks of Globalization for America

Ford Canada aims to slash
legacy costs, source says

Fri Apr 3, 2009

* Source says Ford Canada cannot afford CAW-GM deal
* Says would create $10/hr gap with Ford's U.S. operations
* Says Ford Canada's legacy costs amount to C$15 an hour (In U.S. dollars unless noted.)

By John McCrank

TORONTO, April 3 (Reuters) - Ford Motor Co's Canadian arm won't accept a labor deal that mirrors an agreement struck by General Motors of Canada because the package fails to go far enough in slashing "legacy" costs for retired workers, a source said on Friday.

If Ford were to accept the pattern set by the GM deal, it would cost Ford $10 a hour more in labor to build a car in Canada than in the United States, said the source, who is familiar with Ford's plans.

"Ford is really interested in any ideas in getting at the legacy cost issue in Canada and doing so quickly," said the source, who asked not to be named due to the sensitivity of the situation.

The Canadian Auto Workers, which is expected to begin talks with Ford soon, has reopened its three-year collective agreements with the Canadian arms of GM and Chrysler reached last May to help them qualify for emergency loans from the governments of Canada and the province of Ontario.

The union said it would offer the same savings to Ford, which has not asked for government aid, and still has no plans to do so, said the source.
Chrysler is currently negotiating with the CAW, while the union has yet to set a date for formal talks with Ford.

GM struck a deal with the CAW on March 11 that the company said would permanently cut nearly C$1 billion ($813 million) from its books related to so-called legacy costs for its nearly 12,000 hourly retirees in Canada. That is on top of cuts of around C$7.25 an hour to active labor costs.

If Ford were to apply the GM-CAW deal to its operations, total labor costs would add up to about $61 and hour for each of its nearly 7,000 unionized Canadian employees, the source said.

In the United States, the company will see its per-hour labor costs fall to about $55 an hour this year, and down closer to $50 an hour by 2011, due to a new cost-cutting agreement with the United Auto Workers union.
Total compensation at Ford includes hourly wages, benefits, pension costs, insurance, and other factors.

To account for the lower value of the Canadian dollar compared the the U.S. dollar in its wage comparisons, Ford assumes one Canadian dollar equals 82 cents.

Legacy costs make up about C$15 of Ford Canada's labor costs, the source said. They include pensions and other post-employment benefits, like prescription drug plans, long-term healthcare and dental care. Those costs are paid to retirees, but the company also accrues them on an accounting basis for future retirees.

LEGACY COSTS = 15,000 CARS

Looking at it another way, Ford has to sell about 15,000 vehicles a year to cover legacy costs. In 2008, Ford Canada sold 211,060 vehicles.
"Fifteen thousand is a lot of vehicles to cover just legacy payments to employees," the source said.

If the Ford Canada were to accept the CAW-GM deal, its legacy costs would fall to C$12 an hour.

The company will aim to further reduce those costs in its negotiations with the union in a way that has minimal impact on employees, the source said.
In some cases that will mean allowing current retirees to hang on to their benefits, while eliminating overlap in funds the company has to set aside for active workers.

The source said one change to the long-term care benefit could reduce legacy costs by a further 26 percent.

Specifically, the company would no longer cover the living expenses of pensioners who are in nursing homes, but it would continue to pay their pensions, which the source said are almost equal to the average industrial worker. Currently, the company does both.

General Motors' new chief says worker concessions in Canada already make the teetering automaker competitive despite government calls for more labour cost cuts in exchange for public aid.

Fritz Henderson, who replaced Rick Wagoner as chief execeutive officer, said yesterday the company will consider requests made by federal and Ontario politicians but added that the concessions meet their needs.

"What we need is to understand exactly what the Canadian government would like us to achieve, further beyond what's been achieved," he told reporters in Detroit.

Meanwhile, Ontario Premier Dalton McGuinty echoed calls by other ministers yesterday by saying workers, retirees, dealers and other stakeholders in GM and Chrysler still need to "do more" to qualify for more than $9 billion in loans.

"We are not there yet," McGuinty said. "The parties have to go back, they have to do more work in and among themselves, and they have to do more to get costs down."

GM of Canada workers unanimously voted for concessions recently that will lower hourly labour costs including benefits by about $7.25 to $63 an hour.

The Canadian Auto Workers is negotiating with Chrysler for the same concessions but the two sides are in a deadlock, with the company insisting on more cuts to fall in line with Asian companies' costs. The union has said its labour costs are competitive at GM, and GM has also agreed.

However, the governments want the union and companies to lower so-called "legacy" or post-retirement obligations which have pushed up costs significantly.

But the union has stressed that the problem needs changes in federal tax and provincial pension legislation

"It's a competitive disadvantage to Canada that we don't have a way to pre-fund retiree health benefits like they do in the U.S.," said CAW economist Jim Stanford. "There is no possibility of that without changes in tax law."

Stanford said if a company sets aside funds for retiree benefits, it can't deduct contributions from income tax.

Furthermore, the Ontario government created a provision years ago that allowed GM to fund its pension obligations at lower levels, a ruling that contributed to the current burden.

Stanford said the Ontario government needs to find a way to resolve this issue and assure adequate funding.

"There should be some urgency," said Stanford. "A lot more needs to be done. It's a big challenge.

"Anyone in government that thinks they can sit back while this is resolved at the bargaining table is setting us all up for a very rough road ahead. To get a solution on legacy costs, the governments will have to be fully engaged."

Like the U.S. government, the federal and Ontario governments are giving GM and Chrysler 60 and 30 days respectively to fix restructuring plans so they can qualify for more aid.

Governments on both sides of the border rejected the automakers' plans. U.S. President Barack Obama described their sales and market projections as unrealistic and lacking vision.

The federal and Ontario governments say they have provided Chrysler with $1 billion to temporarily fund operations and are on the verge of sending $3 billion to GM.

Henderson said U.S. demands in exchange for more aid will mean GM will close more plants and offer additional employee buyouts.

GM operates two major assembly plants in Oshawa, a parts complex in St.Catharines and a transmission operation in Windsor. It is closing one Oshawa plant next month and the Windsor operation next year.

Henderson also raised the possibility of seeking bankruptcy court protection for a brief period to deal with the company's problems.

So, Rick Wagoner, the suddenly retired CEO of General Motors Corp., drives off into the sunset with a pension package worth an estimated $23 million (U.S.). But given the brutal shape in which he leaves the behemoth, does he deserve it?

Observers say it's positively galling to watch the top executive walk away from a company teetering on the brink of bankruptcy with a fat payout.

"It's unconscionable," said Ken Lewenza, president of the Canadian Auto Workers union. "During these times, it is morally and ethically wrong to hand out this kind of package. It should be tied to the performance of the company.''

CAW secretary-treasurer Jim O'Neill agreed that "it's just not right, and people don't understand it when workers are losing their jobs, and yet, he failed to bring the company back to recovery.

"It's a great golden handshake, but he's not going to get a lot of support for it in these times," he added.

"Not only are the optics not good, they're awful," said Rick Powers, executive director of MBA programs at the Rotman School of Management.

GM and Chrysler have received $17.4 billion in publicly funded loans south of the border to prop up the ailing companies.

"In terms of his (years of) service-related pension, I have no problem with that," Powers said, noting Wagoner is entitled to it after a 31-year career at GM, including eight years at the helm.

"But in terms of his performance-based compensation, the company should be scrutinizing his record," he said, noting that the share price has plummeted on his watch and the automaker has almost gone under.

While Wagoner's retirement bundle looks bad to U.S. taxpayers, Powers thinks GM's hands are probably tied, since companies that negotiate these sweet deals to attract top-flight executives are contractually obligated to honour them.

"It's becoming a fairly major issue," said executive compensation expert Ken Hugessen of Hugessen Consulting in Toronto. "The public mood is so negative."

GM said Monday it was still reviewing the specifics of Wagoner's compensation. He won't get a severance payment and his retirement package is not guaranteed if GM goes under. He accrued pension benefits the company valued at $22.1 million at the end of last year. The actual amount Wagoner will receive could vary though because it will be paid in instalments over the rest of his life.

Wagoner, 56, is also entitled to $366,602 in unvested stock awards and $534,627 in deferred compensation as of Dec. 31, according to GM's annual report.

The ex-CEO also gets to keep about 3 million stock options that allow him to buy GM shares at prices ranging from about $20 to $76. With GM's stock price now less than $3 per share, however, the options have little value unless the stock price reaches those levels before the options expire.

With files from Star wire services

CAW Responds to Auto
Restructuring Announcements

 
The following is a summary of the statement from CAW President Ken Lewenza, regarding the March 30th auto restructuring announcements from both the U.S. and Canadian governments. In the statement, Mr. Lewenza:
 
● Endorses the proposed merger between Fiat and Chrysler, pending adequate guarantees for Canadian Chrysler operations;
 
● Supports proposals for governments to backstop Chrysler and GM warranties, and stimulate new vehicle sales with a scrappage incentive and more easily available credit;
 
● Indicates the CAW’s willingness to continue bargaining with Chrysler Canada Inc. to reach a new contract;
 
● Notes that legacy cost challenges regarding pensions and health benefits for retired workers cannot be resolved in contract bargaining.  In fact, pension legislation does not allow pensions earned by past retirees to be retroactively cut;
 
● Rules out re-opening the just-concluded contract agreement with General Motors Canada Ltd., which will come into effect as soon as government bridge financing begins flowing to that company.
 
To read the full statement, please visit: http://www.caw.ca/en/7176.htm
 
No Need to Reopen CAW/GM Agreement, GM CEO says
 
Fritz Henderson, the new CEO of General Motors, says the company doesn’t need to reopen its labour agreement with the CAW.

During his first press conference since taking over at the helm of GM, Henderson said March 31 the new agreement makes GM’s Canadian workforce “fully competitive with the UAW.”

The new labour agreement was accepted by 87 per cent of members at ratification meetings held over two days in early March. “We got great support from (CAW President) Ken Lewenza and the CAW in terms of becoming more competitive,” Henderson was quoted in the Windsor Star.
 
In a statement on March 30 following the Canadian and U.S. government announcements regarding auto restructuring, Lewenza ruled out the need to reopen the recently ratified CAW restructuring agreement with GM.

It's cruel and unusual punishment, the way Ontario cabinet ministers dance around the topic of pension guarantees for auto workers.

The U.S. and Canadian governments want General Motors and Chrysler to cut labour costs, knowing a major portion of those costs are tied to pensions for tens of thousands of retirees.

Yet they also know pension laws prevent companies from slashing or negotiating reductions to benefits that have already been earned. To do that, the sponsoring company has to declare bankruptcy or restructure with court protection.

The governments are only prepared to extend loans to the automakers if they can come up with a workable survival plan. And Canada's Industry Minister, Tony Clement, insisted yesterday the loans "are not to ... pay unfunded – under funded – pension liabilities."

So, with bankruptcy still a strong possibility, cabinet ministers ought to know that every GM and Chrysler retiree and older worker is wondering what will happen to their pension benefits.

Everyone knows pension funds are not in good shape these days. In Canada, due to the meltdown of stock, real estate and corporate bond prices in the past year, the automakers' pension funds would be short anywhere from a quarter to half of the money needed to pay benefits.

That's where pension guarantee plans are supposed to come in to play. Ontario's Pension Benefits Guarantee Fund is intended to protect against any shortfall in the first $12,000 per year of eligible pension benefits.

That's much less generous than the guarantee in the United States, but at least Ontario retirees could take some comfort if they knew what their government would do if the automakers did have to seek bankruptcy protection.

The guarantee fund is in deficit, and could require as much as $4 billion to cover claims from both hourly and salaried retirees and workers at GM and Chrysler, independent actuary Paul Duxbury estimates.

Current regulations say the fund has no liability to pay new claims if it has no money, and the plan is already in deficit. But in the past, the government has loaned money to deal with claims over Massey Ferguson and Algoma Steel pensions. It loaned money to Stelco on condition the company stepped up funding to its pension plans.

But a loan of $4 billion or more would impose a heavy burden on sponsors of other pension plans that pay the premiums that support the guarantee fund. Last year, GM paid $10 million of the $32 million in premiums collected.

Both Ontario Finance Minister Dwight Duncan and Economic Development Minister Michael Bryant, when asked about the government's position on pensions, referred reporters to last week's budget document.

The budget proposes to amend the Pension Benefits Act to clarify that the guarantee fund is to be self-sustaining and independent (no change there). The government would have the flexibility to make grants (as opposed to loans), but it would not be required to make either grants or loans.

So all Duncan and Bryant are saying is the government will permit itself to help, but may not help, and it really wants the guarantee fund to be self-sufficient.

"I think it would be an enormously significant thing if they decide that somehow people who are retired and have done their service are on the chopping block," pension lawyer Murray Gold says.

If that's what the ministers intend, they should say so. If not, have a heart.

CAW balks at further givebacks


`Reopening our contract yet again would make no difference,'
CAW president Lewenza says

Ottawa and the province have told teetering General Motors and Chrysler to fix their restructuring plans to qualify for billions of dollars in aid, but the Canadian Auto Workers union says it won't offer any more help.

In an escalating corporate drama with thousands of jobs at stake, the CAW insisted yesterday workers have already accepted concessions that will make GM competitive and the union is willing to support the same labour cost cuts at Chrysler.

"We are not going to reopen our collective agreement with General Motors ... one more time," CAW president Ken Lewenza said.

"We did it once 10 months ago and we did it again one month ago. Reopening our contract yet again would make no difference whatsoever to the situation faced by the industry."

His remarks came after the federal and Ontario governments rejected restructuring plans from the two companies that would help them secure more than $9 billion in critical loans.

The governments told the companies to rework their plans to include more realistic estimates of future annual sales and market share. At the same time, the governments offered $3 billion to GM and $1 billion to Chrysler in interim bridge loans.

In the case of Chrysler, federal Industry Minister Tony Clement said the company needed $250 million immediately because it wouldn't be able to pay workers without the funds.

"If the money had not been forwarded today, they would not have been able to meet payroll ... tomorrow," he said in underlining the company's dire situation.

Earlier in the day, U.S. President Barack Obama gave Detroit-based GM Corp. 60 days to submit a better plan and confirmed that Rick Wagoner, the company's chief executive officer, would "be stepping aside" after more than eight years. A GM regulatory filing shows Wagoner may be eligible for pensions valued at $20.2 million (U.S) as of the end of 2008.

Obama also said Chrysler must negotiate a merger with Italian car giant Fiat or another partner within 30 days or it won't get any further aid.

The two companies have already received $17.4 billion south of the border.

In Canada, the impasse between the union and automakers could become a major stumbling block to the companies getting more critical loans here, although Lewenza noted active labour costs represent only 7 per cent of production expenses.

Finance Minister Jim Flaherty suggested more cuts in labour costs are imperative to receive public aid and make the companies viable over the long term.

"I encourage the union leadership very seriously to go back and speak with the management people in the companies," Flaherty told reporters in Ottawa. "This isn't about collective bargaining. This is about saving thousands of jobs in Ontario and in Canada. This is a very serious situation."

The two governments want the companies to address their huge post-retirement obligations, or so-called legacy costs, but Lewenza stressed the union could not alter those commitments because of pension legislation.

"And even if we could, we wouldn't," said Lewenza, adding that it would be grossly unfair to retirees.

Lewenza said the union would discuss some form of an independent trust fund, which could offload medical expenses and cap corporate costs, but it needs co-operation from the companies and government.

"There are ways to address these issues, going forward," he said.

"But it can't be done at the bargaining table and that's why there's no reason for us to go back to the bargaining table again with General Motors."

Beyond concessions, the issue of legacy costs and what to do with the crippling financial burden, particularly at GM, has become one of the most difficult problems for all sides in trying to save the automakers on both sides of the border.

"We were faced with this choice of a disorderly bankruptcy where, quite frankly, if liquidation had been the result of that bankruptcy, whole plants or parts of plants could have been ripped up from Canadian soil, transferred to another country – India, China, who knows? And obviously, the jobs would have gone with them," Clement added. "That was the stark choice that we were faced with."

Obama delivered a similar message – with identical deadlines and similar conditions – to the parent companies and scolded them for submitting unrealistic plans.

Clement said he agreed with Obama that bankruptcy court protection is a possibility that must be considered.

Ontario Minister of Economic Development Michael Bryant said the GM-CAW deal would not be enough to satisfy the government.

"The auto sector of the future will initially be smaller and it will mean less production and fewer jobs than in the past," Bryant said.

"What we are doing today allows for the possibility of that future."

Conditions for accepting the bridge loans in Canada include: repaying automotive suppliers in a timely manner; imposing limits on compensation for Canadian executives; funds cannot be used to pay taxes owed; borrowers must provide regular reports to the government and officials from both levels of government must have unimpeded access to records.

In the U.S., Obama said the government's Internal Revenue Service will introduce a new benefit until the end of the year on new auto purchases that will allow consumers to deduct the costs of any sales and excise taxes. Governments here are not offering such an incentive but Obama's move could benefit Canada because Ontario exports 85 per cent of its auto output to the U.S.

The U.S. government is also backing auto warranties for the two auto companies in a sign of confidence. Governments here say they are also considering such a move.

Obama sets hard road
for U.S. automakers

By Sheldon Alberts, Washington Correspondent, Canwest News Service

March 30, 2009

U.S. President Barack Obama makes an announcement at the Grand Foyer of the White House Monday in Washington, DC. Obama unveiled the details of his administration's plan on dealing with the auto industry crisis.

WASHINGTON — President Barack Obama on Monday rejected requests from General Motors and Chrysler for an immediate U.S. government bailout, instead ordering the two ailing automakers to draft more radical restructuring plans in order to justify further taxpayers' assistance.

In a hardline response that took many in the auto industry by surprise, the White House said bankruptcy might be the best option for GM and Chrysler unless the two companies take far more drastic efforts to curb costs and revitalize their brands.

Obama has set a 60-day deadline for GM to complete a new business plan, and said the U.S. government would provide "adequate working capital" for the company to continue operating during that time. He said Chrysler must strike a merger deal with the French carmaker Fiat within 30 days as a condition for $6 billion in new U.S. aid.

Speaking at the White House, Obama said his administration has "worked closely" with the Canadian government on assessing the future of both GM and Chrysler.

"The Canadian government has indicated its support for our approach," Obama said.

His remarks came just a day after the depth of White House hesitance about providing another auto industry was made evident with its demand for the resignation of GM CEO Rick Wagoner.

"This is not meant as a condemnation of Mr. Wagoner, who has devoted his life to this company," Obama said. "Rather, it's a recognition that it will take a new vision and new direction to create the GM of the future."
U.S. stock markets plunged Monday morning amid concerns about the extent of government intervention in — and control over — the auto industry, with the Dow Jones industrial average down 260 points even before Obama outlined the conclusions of a White House auto task force.

Despite making a "good faith" effort to restructure in recent months, "our auto industry is not moving in the right direction fast enough to succeed," Obama said.

Neither GM nor Chrysler has gone "far enough" to curtail costs and revamp their operations to merit the $22 billion U.S. in new aid they have requested. While offering reassurance the U.S. government "will not let our auto industry simply vanish," Obama said its day of reckoning had finally arrived.

"Year after year, decade after decade, we have seen problems papered-over and tough choices kicked down the road, even as foreign competitors outpaced us," Obama said. "Well, we have reached the end of that road and we, as a nation, cannot afford to shirk responsibility any longer. Now is the time to confront our problems head-on and do what's necessary to solve them."

Obama said members of his auto task force would be working in tandem with GM on restructuring its $28 billion in debts and developing a "credible model" for survival, thrusting Washington into the centre of the company's decision making.

"Let me be clear: the United States government has no interest or intention of running GM," Obama insisted. "What we are interested in is giving GM an opportunity to finally make those much-needed changes that will let them emerge from this crisis a stronger and more competitive company."

He cast Chrysler's challenges in even bleaker terms, saying it was "with deep reluctance but also a clear-eyed recognition of the facts" that the White House has concluded the company needs to complete a merger with Fiat to stay in business.

"Fiat is prepared to transfer its cutting-edge technology to Chrysler and, after working closely with my team, has committed to building new fuel-efficient cars and engines here in America," Obama said. "We have also secured an agreement that will ensure that Chrysler repays taxpayers for any new investments that are made before Fiat is allowed to take a majority ownership stake in Chrysler."

Because of several remaining hurdles to a Fiat-Chrysler merger, Obama said his administration has given the companies another 30 days to conclude a deal "and we will provide Chrysler with adequate capital to continue operating" through April.

"If they and their stakeholders are unable to reach such an agreement, and in the absence of any other viable partnership, we will not be able to justify investing additional tax dollar to keep Chrysler in business," Obama said.
© Copyright (c) Canwest News Service

GM RATIFICATION
VOTING RESULTS

The results by location are as follows:

CAW Local 222, Oshawa
Production: 86% in favour
Skilled Trades: 80% in favour
Combined total: 84% in favour

CAW Local 1973, Windsor
Production: 91% in favour
Skilled Trades: 95% in favour
Combined total: 92% in favour

CAW Local 199, St. Catharines
Production: 91% in favour
Skilled Trades: 93% in favour
Combined total: 91% in favour

CAW Local 636, Woodstock
Production: 76% in favour
Skilled Trades: 60% in favour
Combined total: 75% in favour

Combined Production: 87% in favour
Combined Skilled Trades: 86% in favour

WASHINGTON/PARIS – The Obama administration seized the wheel of the failing U.S. auto industry on Monday, forcing out General Motors Corp's CEO, pushing Chrysler LLC toward a merger and threatening bankruptcy for both.

GM shares plunged around 20 per cent in Frankfurt after steps outlined by the White House autos panel marked a stunning reversal for management at both GM and private equity-owned Chrysler.

The moves came after Europe's second-biggest carmaker by sales – PSA Peugeot Citroen – ousted CEO Christian Streiff, replacing him with former Corus head Philippe Varin from June 1.

The Obama administration pledged only to fund GM's operations for the next 60 days while it develops a sweeping restructuring plan, instead of granting GM's request for up to a further $16 billion (dollar figures U.S.) in loans.

GM CEO Rick Wagoner, who had presided over the company's rapid decline in the past five years and had run the automaker since 2000, was forced out at the request of the autos panel headed by former investment banker Steve Rattner. A majority of GM's board will also be replaced.

"We are left to look back and say that Wagoner's appointment as both chairman and CEO in 2003 was little more than an act to ensure the dynasty of GM boardroom arrogance and failure continued," said Howard Wheeldon, senior strategist at brokerage BGC Partners.

Wheeldon said Wagoner's departure had been all but inevitable since the automaker sought government funds and said he was disappointed the authorities had not insisted on an external replacement.

UNDER FIRE

Wagoner protégé and GM President and Chief Operating Officer Fritz Henderson was named as new CEO. Wagoner's departure came as the Obama administration came under fire for not blocking bonuses to executives at American International Group Inc.

The senior labour leader of GM's German brand Opel, being spun off with the UK's Vauxhall and seeking investors and government support, said the move was overdue.

In Europe, auto stocks fell on concerns about the broader industry impact of the failure of a major U.S. producer. The DJ Stoxx European autos index fell 6.4 per cent by mid morning, while PSA Peugeot Citroen fell 7.7 per cent.

In France PSA Chairman Thierry Peugeot said in a statement the exceptional difficulties faced by the industry warranted a change in management, but Streiff defended himself saying his policies had equipped the group to weather the storm.

Some analysts viewed the appointment of Philippe Varin as positive.

"It brings somebody in that can look at the problem with fresh eyes. The hope will be that he will have a similar impact here to the impact (Sergio) Marchionne had at Fiat, and indeed Varin had at Corus," said Credit Suisse analyst Stuart Pearson.

Elsewhere, Russia's Avtovaz bucked the trend, its shares surging after Prime Minister Vladimir Putin pledged 20 billion roubles in aid, while Spain's plan to grant subsidies for green cars won approval from the European Commission.

Chrysler, controlled by Cerberus Capital Management, was given 30 days to complete an alliance with Italy's Fiat or face a cut-off of its government funding that could force its liquidation.

Fiat was not immediately available for comment.

The autos panel rejected a claim by Cerberus that Chrysler could be viable on its own, citing its relatively small size, weak product line-up and declining U.S. market share.

AGGRESSIVE RESTRUCTURING

If Chrysler can complete a tie-up with Fiat and cost-saving deals with creditors and its major union, the Treasury would consider investing up to another $6 billion, officials said.

U.S. officials said there had been progress in recent negotiations involving the task force. Fiat had agreed to take less than the 35 per cent stake in Chrysler the two companies had first negotiated, the senior official said.

Meanwhile, Henderson, a key architect of GM's now-rejected turnaround plan, was charged with working with U.S. officials and advisers to develop a more aggressive restructuring.

"We believe our approach to GM is starting with a clean sheet of paper," the senior official said.

GM bondholders, the official said, could have to take less than the 33-cent-on-the-dollar payout they have been offered and should abandon hope of a government guarantee.

The Obama administration had also not ruled out a quick bankruptcy process for either GM or Chrysler, he said.

Wagoner had been outspoken in his opposition to a Chapter 11 reorganization, saying it would drive away consumers and probably lead to GM's liquidation.

GM had asked for more than $16 billion in new government loans, while Chrysler wanted $5 billion to ride out the weakest market for new cars in almost 30 years.

GM has lost about $82 billion since 2005 when its problems began to mount in the U.S. market. GM stock has also lost about 95 per cent of its value since Wagoner took over as CEO. Although he inherited many of the company's deeper problems, his critics say he failed to act fast enough to resolve them.

White House asked GM
chief to step down
By THE ASSOCIATED PRESS  March 30, 2009

General Motors Chairman and Chief Executive Rick Wagoner. THE ASSOCIATED PRESS/Carlos Osorio

DETROIT - General Motors Corp. chairman and CEO Rick Wagoner will step down immediately at the request of the White House, U.S. administration officials said Sunday. The news comes as President Barack Obama prepares to unveil additional restructuring efforts designed to save the domestic auto industry.

The officials asked not to be identified because details of the restructuring plan have not yet been made public. On Monday, Obama is to announce plans to restructure GM and Chrysler LLC in exchange for additional government loans. The companies have been living on US$17.4 billion in government aid and have requested US$21.6 billion more.

Canadian Auto Workers president Ken Lewenza called the move shocking and said it makes Canadian workers nervous. Wagoner's departure is unfortunate because he is a "car man" and given the troubles that GM is facing, now is not the best time for a shakeup at head office, Lewenza said.
The fact the White House said it orchestrated Wagoner's departure is even more disappointing.

"It would reflect a lack of confidence in the business plan of General Motors," Lewenza said.

"Why else would Rick Wagoner be encouraged to leave?"

Wagoner's departure indicates that more management changes may be part of the deal, but it is still unclear who will be put in charge of GM. The automaker recently promoted Fritz Henderson, its former chief financial officer, to become president and chief operating officer. Many in the company thought he would eventually succeed Wagoner.

A person familiar with Chrysler's management said the company has been given no indication that the government will require any changes at the Auburn Hills, Mich., company, which has been led by former Home Depot chief Robert Nardelli since August 2007. The person also spoke on condition of anonymity because Obama's plan has not been made public.

Wagoner, 56, joined the company in 1977, serving in several capacities in the U.S., Brazil and Europe. He has been chairman and chief executive since May 1, 2003.
Obama said Sunday that GM and Chrysler and all those with a stake in their survival need to take more hard steps to help the struggling automakers restructure for the future.

In an interview with CBS' "Face the Nation" broadcast Sunday, Obama said the companies must do more to receive additional financial aid from the government.
"They're not there yet," he said.

A person familiar with Obama's plans said last week they would go deeper than what the Bush administration demanded when it approved the initial loans last year.
The departure, combined with the release of the Obama administration's restructuring plan for GM and Chrysler, are making Canadian workers extremely nervous about the future, Lewenza said.

"That just puts all of us on more pins and needles," he said. "It leaves us all in this...emotional state of what happens next?"

"I never ever thought the White House or the Parliament of Canada could manage and operate an automobile company."

Wagoner, in an interview with The Associated Press in December, declined to speculate on suggestions from some members of Congress that GM's leadership team should step down as part of any rescue package.

"'I'm doing what I do because it adds a lot of value to the company," Wagoner said in a Dec. 4 interview as GM sought federal aid from the Bush administration. "It's not clear to me that experience in this industry should be viewed as a negative but I'm going to do what's right for the company and I'll do it in consultation with the (GM) board (of directors)."

Wagoner, 56, has repeatedly said he felt it was better for the company if he led it through the crisis, but he has faced sharp criticism in Washington for what many politicians regard as years of missteps, mistakes and arrogance by the Big Three automakers.

Wagoner has been credited by auto industry analysts with doing more to restructure the giant bureaucratic automaker than any other executive. But given that he has been at GM's helm for so long, many of his critics say he moved far too slowly to take on the United Auto Workers and shrink the company as its market share tumbled.

While GM has improved its cars in the last two years, critics say the company relied for too long on sales of pickup trucks and sport utility vehicles for its profits and was unprepared for a drastic market shift when gasoline prices increased last year.
During the Congressional debate over whether to give GM and Chrysler loans last year, many lawmakers criticized Wagoner, including Senator Chris Dodd, chairman of the banking committee.

He accused automakers' top management of having a "head-in-the-sand" approach to problems and said Wagoner "has to move on" as part of a government-run restructuring that should be a condition of financial life support for the auto industry.
David Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich., said Sunday that Wagoner's departure gives the government a rationale to provide additional aid to the automaker. He was not surprised by the move, but said he is disappointed because he considers Wagoner a capable leader.

"I think that as a condition for further government support, this helps give them a little cover with the public," Cole said. "Essentially he's taking one for the team."
Cole noted that other automakers have been shaking up management as well. He pointed to Toyota Motor Corp., whose president, Katsuaki Watanabe, recently said he would be stepping down as the Japanese automaker weathers financial difficulty.
Also, France's biggest carmaker, PSA Peugeot-Citroen, abruptly ousted CEO Christian Streiff on Sunday, saying "exceptional difficulties" confronting the auto industry require new management at the top.

Cole said Nardelli's departure is less likely than Wagoner's because Nardelli is "relatively new" to the automaker, with less than two years at the helm.

Many GM executives likely will be disappointed at Wagoner's departure, Cole said.
"They had great affection for Rick - someone that's fair, that acts like a coach, that holds people's feet to the fire but has a good understanding of human behaviour," Cole said.

GM and Chrysler were required by the Bush administration to get major concessions from debtholders and the United Auto Workers, with a deadline of March 31 for signed contracts. But very little headway was being made with either party this weekend as they awaited Obama's announcement.

Members of Obama's auto task force have said bankruptcy could still be an option for GM and Chrysler if their management, workers, creditors and shareholders failed to make sacrifices. Both companies are trying to reduce their debt by two-thirds and convince the United Auto Workers union to accept shares of stock in exchange for half of the payments into a union-run trust fund for retiree health care costs. The deals also call for executive pay cuts and labour costs that are competitive with Japanese automakers with U.S. operations.

Bondholders have been reluctant to accept the cuts, saying they're being required to sacrifice more than others, but they have been reviewing a recent offer by GM. The union has agreed to other terms of the loans, including work rule changes and reducing total hourly labor costs at U.S factories to a level comparable with Japanese automakers.

Associated Press Writer Ken Thomas reported from Washington, D.C. AP Auto Writer Dan Strumpf contributed from New York.

Talks on labour cost cuts that Chrysler Canada says it needs to survive and get about $2.9 billion in government aid bogged down yesterday .

In an escalating game of brinkmanship, Chrysler stuck to its demands for more concessions than the Canadian Auto Workers recently negotiated with General Motors, while the union insisted it would not budge from that "pattern" deal.

The stalemate came as Chrysler faces a deadline on Tuesday to submit a restructuring plan, including the critical labour cost cuts, to the federal and Ontario governments to qualify for loans.

However, insiders say the deadline may soften as long as the governments see progress. It could easily be extended in light of the high stakes here and in the U.S., where there have also been some delays in completing plans for billions of dollars in public loans for Chrysler's parent.

Chrysler and other automakers are struggling to stay alive because of a crash in North American sales last year.

Chrysler Canada and the CAW presented conflicting views yesterday on their progress, with the union stressing it had been on the cusp of a tentative deal twice in the last two days and the company noting that "significant" issues remain to be resolved.

CAW president Ken Lewenza said the union was close to a deal yesterday morning but Chrysler abruptly sought more changes.

"Two times, we were within inches of a collective agreement," Lewenza told reporters. "Both times, the deal was pulled back. The goal posts shifted. ... I assumed we were close to an agreement. But now we're potentially miles apart."

Lewenza questioned whether Chrysler's majority owner, Cerberus Capital Management, the company's bankers or the U.S. Treasury Department are calling the shots at the bargaining table.

One veteran union negotiator said he had never been more frustrated.

"We're negotiating with people who are not in the room," he said.

At an afternoon meeting, more than 200 local union leaders unanimously supported the CAW's position of rejecting more concessions than GM workers. Their contract calls for a freeze in wages and pensions, elimination of one week off the job annually as well as a $1,700 bonus and increases in costs for health care benefits.

Industry sources say the concessions will reduce overall labour costs, including pensions, by $7.25 an hour to about $68.75 for the next three years.

But Chrysler said in a statement later the two sides had not reached a deal that closes the competitive gap with Honda and Toyota in Canada sufficiently to ensure the company's "immediate viability."

Chrysler, which pegs the labour cost gap at about $19 an hour, reiterated the GM deal is unacceptable and the "pattern" must be broken.

"Although we made progress toward `closing the gap,' significant issues related to the existing `pattern' remain on the table," the company added. "We continue to engage with the CAW to resolve these issues in a responsible manner."

Chrysler declined to comment on what the company would do if it didn't have a ratified deal before the plan's deadline. The union, which represents more than 8,000 Chrysler workers, said it needs a tentative deal by this morning to finish voting in time. Chrysler president Tom LaSorda has suggested the company would pull its operations out of Canada if it didn't get more concessions. But CAW economist Jim Stanford doubts this as the company has a labour cost and productivity edge in Canada and a pullout wouldn't help sales.

The CAW has been unable to reach a restructuring deal with Chrysler to significantly reduce labour costs at the company's three Canadian plants, union President Ken Lewenza said Friday morning.

Chrysler has asked the union to "break the pattern" set by a similar deal agreed to by General Motors two weeks ago, Lewenza said - a departure from traditional collective bargaining that the union is not willing to make.

A deal looked imminent two or three times in the last 24 hours but failed each time. "We were close - we were incredibly close. But they keep moving the goal posts." Lewenza refused to identify the issues keeping the two sides from a deal.

"It's not one issue - they keep multiplying," Lewenza said. "We were inches apart and now we're miles apart. They told me at ten to 11: We're far apart, Ken. We're not inches apart. There are multiple requests . . . that we have to deal with."

The union intends to keep bargaining until the deadline of March 31 set by Canadian and U.S. governments to reduce labour costs to qualify for loan guarantees backstopped by taxpayers in both countries.

Jim Stanford, the union's economist and a member of the bargaining strategy team, said the contract changes already agreed to by the union would give Chrysler significantly higher savings per hour than GM got.

"It's several dollars per hour in addition to the General Motors deal," which reduced GM's total labour compensation costs from $76 per hour, including benefits and pensions, by $7.25 per hour.

Stanford said the union would not comment on "the specific issues" keeping the two sides apart. "It doesn't help to do that blow-by-blow in public."

Lewenza said the contract language changes mean that "the savings we are offering the company are huge. It's the most frustrating bargaining expererience I've ever had with Chrysler. This isn't the same Chrysler bargaining team I've bargained with the last 18 years."

The union intends to stay in the hotel and keep trying for a deal until the deadline runs out on March 31. But there is no chance of a work stoppage when the deadline passes, Lewenza said. There is no strike deadline or lockout provision in the current contract, which is still in force and runs until September, 2011.

The tenative ratification meetings booked for the union's Chrysler locals will go ahead this weekend, but the meetings will be for informational purposes only if no deal is struck by the time the meetings start.

The union starts its meetings with its Brampton and Etobicoke locals at 9 a.m. Saturday. Lewenza said the union meets with Windsor locals 444 and 195 on Sunday.

Tony Van Alphen
BUSINESS REPORTER

The Canadian Auto Workers union says it is making progress and hopes to have a deal on labour cost cuts at Chrysler Canada Inc. today so the struggling automaker can qualify for government aid.

Last night, CAW president Ken Lewenza said negotiators for both sides had reached common ground on a number of points for concessions that would help Chrysler craft a survival plan for the federal and Ontario governments before a Tuesday deadline.

"We are making solid progress and are trying to get it done within the next 24 hours," Lewenza said.

A Chrysler spokesperson could not be reached for comment.

If the two sides reach a tentative deal, the union needs at least three days – possibly four – to prepare for votes by the more than 8,000 employees.

Lewenza reiterated the concessions will match a recent deal at General Motors of Canada Ltd., where the hourly labour costs including future pension expenses will fall by $7.25 during the next three years.

Chrysler, which is seeking about $2.9 billion in loans from the two governments, had said earlier the cost reductions in the GM deal aren't deep enough to make the company competitive with Honda and Toyota in Canada and other rivals in the United States.

The company has also suggested it would pull out of Canada if it doesn't get further cost cuts.

S.O.S

Save Our Severance

THE CANADIAN PRESS
March 23, 2009

A call Monday for provincial action on severance pay for autoworkers was deflected by Ontario Premier Dalton McGuinty, who said the federal government must do more on the issue.

Members of the Canadian Auto Workers union held the first of three planned rallies to call on the province to use this week's budget to introduce strong protection provisions for severance pay.

"When workers lose their jobs, they are entitled to get severance pay, vacation pay, termination pay – this is written in law," CAW official Peggy Nash told fellow demonstrators.

"But workers are not getting this pay, so we're here today to say to the minister of labour: Workers want the pay that they're entitled to. It ought to be protected by law."

Several workers at the rally, held outside the Mississauga constituency office of Ontario Labour Minister Peter Fonseca, wore life preservers around their necks emblazoned with "Save Our Severance."

The union wants a provincial wage-earner protection program that would provide additional protection on top of the federal program.

January's federal budget extended that program to cover severance and termination pay, subject to the current maximum of four weeks of insurable earnings of $3,254. The change will help ensure that workers losing their jobs because of a bankruptcy will receive some of the money owed to them.

McGuinty agreed that something must be done for severances in general.

"If we're talking about severances generally, for a number of folks who've lost their jobs in recent months particularly because of this recession, there is something that can, and which I agree, should be done," McGuinty said Monday.

"The federal government should change its bankruptcy legislation so it gives preferred creditor status to ordinary men and women who are workers."

As it stands, banks and insurance companies rank ahead of workers, McGuinty added.

"We've misplaced some of our priorities, especially in difficult times like these, when we're not talking about corporate profit so much as we're talking about the ability to put food on the table for the kids."

The major automakers have been negotiating with the CAW, calling for significant concessions in wages and benefits so the companies can remain competitive.

The union plans to hold similar protests Tuesday at the Labour Ministry offices in Toronto, and at the provincial legislature Wednesday.

Last week, members of the Canadian Auto Workers blockaded two parts plants in Windsor, Ont., saying they wanted fair back pay and severance.

Eighty workers were laid off at the Aradco and Aramco plants, both owned by U.S.-based Catalina Precision Products, which supplies Chrysler.

The automaker struck a deal with the workers, giving them a total of $400,000 to end the blockades and allow the company to retrieve its equipment and tools.

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

As more and more Ontario workers lose their jobs, far too many are also experiencing the tragedy of being denied their severance and other monies owed to them by their employer.

The CAW is calling on the government to develop a provincial wage earner protection program, that is integrated with the existing federal initiative, applies to all severance and separation monies owed, provides significant additional protection on top of the federal program and applies to all insolvencies and 'run away' employers.

Ford bracing for big
loss on Volvo sale

Ford Motor Co. may get $1 billion (U.S.) to $2 billion for its Volvo Cars unit, less than a third of what it paid 10 years ago, as it conducts sale talks with more than three bidders, a person familiar with the discussions said.

Shedding the Swedish firm, maker of the Volvo S80, right, and the last piece of Ford's failed strategy to boost profit with European luxury brands, may take six months to complete, said the person, who asked not to be identified because negotiations are private.

The person wouldn't name the potential buyers.

Ford confirmed talks with multiple "interested parties" in a statement yesterday that didn't cite names or a specific number of prospective buyers for Gothenburg, Sweden-based Volvo.

Ford, the second-largest U.S. automaker, is "pleased with the numbers and quality" of possible bidders, and "is now talking in more detail," according to the statement.

Discussions are furthest along with China's Geely Automobile Holdings Ltd., people familiar with the matter have said. Ford has also approached China's Chery Automobile Co. and Chongqing Changan Automobile Co., the people said.

Ford is expected to take a loss on the sale because the global auto market has slumped so much since 1999, when Volvo was purchased for $6.4 billion, according to the person familiar with the likely price range.

Volvo recorded a fourth-quarter, pre-tax loss of $736 million as its revenue fell 35 per cent to $3.3 billion.

General Motors of Canada Ltd. says it has slashed annual costs by more than $1 billion and future obligations by almost another $1 billion as the company seeks one of the biggest government aid packages in Canadian history.

The teetering auto giant reveals in a recent letter to a federal government committee that it has reduced operations and cut salaried employee expenses by more than $1 billion annually during the last few years.

Furthermore, company president Arturo Elias said in the letter that recent concessions by active workers in pay, benefits and pensions will cut future obligations to them by almost $1 billion.

On top of the union concessions, Elias said the company's executives have taken a 10 per cent salary cut and there will be no bonuses.

Elias said under the company's restructuring plan, it would sustain 17 per cent to 20 per cent of its North American production in Canada.

He said new investments in the country would include six new vehicle launches, including the first hybrid cars produced by any automaker in Canada.

GM has asked the federal and Ontario governments for more than $6 billion in loans. South of the border, parent GM Corp. has received aid and requested more money that could reach up to $30 billion (U.S.).

In Canada, GM has consolidated two car-assembly plants in Oshawa into one operation and plans to close a truck factory in May. It is also shutting down a transmission plant in Windsor next year.

Earlier this month, GM of Canada production workers, who are members of the Canadian Auto Workers union, overwhelmingly ratified concessions that freeze wages, increase benefit costs and reduce retiree expenses. However, implementation of the concessions depends on the company getting government aid.

"Through changes to our business model and salaried worker cost reductions we will be able to make over a billion dollars in annual reductions to our operational and structural costs," Elias said in the letter last week.

"Now, in addition to that, with the new ratified CAW agreement, active hourly costs will now be comparable with our U.S.-based competition and our legacy costs and obligations in Canada will be significantly reduced."

Elias described the cuts in retiree obligations as "unprecedented," pointing to the "permanent removal" of indexing, which protects monthly pensions from inflation.

He also noted a freeze in other escalating expenses such as dental costs and new worker contributions for health care.

Meanwhile, negotiations resumed again yesterday for worker concessions at Chrysler Canada, which is seeking about $2.9 billion (Canadian) in loans from the federal and Ontario governments. Talks stalled last week when the two sides could not agree on labour costs.

Chrysler and GM have until next Tuesday to submit restructuring plans to the two governments.

The union wants Chrysler to accept the same concessions GM workers did under so-called pattern bargaining. But Chrysler says it needs much bigger cuts in labour costs to stay competitive.

"We'll know in the next day," CAW president Ken Lewenza said.

With files from Reuters News Agency

Negotiators for Chrysler Canada and the Canadian Auto Workers will likely hold talks today on labour cost cuts that the company needs before a March 31 deadline so it can qualify for government aid.

The two sides cancelled a meeting in Toronto yesterday when the company's top negotiator could not attend because of other pressing issues in Detroit, according to CAW president Ken Lewenza. Negotiators need to reach a tentative deal on concessions before the weekend so workers can vote by next Tuesday's deadline. The federal and Ontario governments have set that date for Chrysler and GM to submit survival plans, which include lower labour costs.

The union wants Chrysler to match an earlier deal at General Motors of Canada that cuts labour costs by about $7.25 an hour during the next three years. GM says that will help it stay competitive under a survival plan and qualify for more than $6 billion in loans from the two governments.

Chrysler says the GM deal is unacceptable and it needs more savings to compete and to qualify for about $2.9 billion in loan

Chrysler, CAW start concession
talks as loan deadline looms

Car maker needs deal to get government aid

Mar 23, 2009

Chrysler and the Canadian Auto Workers will begin talks today aimed at reaching an agreement on worker concessions in advance of a looming deadline for the troubled automaker to receive billions in emergency loans.

Chrysler needs to submit a finalized restructuring plan to the federal and Ontario governments by March 31 to qualify for the money.

CAW president Ken Lewenza called the talks "a matter of urgency."

"We don't believe it's in the interest of our members or in the interest of consumers for this uncertainty of the industry to prolong itself much longer," he said yesterday in an interview.

The two sides appear to be heading into negotiations with widely varying ideas on what the agreement should entail. Lewenza said the union will ask Chrysler to accept a deal similar to one reached with General Motors of Canada earlier this month.

But Chrysler president Tom LaSorda has described that agreement as "unacceptable" and has raised the spectre of a complete pullout from Canada if the company doesn't get what it needs from workers and the government.

The Canadian Press

Toronto Star

Negotiations for worker concessions at Chrysler and Ford that are necessary for the automakers to receive billions of dollars in government aid remain in a deadlock, says union leader Ken Lewenza.

"We're not on the same page," Lewenza, national president of the Canadian Auto Workers said late yesterday. "We're still miles apart."

The union wants the two struggling automakers to match concessions that workers approved at General Motors more than a week ago.

But Ford and Chrysler officials say the wage freezes and benefit cuts at GM are not enough to make them competitive with rivals here and in the U.S.

Lewenza said the parties will not hold any meetings this weekend but "exploratory talks" may start Monday.

"I'm really disappointed," he said. "I thought we would have this wrapped up by now.'

A spokesperson for Chrysler said there were no new developments. Ford officials could not be reached for comment.

Negotiators for the union and Chrysler have been unable to discuss a "pattern" contract that matches GM because they are still disputing the current average value of existing hourly labour costs.

People who are familiar with the negotiations say concessions at GM would reduce hourly labour costs including benefits for active workers by about $7.25 to $68.75 until 2012. The concessions are contingent on GM receiving government aid.

Chrysler says it needs to slash labour costs by $19 an hour to complete with Toyota and Honda in Canada.

GM is seeking more than $6 billion from the federal and provincial governments, Chrysler is asking for about $2.9 million, and Ford is requesting a $2 billion standby line of credit if necessary.

The governments have set a March 31 deadline for approval of restructuring plans from GM and Chrysler.

With pensions and the survival of major companies both hanging in the balance, union leaders, frightened retirees and their advocates are pleading with Ottawa not to relax permanently its pension security rules.

The request comes after a group of major employers asked Ottawa to double the amount of time allowed to top up underfunded pension plans to 10 years and to use a method of calculation that would reduce the size of reported deficits.

"You will ensure (pensions) are never fully funded," Air Canada pilot and association chair Paul Strachan warned yesterday at a public consultation session with sparse representation from employers.

Several speakers also took jabs at executives' ethics, multi-million-dollar bonuses and the decisions they took in good times that favoured shareholders and themselves over employees' retirement income rights.

Those rights are looking shaky and employees are fearful knowing their pension claims would fall to the back of the line of creditors in cases of business bankruptcy.

"It is not acceptable for banks to get greater protection than workers in a bankruptcy," argued Sym Gill of the Canadian Auto Workers union, which represents employees of airlines and other federally regulated pension sponsors.

Gill and several other speakers called for changes to bankruptcy law, a national pension benefits guarantee fund such as exists in the United States and an expansion of the Canada Pension Plan to provide greater security for more workers.

A pension actuary and a representative of pension sponsors called for a balance that would help companies stay in business, and keep sponsoring pensions.

But Strachan called it opportunistic for the chief financial officer at Air Canada and six other major employers regulated by Ottawa to capitalize on a "short-term situation" by requesting permanent relief from pension funding.

Strachan said the current recession and recent heavy investment losses may justify allowing companies extra time to top up their pension funds. But he said there should be restrictions and consultation with employees, just as Ottawa proposed last year for granting temporary relief.

The so-called group of seven companies that made a joint submission to Ottawa earlier in the week wants to take 10 years to close a funding gap, without consulting employees or retirees.

They also want a formula for calculating the size of the funding shortfall that would be far laxer in the current economic climate.

Strachan and Leslie Dias of the CAW said Air Canada's pension plans would now be short about $3.2 billion, or about 30 per cent, if it calculated the total value of pension promises using the low interest rate paid on federal government bonds.

But Air Canada's shortfall would fall to zero if it got its wish to calculate what it owes using the interest yield paid on corporate bonds that has moved higher due to uncertainty about the chances of being repaid.

Companies are permitted to use these higher interest rates when reporting the state of their pension plans in their financial statements to shareholders and bondholders, but not when reporting their solvency funding to pension regulators.

An increase in corporate bond yields over the past year allowed Hydro One, the government-owned distributor of electricity in Ontario, to report a $1 billion or 20 per cent decline in the size of its pension obligations last year.

The group of seven federal companies that are seeking a similar calculation for reporting solvency funding to pension regulators include Air Canada, Bell Canada, Canada Post, Canadian National Railway, Canadian Pacific Railway, MTS Allstream and NAV Canada.

They account for the bulk of pension assets regulated by Ottawa. Most pension assets are overseen by the provinces, but other companies could ask for similar treatment if Ottawa agreed to the request.

The seven employers say their plans are 83 per cent funded on average.

Yet, their total contributions would jump from an average of $1.2 billion during the past four years to $3.5 billion if they had to fund their deficits over five years, and $2.4 billion over 10 years.

Ted Menzies, the parliamentary secretary to the minister of finance who is heading up the pension consultations, promised legislative changes by the end of the year. He assured speakers he was there to listen to everyone, and that the government's goal is to improve the framework for pensions.  

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

The pension health index, which measures the solvency funded
status of plans, reached its lowest point on March 31, 2008.

CLICK HERE FOR CHART

Match U.S. car parts plan,
Ottawa told

PAUL WALDIE

Globe and Mail Update

March 20, 2009

The Canadian government is under pressure to provide substantial financial help to auto parts companies now that the United States has unveiled a $5-billion (U.S.) program for part suppliers south of border.

“We need our government to do exactly the same thing,” said Gerry Fedchun, president of the Automotive Parts Manufacturers' Association. “I'm going to push them to come through more quickly now that my competitors in the U.S. have access to that cash. We have to accelerate [the program] or we are going to be at a really big competitive disadvantage.”

The U.S. government announced a Supplier Support Program yesterday as part of the Troubled Assets Relief Program, or TARP. Under the supplier program, the government will guarantee invoices from General Motors Corp. and Chrysler LLC.

Parts companies typically wait up to 60 days to receive payment from auto makers and until recently they used these expected receivables as collateral to borrow money for ongoing operations. The current state of the auto sector has left banks reluctant to accept the receivables as collateral, putting many suppliers in a cash crunch. Now the U.S. government will guarantee the invoices, which will give greater security for lenders.

$5-billion bailout for U.S. car parts makers
General Motors and Chrysler have agreed to participate in the program and they will decide which suppliers are eligible. Ford Motor Co. has said that it does not need to join.

In a statement last night, Industry Minister Tony Clement said Canada already has a similar program in place provided through Export Development Canada.

“In 2008, EDC provided a total of $4.2-billion in commercial facilitation to 595 Canadian companies in the auto industry through its financing and insurance products and services,” Mr. Clement said in a statement. “Of this amount, $3.2-billion was in the form of [accounts receivable insurance].”

The Automotive Parts Manufacturers' Association says, however, that it is hoping for more targeted assistance, and is urging Ottawa to add $1-billion to its funding.

Auto parts companies in the United States and Canada have been reeling because of the downturn in the auto industry. More than 40 U.S. companies have filed for bankruptcy protection and large players such as Lear Corp., the second-largest auto-seat maker, said this month its auditors expressed doubt that it can keep operating.

There are about 600 auto parts companies in Canada employing roughly 80,000 workers. There were about 96,000 jobs in the industry four years ago.

Let Collective Bargaining Take Its Course, Lewenza Says

March 19, 2009

CAW President Ken Lewenza recommitted his union to a constructive dialogue with Chrysler Canada, and rejected “destructive innuendo” regarding the relocation of Chrysler manufacturing facilities away from Canada.

“We are engaged in a process of information sharing and exchange with both Chrysler Canada and Ford Canada,” Lewenza said. “It is essential that this process continue, and we will continue to negotiate with these two companies in a respectful and confidential manner.”

According to company data, labour costs in Chrysler’s Canadian operations are presently several dollars per hour lower than in its U.S. facilities. The CAW has committed to ensuring that this Canadian investment advantage is preserved in coming years, even as U.S. auto operations are restructured, and U.S. labour contracts are renegotiated. The CAW’s recent pattern agreement with GM Canada will reduce Canadian active labour costs by several dollars per hour, and will eliminate hundreds of millions of dollars in legacy obligations. GM officials have confirmed that CAW all-in active labour costs will fall to below $50 U.S. per hour under the new CAW pattern agreement.

The CAW would not provide more detail on the cost comparisons being discussed with Chrysler, respecting the confidential nature of the negotiations. However, Lewenza did say, “Chrysler’s claim that CAW labour costs are $20 per hour too high is utterly false, and is not justified even by their own internal data.”

Chrysler enjoys a very strong position in Canada’s auto sector, in both manufacturing and sales. Chrysler’s Windsor assembly plant is the most productive minivan assembly plant in North America, and its Brampton facility ranks among the ten most productive plants on the continent.

“Canada has been very good for Chrysler,” Lewenza said. “Our labour costs are very attractive, and we have committed to keeping them that way. Our productivity is superior. The company’s president just confirmed that it has been highly profitable in Canada. Our governments are ready to help. And our consumers love Chrysler products.”

“In short, Canada has been a bright light for this company.”

Lewenza also pointed out that the union’s current collective agreement with Chrysler bars closure of any Canadian facilities until at least the expiration of the contract (in September 2011). Moreover, that contract and Canadian labour laws impose additional requirements on the company regarding large severance costs, notice of plant closure, and other aspects of plant closures. Brand new capital equipment has been installed in both the Brampton and Windsor locations, which would be highly difficult to relocate.

Chrysler and CAW hit gridlock

Sides 'not in the same ballpark' as they try to agree on labour cost cuts to qualify for government funds

Mar 18, 2009

Business Reporter

A huge gap exists between Chrysler and the Canadian Auto Workers in negotiating a critical deal for cuts in labour costs that would qualify the company for almost $3 billion in government aid, according to industry sources.

People familiar with the discussions said yesterday the union remains firm in wanting Chrysler to match an earlier deal for concessions at General Motors, but the company insists those cuts would leave it far from being competitive.

The impasse is so acute that after several days of discussions, the union and company can't even agree on a starting point on the current value of hourly labour costs. That, in turn, is skewing any negotiations about how far apart the two sides actually are and what still needs to be done.

"They're not in the same ballpark or even in the same neighbourhood," said one person with knowledge of the situation. "It's very concerning."

Another insider, who requested anonymity, said Chrysler needs to slash hourly labour costs by $19 from $76 to $57 in Canada to compete with Honda and Toyota here. However concessions in the GM contract would close the gap by only $7.25 to $68.75.

Chrysler officials have not indicated how much the labour-cost gap would have to narrow before the company would agree to a deal.

The company last week threatened to shut down its Canadian operations if it doesn't win major labour concessions.

In response, CAW president Ken Lewenza rejected talk that labour costs at Chrysler are $20 an hour in excess of its competitors.

"Chrysler's claim that CAW labour costs are about $20 per hour too high is utterly false and is not justified even by their own internal data," he said in a statement.

Furthermore, he noted that Chrysler's own data shows labour costs at its Canadian plants are already lower than at the company's U.S. operations.

His comments underline increasing frustration by both sides in how to craft a deal without veering away from the union's position on a "pattern" contract.

Under pattern bargaining, the union negotiates a deal with one automaker and presses the same terms on the other two Detroit-based vehicle producers where it represents workers. In that way, no automaker gains a competitive edge over its rivals on labour costs.

One problem in negotiating a pattern contract at GM and Chrysler now is a claim of differences in current labour costs for active workers. GM says the hourly cost is $70.56 for its workers, while Chrysler pegs the expense at $74.01.

Despite the union's stance on pattern bargaining, sources say Chrysler continues to probe ways of reducing labour expenses including less time off the job; a cut in relief minutes off production lines; elimination of provisions for school tuition and legal fees; and reductions in life insurance costs.

Lewenza said his union wants "constructive dialogue" with Chrysler and Ford, which is also trying to get concessions so it can be eligible for a $2 billion line of credit from the federal and Ontario governments if it needs the money later.

The union and Ford have also not agreed on the value of labour costs in discussions.

Ford has said the cost cuts in the GM deal will not keep the company competitive globally or deliver "sufficient" savings in comparison to auto operations in the U.S.

Last week, workers at GM overwhelmingly ratified concessions, which involve wage freezes and more sharing of benefit costs. The move marked the second time in two years that GM workers had agreed to concessions.

GM, which is seeking more than $6 billion in government loans, said the concessions will quickly reduce labour costs of "active" employees in Canada and close the competitive gap with Japanese-based rivals in the U.S. The deal would also "substantially reduce" its expenses for retirees and surviving spouses, the company added.

Tom LaSorda, president of Detroit-parent Chrysler LLC, told MPs in Ottawa last week that "it is imperative" that the labour-cost gap "is closed" to preserve the company's plants in Canada.

Lewenza described LaSorda's remark about Chrysler's future here as "destructive innuendo."

In a statement yesterday, Chrysler said the company is "evaluating alternative solutions, as a contingency measure" if talks are unsuccessful.

thestar.com

GM CEO says Ford/UAW agreement won't work for GM

March 17, 2009

WASHINGTON, March 17 (Reuters) - A healthcare agreement struck between Ford Motor Co and the United Auto Workers would not work for General Motors Corp , GM's chief executive said on Tuesday.

Rick Wagoner also told a meeting of newspaper reporters and editors that restructuring the company out of bankruptcy was still the best option for the ailing automaker, according to a spokesman.

Wagoner said the Ford agreement "does not meet our needs" and the company was working with the UAW to "do something different."

GM and Chrysler LLC are required to make wages and benefits paid to U.S. factory workers competitive with those at Toyota Motor Corp and other Japanese automakers under the terms of their government bailouts.

The Ford agreement, ratified this month, also restructures funding of a union retiree healthcare trust, a deal that has eluded both GM and Chrysler.
GM and Chrysler have reached tentative agreements on some issues, but have not released details.

The Canadian Auto Workers union says it has not reached agreement with Chrysler or Ford on the value of concessions at General Motors, which is holding up their restructuring plans to qualify for government loans.

CAW president Ken Lewenza said yesterday the union and two companies will continue meetings today in efforts to find some consensus on how much the GM concessions will save them during the next three years.

"Until we agree on the numbers, there's not much point going forward," he said at a downtown hotel. "They're still crunching numbers."

GM workers voted for wage freezes and benefit cuts last week. But Ford and Chrysler are trying to buck that "pattern" deal and say they need more savings to become competitive in Canada and get the public aid. The CAW has insisted on the same GM deal at Ford and Chrysler.

'Disgusting' bonuses ripped
Plant workers upset by threat

By BRETT CLARKSON, SUN MEDIA

BRAMPTON -- Chrysler president Tom LaSorda should think about putting the brakes on his bonuses instead of shooting off his mouth and threatening Canadian jobs, angry Chrysler plant workers said yesterday.

"How much is Tom LaSorda making this year?" Chrysler worker Rob McLarnon asked as he drove out of the Williams Pkwy. assembly plant. "I think it's disgusting -- he should start giving up more of his money."

McLarnon, a 22-year plant veteran who was behind the wheel of his Dodge Charger, said the workers at the Brampton plant yesterday were "not too happy" about the Chrysler big-wig's brazen ultimatum to a parliamentary committee Wednesday.

The Canadian-born LaSorda threatened to pull Chrysler out of Canada if it doesn't get more concessions and about $2.3 billion in aid from the provincial and federal governments.

"We're not earning close to what he's getting in bonuses," McLarnon said. "He's making millions a year in bonuses. That's disgusting."

LaSorda, who was born in Windsor, said Wednesday night that Chrysler "cannot afford to manufacture products in a jurisdiction that is uncompetitive." He threatened to shut down the auto-maker's Canadian plants if the union doesn't agree to a bigger-than-GM cut in costs.

Specifically, if the Canadian Auto Workers union doesn't agree to an estimated cut of more than 25% in total labour costs, excluding retirees, Chrysler could walk, LaSorda said. The GM deal allowed for a chop of 10% in labour costs.

Brampton Mayor Susan Fennell was also at Chrysler Assembly yesterday to defend the plant, which employs about 3,400 people. The mayor called LaSorda's choice of words "unacceptable" and said Canadian livelihoods are not a bargaining chip.

"My reaction is very clear -- Canadian jobs ought not to be optioned in negotiations," Fennell said. "Putting a chip on the table, a marker about Canadian jobs, is absolutely unacceptable. It is no way to negotiate and find a successful outcome."

Fennell, who drives a Chrysler 300 SRT that was assembled at the Brampton plant, wouldn't get into a public slanging match with LaSorda but she made it clear she wasn't impressed with his message to Canada.

"If he would like to call me, I'd like to tell him personally what I thought of his remarks (Wednesday)," Fennell said. "Perhaps it was a tactic -- I just don't think it was helpful."

Another plant worker, Wayne Cooper, 44, was asked if the governments should give Chrysler the $2.3 billion LaSorda asked for.

"Yes, as long as they've got their hands involved in how it's going to be spent," Cooper said. "For sure, you can't let it collapse."

Cooper said the impact would be "huge" and said the city would "just be a ghost town" if Chrysler were to leave Brampton.

Another female worker who was leaving the plant broke down in tears.

The Canadian Auto Workers union would likely prefer to deal next with Ford instead of Chrysler as it attempts to negotiate a deal for concessions that matches cuts at General Motors.

Ford and Chrysler have already said the concessions in the GM-CAW deal are inadequate.

CAW negotiators yesterday held high-level talks with both companies in an attempt to break the impasse between the ailing automakers, which are demanding more concessions, and the union, which insists Ford and Chrysler must follow the GM "pattern" contract.

CAW president Ken Lewenza said talks recessed for the weekend and the union will likely select one of the companies on Monday in efforts to reach a deal.

Agreement on significant cuts in labour costs is critical for the three money-losing companies if they want to qualify for billions of dollars in financial assistance from the federal and Ontario governments, and stay alive.

Lewenza said there is more pressure for a deal at Ford Motor Co. of Canada Ltd. now because the company's U.S. workers have ratified a deal with cost savings that puts their Canadian counterparts at a disadvantage.

"We held exploratory talks with Ford that were constructive and we have been also meeting with Chrysler," he said yesterday.

"The deal with the UAW (United Auto Workers) and Ford in the U.S. is putting a little more pressure on getting the job done. The disadvantage of not doing so is obvious."

Lewenza doesn't think Ford and Chrysler could achieve any significant savings through workplace changes in local plant deals that would be beyond the so-called "master agreement" with GM.

The union, which represents about 9,000 workers at operations in Oakville, Windsor and St. Thomas, has said it will retain its competitive edge over labour costs at Ford in the U.S. so they don't jeopardize company investments here.

Ford is seeking a standby line of credit of about $2 billion from Ottawa and Queen's Park. Chrysler is requesting nearly $3 billion.

CAW leaders have historically looked at Ford as more co-operative in reaching contracts under difficult circumstances. But one CAW insider said yesterday the union was running into problems with both companies.

The comment came a day after Joe Hinrichs, group vice-president for global manufacturing at parent Ford Motor Co., said the GM deal would not provide sufficient savings to compete against U.S. rivals.

A day earlier, Chrysler president Tom LaSorda described the GM concessions as "unacceptable" for his company. Chrysler would need more cuts, plus the resolution of a long tax dispute worth hundreds of millions of dollars, otherwise plants here would be at risk, he said.

The GM worker concessions, which are conditional on the company getting loans from the governments, call for wage and pension freezes until 2012, plus higher personal costs for benefits.

The union says the GM concessions will reduce labour costs, including pension obligations, by "several dollars" an hour from the current level of almost $70.

CAW economist Jim Stanford said the latest GM cuts will mean "even more substantial savings" than a deal last year, in which workers accepted changes that would cut labour costs by about $400 million until 2011. Lewenza said the current talks are unusual because there is no strike deadline and workers have a contract for more than two years.

As well, it is unusual for talks to be linked to negotiations between the automakers and the government.

Industry watcher Dennis DesRosiers expressed concern this week that GM did not gain more concessions from production workers who earn about $34 an hour and receive significant benefits.

He said the deal could "blow up" in GM's face because of public sentiment against taxpayers' aid. At the same time, he said lack of aid for the automakers would cause thousands of other job losses and "untold damage" to the economy.

Federal Industry Minister Tony Clement said he didn't want to pass judgment on the GM concessions, but added it was one of many issues that needed resolution before Ottawa invested taxpayers' money.

Business Reporter
March 13, 2009

A deal for concessions to save teetering automakers in Canada may be unravelling.

Ford joined Chrysler yesterday in telling the Canadian Auto Workers that a new deal for concessions at General Motors doesn't reduce labour costs enough so their companies can be viable and qualify for possible government aid.

But union leaders insisted last night that Ford and Chrysler would soon follow the GM pattern contract, despite their public stances.

At Ford, Joe Hinrichs, group vice-president for global manufacturing and labour affairs at the parent Detroit company, said in a statement that ratification of wage freezes and benefit cuts at GM of Canada Ltd. this week will not keep the automaker's Canadian operations competitive in a worldwide economy.

"The GM-CAW agreement will not deliver sufficient labour cost savings compared to auto manufacturing operations in the United States," added Hinrichs who expressed confidence in negotiating a different deal.

"Therefore, we look forward to working with the CAW to find additional cost savings in order to maintain the competitiveness of our manufacturing operations in Canada."

His statement follows comments by Chrysler LLC president Tom LaSorda, who told a parliamentary subcommittee a day earlier that the concessions at GM were "unacceptable" and there would need to be more cuts, otherwise the future of plants are at risk here.

LaSorda's remarks came as 87 per cent of GM of Canada workers voted in favour of contract concessions that will freeze their wages, eliminate bonuses and some vacation time and increase health care expenses until 2012.

The CAW said the GM deal cut labour costs including benefits and pension obligations by "several dollars" from almost $70 an hour for about 10,000 workers. Retirees would also face freezes in pensions and more benefit costs.

GM, which commended the union for the "shared sacrifice," said the concessions would make the company competitive under a restructuring plan to the federal and Ontario governments in its bid to qualify for more than $6 billion in loans.

Analysts say the reaction from Chrysler and Ford could jeopardize the GM deal and negotiations with the two governments for critical aid. Chrysler is asking for almost $3 billion in loans while Ford is seeking a standby line of credit of up to $2 billion.

Canada's Industry Minister Tony Clement has said that the government could be willing to negotiate an aid deal with the automakers past an end-of-March deadline if necessary.

Ottawa and Ontario have stressed that they won't invest billions of dollars in taxpayers' money in the ailing companies unless they can show their businesses will be viable with guarantees for percentages of North American production.

Ken Lewenza, the CAW's national president, said in an interview that in the last four rounds of contract bargaining involving the three manufacturers every automaker has vowed they would not follow the pattern contract of the first company.

"They then come to their senses," he said.

"We sit down with them around a table, show the numbers and we reach a settlement. We'll do the same here during the next few days."

Lewenza said there was "no way" about 9,000 workers at Chrysler and another 9,000 at Ford would be accepting more concessions than their counterparts at GM.

"We're not breaking the pattern," he said.

In traditional pattern bargaining in the auto industry, the union selects a strike target, negotiates an initial contract with that company and the other two rivals match it.

Industry watcher Dennis DesRosiers expressed concern earlier that GM did not gain more concessions from production workers who earn about $34 an hour and receive significant benefits.

He said the deal could "blow up" in GM's face because of public sentiment against taxpayers' aid.

During the last few weeks, Clement has hinted that providing aid to Chrysler might be more difficult than GM. Among other things, the government needed more information from Chrysler in deciding whether to offer loans, he said.

Meanwhile, Ontario Economic Development Minister Michael Bryant criticized LaSorda of Chrysler for threatening to pull the company's operations out of Canada.

"It was a ham-fisted way of expressing the reality that in the absence of an agreement, Chrysler is going to face critical challenges," Bryant told reporters. "There is a deal to be had if Chrysler wants it – in the event that they can prove themselves to be viable."

In his presentation in Ottawa, LaSorda also said Chrysler wants relief on federal taxes in a dispute involving hundreds of millions of dollars that has dragged on for several years.

NDP Leader Jack Layton reacted angrily to LaSorda's comments, saying U.S. lawmakers wouldn't sit still for that kind of tough talk from an automaker. GM and Chrysler have already received several billion dollars from Washington.

"They've made lots of money over the years, sold a lot of vehicles and I thought it was outrageous," Layton said.

Prime Minister Stephen Harper said Chrysler's threat will not alter Ottawa's approach in negotiations to aid the company.

Liberal Leader Michael Ignatieff also slammed LaSorda's tough approach. "I react very badly to threats," Ignatieff said.

With files from Robert Benzie, Les Whittington and Joanna Smith

Chrysler threatens to close
Canadian plants

March 12, 2009

OTTAWA–The head of Chrysler issued a grim threat to federal politicians last night, warning the struggling automaker may shut down its plants in Canada if it doesn't get significant labour concessions and government aid.

"Chrysler LLC cannot afford to manufacture products in a jurisdiction that is uncompetitive, relative to other jurisdictions," president Tom LaSorda told a parliamentary committee.

Chrysler's labour costs in Canada are about $20 an hour more than the costs of automakers like Toyota and Honda, LaSorda told the committee.

"Currently, Chrysler CAW (Canadian Auto Workers) are not competitive," he said.

The automaker also asked for roughly $2.3 billion (U.S.) from the Canadian and Ontario governments and demanded relief in a tax dispute with Ottawa.

"Failure to satisfactorily resolve these three factors will place our Canadian manufacturing operations at a significant disadvantage relative to our manufacturing operations in North America and may very well impair our ability to continue to produce," LaSorda said.

The tax issue involves tax assessments from the 1990s that Chrysler Canada should have earned greater profits than reported in Canada, the automaker said in a brief submitted to the committee.

Chrysler is challenging the assessments, but has had to pay a security and wants an assurance it won't have to pay any more while the dispute is being resolved.

Analysts say the automaker is teetering on the brink of bankruptcy and labour costs are only a small part of its problems.

LaSorda told reporters after his testimony to the House of Commons finance committee that his direct tone was needed to lay out the facts in a serious situation.

"Bottom line, we needed to be very, very clear, and ambiguity doesn't help the process. These are the things that Chrysler needs," he said. "I thought when I came up here today the Canadian government wanted to hear what are the true facts."

He said the Canadian Auto Workers agreement reached with General Motors Corp. last weekend would not eliminate even half of Chrysler's labour cost gap.

"The current agreement with GM is unacceptable and we have to break the pattern," LaSorda said.

Chrysler has 9,400 direct employees in Canada, including more than 3,000 at its Brampton assembly plant. Another 25,900 work at dealerships.

Including suppliers and retirees, the company said 100,000 Canadians depend directly or indirectly on Chrysler Canada.

Meanwhile, an industry watcher says consumers, politicians and the media don't think worker concessions at General Motors of Canada Ltd. are significant enough to qualify for taxpayers' money.

Dennis DesRosiers, president of DesRosiers Automotive Consultants, said yesterday the three groups don't believe freezes in wages and extra costs for health care are sufficient to qualify for more than $6 billion in government loans.

They also think public assistance in shoring up the company's pension shortfall is inappropriate, DesRosiers said in a note to clients.

"These groups are wrong on all these perceptions. All of these items and the many others negotiated are `transformational' and will save hundreds of millions.

"But they don't accept this and don't understand this and they have been `spun' so many times in the past they have a hard time believing GM when told the opposite."

DesRosiers, who appeared before a parliamentary subcommittee last night, said he senses the extent of concessions will create trouble for GM in its bid for aid.

"I hope I'm wrong, but I'm very worried that GM misread public sentiment and that this whole thing might blow up in their face," DesRosiers said.

"In the meantime, we should support what GM did with their labour agreement and hopefully Ford and Chrysler will address these very visible irritants in their negotiations."

DesRosiers said the public can't understand why GM workers didn't lose all their special holidays plus company funding for legal bills, child care and tuition, since many employees in the country don't have such benefits.

Furthermore, he said GM workers don't contribute to their own pension plan, but now the company wants the Ontario government to help cover a huge shortfall.

"How does a politician explain to a taxpayer who has lost a third to half of their RRSP contributions that they have to cover part of the liability of the CAW pension fund when these workers don't contribute to their own pensions," he said.

The Canadian Press, with files from Tony Van Alphen and Reuters

GM workers vote on concessions

By KRISTINE OWRAM The Canadian Press
Wed. Mar 11 - 4:45 AM

General Motors' workers must unite to defend the middle class and fight a growing perception that auto industry wages are too high and that auto workers should take bigger pay cuts to save the company, union leaders say.

Ken Lewenza, national president of the Canadian Auto Workers union, told membership meetings yesterday that workers will be under intense pressure from analysts and conservative politicians during the next few weeks to make even more concessions so that GM would qualify for more than $6 billion in critical government aid.

The CAW on Sunday reached a tentative agreement with General Motors of Canada Ltd. on a multi-year pay freeze and other concessions. .

The 10,000 workers covered by the agreement held ratification votes yesterday and will continue voting today.

"We've got to change the mood," Lewenza said at the GM Centre in Oshawa. "Every single day we've been on the defence, defending our right to a good job."

Lewenza told more than 2,000 workers at the vote that they need to become more active in fighting attacks on their pay and benefit packages. "Why is all the pressure on our workers?" he asked. "Our labour costs represent 7 per cent of production."

Earlier this week, Conservative MPs on a parliamentary committee took aim at the union's wages and suggested more concessions might be necessary.

Chris Buckley, president of CAW Local 222 in Oshawa, said he was "absolutely disgusted" with the attitude of the Tory MPs that GM workers are overpaid and underworked.

But he said workers need to counter those views by sending emails and speaking out.

"We have to turn up the heat," Buckley added.

Auto industry analyst Dennis DesRosiers has indicated that he believes concessions accepted by GM Canada workers are not enough to help the teetering Detroit-based auto giant survive.

But federal Industry Minister Tony Clement said he did not want to pass judgment on whether the concessions in the GM-union deal are sufficient.

"I'm here to say that in order for government money to flow, there has to be the ability to be competitive in the new marketplace." Clement described the deal as one piece of the puzzle.

"There has to be a viable plan on a go-forward basis. There have to be the right kind of management decisions ... All those factors are put into the hopper."

GM has praised the CAW for its leadership in agreeing to concessions after only four days of negotiations.

Under the tentative deal, production workers, who currently earn about $34 an hour, would not receive any wage increases or cost-of-living protection until 2012. They would lose a $1,700 annual bonus, a week of special holidays a year and contribute more for health-care benefits.

Retirees face a freeze in pensions and cost-of-living protection and will also need to pay more for health care.

In his speech to workers before the contract vote, Lewenza stressed that cuts will mean significant pain for workers and retirees, but are necessary to avoid a deeper recession in the Canadian and North American economies.

Accusing conservative politicians of attempting to destroy the middle class, Lewenza said good auto jobs and pay are major contributors to communities, the economy and the standard of living in Canada.

Lewenza and Buckley also called again for a national auto strategy in Canada to enhance investment, jobs and fair trade. They charged that auto imports continue to "pollute" the domestic market, while Canadian-made vehicles can't get fair access to overseas countries.

The union held other membership meetings in Oshawa, Woodstock, St. Catharines and Windsor today. It will release the results tonight.

Union negotiators are unanimously recommending acceptance of the contract concessions and expect strong support.

Ratification could lead to bargaining for similar deals at Chrysler, which is also seeking government aid, and Ford.

Unionized auto workers at General Motors plants in Ontario start voting on a new contract Tuesday.

The cost-cutting deal contains key concessions by the Canadian Auto Workers union meant to help the struggling automaker.

The deal negotiated on the weekend covers 10,000 union members at GM's Ontario assembly complex in Oshawa and component plants in St. Catharines, Windsor and Woodstock.

It is contingent on GM winning federal and provincial taxpayer support. And it depends on a promise that Detroit-based parent General Motors will maintain the current 20 per cent Canadian portion of its total North American manufacturing volume.

Some industry analysts, along with federal Industry Minister Tony Clement, say the deal doesn't go far enough.

GM Canada is eligible for loans of up to $3 billion under a government aid package. It submitted a restructuring plan last month.

Ford workers approve UAW contract changes

DETROIT — Unionized workers at Ford Motor Co. have approved contract changes that include freezing wages and cutting benefits in a move to aimed at helping the auto maker remain competitive.

The United Auto Workers said Monday a majority of hourly workers voted in favour of modifications to the 2007 contract with Ford, eliminating cost-of-living increases and cash bonuses.

The UAW said 59 per cent of production workers and 58 per cent of skilled-trades workers voted for the concessions.

“By working together with our UAW partners, we identified solutions that will help Ford reach competitive parity with foreign-owned auto manufacturers and that are important to our efforts to operate through the current economic environment without accessing a bridge loan from the U.S. government,” said UAW President Ron Gettelfinger in a written statement.

The ratified deal also ends the controversial jobs bank program that let workers collect most of their pay from the company.

The concessions also let Ford make payments in stock to a union-run trust for retiree health care.

Ford, which has not sought government funding as rivals General Motors Corp. and Chrysler LLC have, is the first U.S. auto maker to come to an agreement with the union.

The details of the Ford agreement are expected to be a guideline for GM and Chrysler. The UAW must now negotiate concessions on the health care trust with those two companies as a deal with the union is a requirement of the $17.4-billion (U.S.) they have received in federal aid so far.

Shares of Ford rose 4 cents to a $1.74 in late afternoon trading.

“By working together with our UAW partners, we identified solutions that will help Ford reach competitive parity with foreign-owned auto manufacturers and that are important to our efforts to operate through the current economic environment without accessing a bridge loan from the U.S. government,” said Joe Hinrichs, Ford's group vice president of global manufacturing and labour affairs, in a written statement.

Chrysler and GM are required to bring their labour costs in line with those of foreign auto companies' plants in the U.S. Under terms of their loan agreements, progress must be made by March 31. The companies are seeking an additional $21.6-billion in government aid.

Chrysler, however, may not be able to match Ford's guarantee of issuing additional shares for the trust if Ford's share price drops, according to a person briefed on Chrysler's negotiations. The person asked not to be identified because the talks are private.

Ford urges Ottawa to give
incentives to car buyers

OTTAWA, March 9 (Reuters) - The Canadian unit of Ford Motor Co. proposed on Monday that Ottawa provide a C$3,500 ($2,700) incentive to consumers who buy a new vehicle in 2009, as a way to counter a sharp decline in auto sales.

David Mondragon, chief executive officer of Ford Canada, proposed the cash incentive, which he said could be based on the German model, in testimony to a special parliamentary committee on the automotive crisis.

He also said a C$12 billion ($9.2 billion) credit facility provided by the government in its 2009 budget for automotive financing companies was "likely much less than needed" to rescue the C$60 billion a year sector.

Mondragon forecast a 13 percent decline in Canadian auto sales this year and urged government action to minimize the fallout on the overall economy.

"The consumer incentive is urgently needed to spur automotive sales, which will help drive economic activity and factory production for all manufacturers in Canada," Mondragon told lawmakers on the committee.

"For the one in seven Canadians dependent on the auto industry, I don't have to tell you how critical it is that we take steps to stimulate the industry."

Under the proposed scheme, car owners would be eligible for the cash if they bought a car or light vehicle and turned in a vehicle that is 10 years or older to be scrapped.

Germany's car industry has brightened after the German government introduced a consumer incentive plan there, Mondragon said.

Eighty percent of the cars Ford manufactures in Canada are sold in the U.S. market.

Ford, unlike General Motors Corp and Chrysler, is not seeking any government assistance in Canada or the United States at this time. Mondragon said that position has not changed.

His remarks came on the same day that the Canadian arm of GM reached a tentative cost savings deal with the Canadian Auto Workers Union (CAW), bringing it a step closer to qualifying for up to C$7 billion in emergency loans from the government.

He said Ford was aiming for a similar deal with the union in conversations that are starting now.

"We do not, as a manufacturer, have a production or cost advantage today in Canada versus other North American jurisdictions. We're hopeful that through these discussions with the CAW we will be able to bring our costs in line with other areas of North America," he said.

CAW Leadership at GM Unanimously Endorse
Restructuring Deal

March 9, 2009, 3:50 PM EST

CAW leadership representing production and skilled trades workers at General Motors in Canada unanimously endorsed the CAW-GM tentative restructuring agreement at a meeting on March 9, in Toronto.

Over three hundred local union and workplace representatives approved the tentative restructuring deal that generates substantial cost savings for the company, including a freeze to base wages and pensions and co-pays on benefits. Cost savings were negotiated by the union as part of the company's overall restructuring program in an effort to obtain government financial assistance.

"The overwhelming positive response we've received from our leadership shows that they understand the severity of this crisis," said CAW President Ken Lewenza. "Although we cannot solve the industry's problems in isolation, we will be part of the solution."

The tentative deal still needs a majority of support by the roughly 10,000 CAW members at General Motors. CAW members are scheduled to vote on the tentative deal at ratification meetings scheduled for March 10 and 11 in Oshawa, St. Catharines, Woodstock and Windsor.

Details of the vote will be made available by the end of day on Wednesday, once all of the votes have been tallied

I want my job back

I want my job back.........I retired under agreed conditions......now the sand is shifting underneath me and other retirees that made room for people to stay........I will be affected by no annual cost of living adjustments, health and non-wage benefits, including a new monthly co-pay premium which will collect $30 per month from active workers and pensioners under 65 and what ever they are cooking up on tuition fees and dental. Not to mention the loss in long term care in the future. Worst part is as a retiree I don't even have a vote anymore. I am going to send someone the toilet I just puked in.

In two years when the economy is good.....I would like to see us get all these concessions back and this agreement be contingent on that. Look how long Chrysler workers had to wait for wage parity......lol...like that will happen.So now by opening he agreement once again we gave through Buzz and now we get to give through Ken

Well this is a GM agreement and I think its a hard slap to our brothers and sisters at GM and after all that we have given back already.

I guess at Ford/Chrysler we are now waiting for the speech that says we must follow suit so that we are competitive. I know that Oakville has been giving back since the start of the Windstar and now we cant even sign the term of a agreement never mind the concessions.......yeah I am a lot pissed.

Damn lets get it over with.....lets just pay them to have a job there.

Arnie De Vaan
Ford Oakville
CAW Local 707 Retiree

CAW makes concessions
in GM deal

Mar 08, 2009

Business Reporter

The Canadian Auto Workers union reached a tentative deal with General Motors of Canada Ltd. today on major concessions that will help the reeling automaker qualify for critical government aid.

More than 10,000 workers will be eligible to vote on the deal - which involves cuts in pay, benefits and time off the job - at meetings Tuesday and Wednesday.

Union negotiators said they expect workers to accept the deal that would slash labour costs significantly and make the company more viable in its request for more than $6 billion in aid from the federal and Ontario governments.

"This was difficult for us but absolutely necessary to help GM at this time," said CAW president Ken Lewenza.

Lewenza said the union reached the surprise deal in only a few days because of the quick need to get government aid and lift the cloud of possible bankruptcy from the company so consumers can confidently buy its cars again.

GM's sales crashed by 56 per cent in Canada last month and it lost its title as No.1 auto retailer for the first time since about 1950.

"All eyes must be on the federal and provincial governments now," said Lewenza.

GM said in a brief statement that the deal is another step in its effort to formulate a plan that will make the company viable again here.

"We compliment the CAW for their leadership to share sacrifices in these extremely challenging economic times," the company added.

The deal would extend the current three-year contract by a year to September 2012 and mean a freeze in wages and cost of living allowance; the annual loss of one more week of holidays; a $1,700 bonus and implementation of a $360-a-year premium for health care. They would also have to pay more for health care including dental bills.

Retirees also face a freeze in monthly pensions and cost of living protection and would have to pay a $180 annual premium for health care plus more out-of-pocket expenses for services such as long-term care.

Detroit-based parent GM, which is on the brink of bankruptcy, can only survive with billions of dollars in loans from governments in the U.S. and Canada. In the U.S., GM says it needs up to $30 billion (U.S.) in loans to survive from the American government.

Some of the major features of the tentative contract include:

• The existing CAW-GM contract (which was signed last year) is extended one additional year, to expire in September 2012.
  
  
• Base wages are frozen for the remainder of the contract.
  
  
• Quarterly cost of living adjustments for wages are suspended until almost the end of the contract (coming back into effect in June 2012).
  
  
• There will be no annual cost of living adjustments to pensions in this contract.
  
  
• Paid time off is reduced by an additional 40 hours per year, on top of the 40 hour reduction in annual vacation pay already implemented beginning in 2009.
  
  
• An annual $1700 special bonus payment is diverted to help offset the cost of retiree health care benefits.
  
  
• Expenses for union-sponsored programs (including training, child care facilities, wellness programs, and national coordinators) are reduced by about one-third.
  
  
• Significant changes are made to a range of health and non-wage benefits, including a new monthly co-pay premium which will collect $30 per month from active workers and pensioners under 65, and $15 per month from pensioners over 65 and surviving spouses.  Other health benefits affected by reduced caps or increased co-pays include dental, long-term care, life insurance, and tuition benefits.
  
  
• The agreement is contingent on the company receiving government financial assistance and recommitting to a proportional Canadian manufacturing presence (including specific product commitments in GM’s respective plants).

3 locals say no to Ford concessions

Friday, March 6, 2009

Most rank-and-file votes so far back deal;
Saline plant workers among dissenters.

Louis Aguilar / The Detroit News

Ford Motor Co. workers at three United Auto Workers locals rejected concessions to their national labor contract Wednesday, according to union sources, but a majority of rank-and-file members who have voted appear to endorse the changes.

Workers at Woodhaven Stamping; the Lima, Ohio, engine operation and Ford's Automotive Controls Holdings LLC in Saline voted against the measures Wednesday.

The proposed amendments to the national contract would not cut wages but would allow Ford to save billions and make the struggling automaker more competitive with its foreign rivals, analysts contend.
But Wednesday's results shows the changes are too much for some rank-and-file members to swallow.

At Woodhaven, the plan was rejected by 73 percent, according to four workers leaving the plant Thursday afternoon. The plant has 1,243 active workers, according to Ford's media Web site. "They just have too many layoffs here and (they're) cutting back on our hours," said one of the workers.

At UAW Local 892, which represents 600 workers at the ACH plant in Saline, the contract modifications were turned down by a 76 percent margin, local officials said. A slimmer margin -- 51 percent -- voted against it at Local 1219, which represents 650 workers in Lima, according to a union source.

Also on Wednesday, Local 1250, representing 1,255 workers at Ford's Brook Park, Ohio, complex, voted 60 percent in favour, UAW local officials said.

At least 10 locals representing about 15,000 Ford employees have voted. Results are known for eight locals, with five approving the concessions. The locals approving the changes represent about 10,600 UAW members, while the three dissenting locals represent about 2,490 workers.

A simple majority must ratify the agreement. The deadline to complete the vote is Monday, and several locals with a large number of members have yet to vote.

The contract changes in question would allow Ford to cover half of its payments into a UAW-run trust to cover retiree health care with company stock instead of cash -- a move that would also dramatically dilute investors' equity in the company.

While the proposed deal leaves base wages intact, workers are being asked to give up cost-of-living pay increases, performance bonuses that were worth $500 last year and an annual Christmas bonus worth $600.

It suspends the controversial jobs bank program, which pays workers even when they are laid off, but guarantees at least partial pay for up to two years for those with the most seniority. The pact also would allow Ford to change the way that skilled-trades work is performed at some plants.

The Canadian Auto Workers union is bracing for concessions at General Motors but the company shouldn't be "overzealous" in any pursuit of wage and benefit cuts to stay alive, union president Ken Lewenza said.

Meanwhile, GM's auditors yesterday raised "substantial doubt" about its ability to continue operations and the company said it may have to seek bankruptcy protection if it can't execute a major restructuring in North America.

GM's outlook had politicians in Canada insisting they're carefully scrutinizing the company's request for billions of dollars of emergency funding.

Industry Minister Tony Clement said the auditors' warning demonstrated the need for Canada to review GM's plans "very closely and make sure they make sense from a Canadian perspective."

Before opening high-profile negotiations to lower labour costs yesterday afternoon, Lewenza said although the union doesn't have a lot of power now, General Motors of Canada Ltd. wouldn't benefit much by pushing hard for major concessions because it won't solve the company's problems.

He stressed that the global financial crisis and tightening credit have choked auto sales in North America since last fall, not labour costs.

"The worst thing they (GM) can do, and I don't want to speak for them, is get overzealous in driving back the wages, benefits and working conditions that we fought for for many years," Lewenza told reporters.

"If they get overzealous, I think we have a problem."

GM needs cuts in labour costs as part of a restructuring plan to satisfy the federal and Ontario governments so the company can get more than $6 billion in public loans.

About 11,000 workers at GM operations in Oshawa, St.Catharines and Windsor currently earn about $34 an hour and receive extensive benefits. The union said it accepted some concessions in a 2008 contract that will save GM about $300 million over three years.

But a continuing deterioration of the auto market has led to requests for public aid by GM and Chrysler and more concessions to keep the companies viable.

The CAW has indicated it would be part of any solution to help GM survive here by keeping labour costs competitive.

"No question about it," Lewenza said about concessions. "After some tough internal discussions, there seems to be an expectation that we have a collective responsibility to get this done."

If the union can't reach agreement at GM, it would turn to Chrysler to set a pattern contract that would also affect Ford.

The union hopes to reach deals by March 15. Workers would then need to ratify them.The union says it has a labour cost and productivity advantage in Canada today, but officials would not comment on the extent of changes after the United Auto Workers union agreed on lowering its compensation packages in U.S. contracts. Wages and benefits are also lower at non-unionized automakers in Canada and the U.S.

Lewenza also would not speculate on what the union would give up but industry sources said the two sides will probably agree to the elimination of 10 special paid absence days annually; a continuing freeze in cost-of-living allowance and reductions in some health care benefits, school tuition and legal fees.

GM officials won't publicly discuss what the company is seeking in negotiations. But the company gave the union an outline of necessary changes at meetings last month.

The company is also pressing for help from the union and Ontario government for changes in its pension plan because it says obligations "are no longer sustainable."

But CAW economist Jim Stanford said the Ontario government must accept some responsibility since it passed legislation many years ago giving GM relief in funding the plan, a move which is now causing serious shortfalls.

With files from the Star's wire services

GM auditors raise bankruptcy fear

March 5, 2009
TOM KRISHER
The Associated Press

DETROIT–General Motors Corp.'s auditors have raised "substantial doubt" about the troubled automaker's ability to continue operations, and the company said it may have to seek bankruptcy protection if it can't execute a huge restructuring plan.

The automaker revealed the concerns Thursday in an annual report filed with the U.S. Securities and Exchange Commission.

"The corporation's recurring losses from operations, stockholders' deficit, and inability to generate sufficient cash flow to meet its obligations and sustain its operations raise substantial doubt about its ability to continue as a going concern," auditors for the accounting firm Deloitte & Touche LLP wrote in the report.

GM has received $13.4 billion in federal loans as it tries to survive the worst auto sales climate in 27 years. It is seeking a total of $30 billion from the government. During the past three years it has piled up $82 billion in losses, including $30.9 billion in 2008.

The company faces a March 31 deadline to have signed agreements of concessions from debtholders and the United Auto Workers union to show the government it can become viable again. On Feb. 17 it submitted the restructuring plan to the Treasury Department that includes laying off 47,000 workers worldwide by the end of the year and closing five more U.S. factories.

GM said in its filing that its future depends on successfully executing the plan.

"If we fail to do so for any reason, we would not be able to continue as a going concern and could potentially be forced to seek relief through a filing under the U.S. Bankruptcy Code," the Detroit-based automaker said in the annual report.

GM, the report said, is highly dependent on auto sales volume, which dropped rapidly last year.

"There is no assurance that the global automobile market will recover or that it will not suffer a significant further downturn," the company wrote.

GM warned last month that its auditors may raise the doubts, and industry analysts said auditors' statements may trigger clauses in some of GM's loans, placing them in default.

But the company said in its filing that it has received waivers of the clauses for its $4.5 billion secured revolving credit facility, a $1.5 billion term loan and a $125 million secured credit facility.

"Consequently, we are not in default of our covenants," the report said. "If we conclude that there is substantial doubt about our ability to continue as a going concern for the year ending Dec. 31, 2009, we will have to seek similar amendments or waivers at that time.''

GM spokeswoman Julie Gibson said there is no clause in the terms of the government loans that places them in default if the auditors raise doubts about GM's ability to keep operating.

"That was not a condition of the loan. It's not in the agreement," she said.

Auto workers had their worst fears realized yesterday when reeling Chrysler announced the company would eliminate 1,200 jobs and one of three shifts at its Windsor minivan plant for the first time in more than 15 years.

The company, which is already operating on a government lifeline of loans in the U.S., said it would cut the shift as early as June 24 because of a continuing deterioration of sales.

“It is another huge blow to the city of Windsor,” said Ken Lewenza, national president of the Canadian Auto Workers. “This is nothing but devastating.”

Lewenza, who led the big CAW local in Windsor at one time, revealed that the cut would affect workers with up to 13 years of service.

The loss of production will also affect thousands of workers in the region who make parts and provide services to the plant, the biggest minivan operation in the world.

Windsor, which is heavily dependent on the auto industry, already has the highest unemployment rate of any major city in the country at 10.9 per cent. Next year, General Motors will close its transmission plant in the city and wipe out another 1,200 direct jobs.

The union and some 4,450 Chrysler production and skilled workers were uneasy two weeks ago when Detroit-parent Chrysler LLC submitted restructuring plans to the U.S. government that included no further plant and job reductions in Canada. Chrysler president Tom LaSorda noted at the time that if the market didn’t improve, the company’s Canadian operations could still face job losses.

The plant remained idle during the last half of December and the month of January because of heavy inventories piling up on dealer lots.

But in a further sign of impending trouble, employees returned in early February to a schedule of working two weeks and then taking one week off in what the company calls “smoothing” production, which effectively reduced daily output by about one third.

That smoothing became a lot rougher yesterday when Chrysler said it would take “another unfortunate but necessary step” to streamline operations and meet commitments made in its “viability plan” to the U.S. government in exchange for billions in aid. That plan includes reductions in workforce, plant operating shifts and product models.

“Given today’s severe economic environment and continued lack of consumer credit, which has affected the minivan market as well, we cannot sustain a three-shift operation at Windsor as we continue to work towards the appropriate level of plant utilization,” said Frank Ewasyshyn, Chrysler’s executive-vice-president of manufacturing.

The loss of the shift will probably reduce output by about 90,000 Dodge Grand Caravan and Chrysler Town & Country models annually.

Chrysler also started building the Volkswagen Routan minivan at the plant last year and the company and union officials thought it would keep the plant humming on three shifts despite a gradual decline in the minivan segment.

Chrysler, which invented the minivan a quarter of a century ago and pioneered the industry’s first third shift in 1993, continues to dominate model sales. It holds 44 per cent of the U.S. minivan market and 58 per cent of the segment in Canada.

Other automakers that built minivans had exited the segment because of stiff competition and a shift to more fuel-efficient and smaller crossover vehicles. That potentially would leave more of the remaining minivan market for Chrysler. But a crash in North American vehicle sales since the middle of last year has also engulfed the minivan segment and pushed business down.

Meanwhile, Ontario Economic Development Minister Michael Bryant said the “brutal news” about job losses at the Windsor plant would not have an impact on provincial and federal negotiations over financial aid for Chrysler.

“This is an industry that’s going to be leaner. As a result of that there’s going to be less production than in the past,” he said last night.

But NDP Leader Howard Hampton said the latest Chrysler cuts underscore the need for Prime Minister Stephen Harper and Premier Dalton McGuinty to insist on job guarantees from automakers as part of any government aid.

Canada's auto market crashed again last month but Chrysler emerged from the wreckage as the top seller for the first time in its 84-year history – ahead of perennial leader General Motors.

In another tumultuous month in a reeling industry, Chrysler and Ford posted double-digit declines, yet both struggling automakers still beat General Motors, whose sales collapsed by a staggering 56.7 per cent in February.

It marked the first time that GM of Canada Ltd. has surrendered sale leadership in any month since about 1950 when it surpassed Ford.

"It's a world gone mad," said veteran industry watcher Dennis DesRosiers yesterday after seeing the continuing upheaval in the industry, ranging from government bailouts, sales swings and plant shutdowns. "It's pretty shocking."

Manufacturers reported that sales of new cars and light trucks slid 27.7 per cent or 30,721 to 80,230 vehicles in February from the same month last year. That's worse than January when sales skidded 26.5 per cent.

DesRosiers said in his 30 years in auto consulting and statistical analysis he could not recall that much of a sales plunge in two months.

The North American auto industry is struggling to stay in business as sales nosedive because of tightening credit and edgy consumers who have shut their wallets.

The sales drop has left GM and Chrysler Canada seeking billions of dollars in loans from the Canadian and U.S. governments – and forced major production stoppages by automakers and suppliers along with thousands of layoffs. U.S. Steel announced yesterday, for example, that it is halting production temporarily next month at the former Stelco operations in Hamilton and Nanticoke.

Overseas, Toyota, whose sales have soared for the last decade, is requesting $2 billion (U.S.) from the Japanese government to weather the economic storm amid sharp declines in business. It hired a cargo ship to store 2,500 cars at the southern Swedish port city of Malmo recently because the terminal was overflowing with more than 27,000 parked vehicles.

In the U.S., where Canada exports most of its auto production, February sales plunged a stunning 41 per cent. Business at GM fell 53 per cent; Toyota, 40 per cent; Ford, 48 per cent; Chrysler, 44 per cent; Honda, 38 per cent and Nissan, 37 per cent.

In Canada, DesRosiers said heavy incentives by Chrysler and Ford in combination with fewer sweeteners and a price increase late last year by GM contributed to the massive shift in sales positions. GM has also backed out of many fleet sales.

"I suspect you have to go back to the early 1900s to find a month when GM was not at least in second place," he noted.

GM's volumes tumbled by almost 5,000 to 11,381 vehicles and Marc Comeau, vice-president of sales, service and marketing, confirmed that strong incentive competition hurt retail business.

"February was a low point right across the industry for new vehicle sales and it was a tough month for GM Canada versus the relatively strong February sales GM had in 2008," he added in a statement.

GM still leads the Canadian market this year and DesRosiers suggested it will recover and should top monthly sales soon again.

At Chrysler, sales tumbled 27 per cent, or more than 4,400 vehicles to 12,015, in one of its biggest monthly declines in years but the company focused on its new status as "No. 1 selling automaker" last month.

"Our position as the No. 1 automaker this month clearly demonstrates the continued confidence Canadians have in Chrysler vehicles and in the company's future," said Reid Bigland, Chrysler's chief executive officer.

"There is no question that the current economic and automotive environment is challenging for all companies. However it is times such as these where great value and great products can truly dominate."

Sales at Ford Motor Co. of Canada Ltd. fell 15.5 per cent, or more than 2,100 to 11,869 vehicles, but the tally was big enough to surpass GM. Ford noted that it has now increased market share for fourth straight months despite the declines.

Toyota Canada, including the Lexus luxury brand, said its sales slid 25.5 per cent or more than 3,400 vehicles to 10,136. The company hopes to reverse its decline with the annual "Red Tag" incentive campaign in March.

Honda, including the Acura luxury brand, saw sales plummeted 41.7 per cent, or more than 5,000 units, to 7,041 vehicles.

Almost every automaker in Canada posted big declines last month except Hyundai, whose sales soared almost 30 per cent to to 6,912 vehicles.

Second Ford local OKs
contract amendments

March 3, 2009

A second United Auto Workers local representing Ford Motor Co. employees has approved amendments to their national labor contract.

Production workers at UAW Local 900, which represents 3,900 workers at Ford's Michigan Truck, Wayne Stamping and Wayne Assembly, approved the amendments by 83 percent and skilled trades workers approved it by 53 percent, according to two workers with knowledge of the vote tallies.

UAW members are voting to accept a pay freeze; suspend the jobs bank program; and allow Ford to cover up to half of its hourly retiree health care obligations with company stock instead of cash.

On Saturday, workers at Ford's Sterling axle plant approved the contract changes by a 59 percent margin. Elections will be held throughout the week at UAW locals representing 42,000 Ford workers nationwide. The deadline for the contract changes to be ratified is March 9.

Retired union leader Buzz Hargrove is back in school.

Hargrove, the former president of the Canadian Auto Workers who dropped out of high school after Grade 10, confirmed yesterday that he started lecturing at the Ted Rogers School of Management at Ryerson University last week.

Hargrove, 65, said he is the school's "distinguished visiting professor" and teaches undergraduates and MBA students on current economic and labour issues from a left-leaning perspective.

Hargrove is holding a 1  1/2-hour lecture, answering questions and helping students one day a week during the current semester.

He retired last year after leading the CAW for 16 years and more than four decades of work in the labour movement.

Although Hargrove didn't finish high school, he holds honorary degrees from four universities and is currently working on a second book about his career.

As the crowds gather to watch our union and the North American automakers wrangle over cost-cutting to secure government loans, we need to step back and consider the real reason we're having this debate at all.

In the excitement over a possible dust-up in the auto sector, the financiers, the bankers and their cheerleaders are desperately trying to duck responsibility for this mess. The central reason we're talking about the very survival of the domestic auto industry is because of the complete failure of the financial sector and its regulators to do their job.

A track record of reckless greed, irresponsible investment and outright lies to their shareholders and the public has led us to the near collapse of the global financial industry and a historic freezing-up of the credit system. And yet despite hundreds of billions of no-strings-attached public dollars delivered to shore up banks around the world, they still aren't lending adequately to business – or to consumers.

In Canada, last month's federal budget brought the tab for loans and credit guarantees provided to the banks to a staggering $200 billion – with few conditions. By contrast, the $4 billion in repayable loans offered to General Motors and Chrysler have been accompanied by immense public debate, requirements for government-approved restructuring plans and sacrifices from all parties.

The failure of the banks to provide credit is key to understanding the current situation in the auto industry. Auto is one of the most credit-dependent industries in the world: Producers need billions to finance the design and production of vehicles, and consumers need to finance their purchases.

Given the global nature of the credit crisis, it is no wonder that governments around the world have rapidly injected liquidity into their auto industries – most without much fuss. What is happening with the Detroit Three is not isolated to North America, nor is it about poorly run companies suffering the consequences of free-market justice. Some 16 national governments – including Germany, Japan, France, Spain, Britain, Sweden, Australia, China and South Korea – have already provided loans, direct investments and stimulus packages designed to support some of the strongest auto companies in the world.

Only in the United States did the outgoing Bush administration tie government support for the auto sector to demands for deep concessions from workers (not surprisingly, this was parroted by the Harper government). In endlessly partisan America, this was the lowest form of political payback from badly stung Republicans taking aim at the union supporters who voted strongly for Obama.

We have rightly maintained throughout this debate that it is just plain wrong to argue that labour costs lie at the heart of the problem. The very fact that the direct labour targeted by the Bush administration represents just 7 per cent of the average cost of a new vehicle should be proof enough that cutting wages cannot solve the automakers' problems.

There is no hiding from the current crisis. The financial sector and its regulators have failed miserably on all fronts, and the credit-dependent domestic auto sector now teeters on the brink. But more of the same kind of thinking will get us nowhere – there must be a day of reckoning for bad ideas. Those who have insisted for the past two decades that deregulation and free markets are the only option for progress are the very same voices now championing efforts to roll back workers' wages as the solution for their mess.

The CAW will continue to be part of the solution as we go forward. But we all need to understand what the problems really are – and they are not the workers' wages and working conditions. The near collapse of the financial system, the ongoing freeze of the credit markets and the justifiable fear spreading among consumers are the immediate problems. The auto companies need short-term access to credit, temporary relief from costs and support for creative ways to maintain jobs for the duration of this crisis – and we are going to be part of those efforts.

The public also has a right to know what they're getting in exchange for stepping in where the financial sector has failed. And governments are right to insist that Canada maintains its share of North American production and jobs.

Perhaps more importantly, now is the time to put the longer-term challenges facing the domestic auto industry front and centre, including addressing the corrosive legacy of unbalanced and one-way trade between North America and other auto-producing regions, the need for government to provide firm leadership to move the industry toward a more environmentally sustainable future, and the creation of measures to stem unnecessary investments that merely add to problems with industry-wide overcapacity.

Given where we're at today, and the deep cracks that have emerged in the two-decade-long project of market deregulation, it's not surprising that some are desperately trying to pin the problems of the auto industry on its workers and retirees. Of course that's not only short-sighted, but simply wrong. The time has come for more serious debate.

Ken Lewenza is president of the Canadian Auto Workers union.

Interview with Ken Lewenza CAW National President

The best CEO of a major automaker in North America has been on the job for less than three years. His name is in the headlines far less frequently than his struggling peers at General Motors Corp. and Chrysler LLC.

Alan Mulally isn't even a "car guy," in the parlance of Detroit industry veterans. Passed over for the top post at Boeing Co., Mulally was overseeing that company's answer to rival Airbus S.A.S.'s superjumbo A380, the 787 "Dreamliner," intended to be the fastest large-scale people-mover in the air.

Mulally isn't in the spotlight because, unlike his counterparts at GM and Chrysler, he's not seeking a taxpayer-funded bailout to stave off bankruptcy at his Ford Motor Co. Which, when you think about it, is why more attention should be paid to Mulally's Ford tenure.

Ford, to be sure, is hardly the picture of health. It lost $14.6 billion (U.S.) last year. (GM lost $31 billion U.S., and the much smaller Chrysler spilled $8 billion in red ink.) Ford boasts the strongest balance sheet of the Detroit automakers, with $13.4 billion (U.S.) in its treasury. But it also carries $26 billion (U.S.) of debt.

Ford's domestic rivals may have pretty much depleted their cash reserves altogether. But Ford's $13.4 billion (U.S.) in cash reserves won't get the company through the next two years without a significant reversal of 2008's calamitous downturn in vehicle sales. In last year's fourth quarter alone, Ford burned through $5.5 billion (U.S.) in losses, causing it to exhaust the last of its lines of credit.

All that said, Mulally has a knack for seeing around corners. He lost no time since his September 2006 arrival at Ford's Dearborn, Mich. headquarters in forcing what is now Detroit's strongest automaker to get religion about the basics of 21st-century automaking.

Outsider turnaround CEOs are over-rated. The now-bankrupt Nortel Networks Corp. is a sad example of that.

But Mulally's remove from Detroit's notoriously insular culture has perhaps saved Ford, at a time when at least one U.S. credit-rating agency says there is a 70 per cent chance that either or both of GM and Chrysler succumb to bankruptcy.

Ford was in parlous condition when Mulally signed on. The 105-year-old firm had reported the largest annual loss in its history. Morale was abysmal due to fractious labour relations, an incoherent growth strategy, and continued market-share losses.

Mulally, 63, blessed with a deceptively soft-spoken persona, was audacious in taking on all of Ford's most critical problems at once. The result is the healthiest cash position of any domestic automaker, a firm committed to just one brand, the "greenest" line-up of Detroit offerings, and the one domestic U.S. automaker that has actually been gaining market share.

A prescient Mulally soon after his arrival bolstered Ford's treasury with a stunning $23.4 billion (U.S.) in fresh borrowings and lines of credit in late 2006. The move was questioned at the time because Ford was required to put in hock just about all of its assets, even its hallowed "Blue Oval" trademark.

Against Mulally's recent joke that he had merely sought a "home improvement loan" to finance a thorough restructuring of Ford - and indeed, that is what he began using the money for, along with the costly development of better-built cars with more showroom appeal - that fact is he was bracing for a prolonged industry downturn.

And Mulally was right. First came the spectacular jump in fuel prices that cut heavily into sales of Detroit's chief source of profits, its truck-based SUVs. Then came the current recession, and the gut-wrenching 18 per cent plunge in 2008 vehicle sales. Mulally and other experts, who keep ratcheting down expectations for this year, now forecast North American sales volume as low as 10 million vehicle sales this year, down from the lofty 16 million or so units sold annually earlier this decade.

And that, says Mulally, is close to the new normal. "We will not return to the peaks of production that we've seen in the past," the Ford CEO told the U.K. Financial Times last month. Long before that, as part of the "home improvement," Mulally began to drastically shrink Ford to the changed circumstances he saw ahead. Plants were closed, thousands of employees laid off, model lines discontinued.

It seemed to Mulally, as it has to many industry experts for a long time, that Detroit diluted its finance, R&D and marketing efforts by supporting too many brands. As he had done in raising $23.4 billion just before the global credit market dried up, Mulally unloaded Ford's niche brands - Jaguar, Land Rover and Aston Martin - while there were still buyers. "We had a strategy of mini-brands," Mulally said recently, "and what we're doing now is focusing mainly on Ford."

It has lately occurred to GM, for instance, that Toyota Motor Corp., which has eclipsed GM in size, gets by with two brands, Toyota and Lexus; and Honda Motor Co. makes do with just Honda and Acura. As a condition of its bailout proposal, GM is pledging to shed four of its eight brands. But there are no buyers. GM's Hummer already has been on the auction block for months, with no takers. Its forlorn Saab brand, which even the Swedish government has shown reluctance in assisting, abruptly filed for bankruptcy last week.

With Ford's engineering, design stylists and marketers focused on one brand, the company, alone among the U.S. domestics, has at last arrested Ford's market-share decline. Indeed, in last year's fourth quarter, Ford, Toyota and Honda were alone among the top six automakers in increasing their market share. In Canada, Ford took back 1.8 points of market share in January, while GM and Chrysler continued to lose share. And in the past three months, Ford has outsold Toyota in Canada.

Automakers talk of their "conquest rate," the portion of their new-car sales in which a buyer's trade-in is from another manufacturer. In January, 45 per cent of Ford buyers were converts, up from 38 per cent in August.

The quality improvements Mulally sought have paid off. Consumer Reports noted this month that of the eight new Detroit vehicles it recommends, six are Fords. The latest hybrid version of the Ford Fusion sedan is noteworthy, not just because it beats the Toyota Camry in fuel efficiency by seven miles per gallon and the Chev Malibu by 15.

Hybrid sales have dived along with fuel prices. What matters is the excited showroom and blogosphere chatter about a hybrid Ford Fusion, which is casting an eco-friendly "halo" on Ford's entire line-up. GM's Hummer, obviously, contributes to the wrong image for the times.

Yet Ford needs to do much better. Its North American sales dropped 40 per cent last month, part of the continued industry downturn. Ford in January slashed another 10 per cent of its U.S. white-collar staff. And this week, Mulally and executive chairman Bill Ford Jr. took 30 per cent salary cuts for 2009 and 2010, while scrapping bonuses for all Ford senior executives and salaried employees worldwide.

In the search for cost cuts since Mulally's arrival, the CEO recently signalled that "non-core" assets such as unused land and buildings may go on the block. Ford also is talking with potential buyers for its Volvo brand its 33-per-cent stake in Mazda Motor Corp. Even in a buyers' market, those brands have more value than the likes of the GM Saturn division now bearing a For Sale sign.

Ford's immediate worry is that North American consumers still lump it in with its troubled Detroit rivals. When asked about GM, Ford and Chrysler products, U.S. survey respondents vow to stay clear of them all, given the precarious state of the latter two firms. When asked about Ford alone, the perceptions improve considerably.

So, in one of several moves to break from the Detroit pack, Ford this spring will roll out a marketing campaign that takes on its foreign rather than domestic competition, and emphasizes the firm's longevity, financial soundness, product quality and new-feature enhancements.

Ford and Detroit go together like salt and pepper. Separating them in the public mind might be the toughest challenge Mulally has faced. But for at least the next year, it will be Job 1 in Dearborn.

Are Auto Workers Really Making $70 an Hour?

Watch this interesting Video
Click Here

Our Own Duncan McCallum Demonstrates addressing of the Haggis on the 250th Anniversary of Robert Burns

Jennifer Valentine from Breakfast Television
with CAW retiree Duncan McCallum

Click here for video

Auto bailout for who?

To understand the context of the current crisis in the auto industry, Paul Jay speaks to Sam Gindin, former assistant to the President of the Canadian Autoworkers' Union. “In terms of the present moment, all the companies are in crisis, but what needs to be emphasized is that GM, Chrysler, and Ford were already in trouble before this crisis emerged, and the length of this crisis will determine very much whether they will survive.” He explains that “there was a very conscious decision going back to the 1970s that [US companies] would leave the small car market to the Japanese.”

Click here for video

Reopening the Contract
How does this affect Retirees

Latest indications point to the CAW looking at either freezing or eliminating the Pension COLA.

Eliminating the cost of living for retirees would be devastating. Maybe not felt now but in the upcoming years when the economy improves and inflation rises their pensions would be eroded severely.

The big 3 had handed out retirement incentives like candy recently and many employees elected to retire some as young as 48. With today's average life expectancy, retirees would be living well into their eighties and nineties. That would mean many of the recent retirees would still be collecting a pension 30 to 40 years from now. If that cost of living was eliminated these retirees would be likely living in poverty.

The negotiated pension cost of living was one of the contributing factors why so many younger retirees chose to retire; it is the security that is needed to take them into their autumn and golden years.  It’s their reward for working loyally for the company for the last 30 to 40 years.

Hopefully the CAW & The Big 3 have the insight to see this and yes the retirees are all willing to help the automaker get through this crisis but for heaven's sake don't take away their cost of living permanently.

US AUTO SHOW RALLY

         

On January 11, 2009, active and retired autoworkers, labor and community activists, and others concerned about the future of U.S. manufacturing, healthcare, the environment, the economy, and working families rallied outside Cobo Hall in Detroit during press day of the North American International Auto Show. They advocated for Single-Payer Health Care Bill H.R. 676, bold green jobs legislation, fair trade, the Employee Free Choice Act and other concrete solutions to remedy decades of failed corporate and government policies.

Canadian Auto Show
Rally/Demonstration
Feb 15, 2009

Part Two Available by Clicking Here

CAW Auto Leadership Endorse
Resolution on Auto Restructuring 

February 20, 2009

CAW local union and workplace leadership in the auto sector overwhelmingly endorsed a resolution authorizing the national union and Master Bargaining Committees to engage in restructuring talks with North American automakers at a special meeting held on February 17.

The meeting, held in Toronto, took place on the same day as the restructuring plans for General Motors and Chrysler were presented in the United States.  

At the press conference following the unveiling of the American restructuring plans, CAW President Ken Lewenza said that he is optimistic that the plans will allow the two companies to get on more stable footing for the future in both the U.S. and Canada.

He indicated however, that he is concerned what the restructuring plans will mean for auto parts suppliers and parts workers, who have already been “squeezed” in recent years. General Motors announced that it will be eliminating 47,000 jobs globally, and Chrysler 3,000, which will have a terrible ripple effect across the industry, said Lewenza. 

He said the union will be gearing up for talks with the Detroit Three automakers in the coming weeks. He indicated that the resolution, adopted earlier that day by approximately 500 rank and file auto leaders, enables the union to discuss alternative funding mechanisms for retiree benefits such as health and pension benefits.

The full resolution is available by cliking here.

Good news for GM retirees?

MAYOR VIRG BERNERO OF
LANSING MICHIGAN TEARS
INTO FOX ANCHOR

Feb 21 Arnie De Vaan wrote the Lansing Michigan Mayor this letter.......his answer is below:

MAYOR VIRG BERNERO OF LANSING MICHIGAN

Mr. Mayor my hat is off to you for defending the rights of working people. Your Fox News clip was nothing short of the mark. Thank you for not holding back. You have spoken for auto workers not only in Lansing but autoworkers everywhere. I am a retiree from the Ford Oakville plant in Canada. As a past Vice President of the local union CAW 707 I thank you for your great words and the tenacity with which you delivered them to corporate America.

Sincere solidarity,
Arnie De Vaan
Retiree CAW 707
Acton, Ontario
Canada

http://www.youtube.com/watch?v=a-nLS6FJtSM

Dear Friend,
 
Thank you for your encouraging note of support for my efforts to speak out on behalf of the U.S. auto industry and working people across this country.
 
We are certainly on the same page with regard to the contributions and importance of the American automotive industry and the vital role they have played in creating our nation’s middle class.  I cannot sit idly by and watch as America’s industrial might collapses under the weight of grossly unfair trade agreements.  I must speak out.
 
I know there is plenty of blame being directed at unions and at
corporate management, some of it perhaps deserved, but the greatest assault on the American standard of living has come from the exporting of American jobs through so-called Free Trade Agreements that create an unfair playing field between American companies and their foreign competitors.
 
Over the last several decades, industry after industry in this country has been decimated as the unholy alliance of Washington and Wall Street has conspired to sell the American worker down the river with bad trade agreements that are badly enforced.
 
The Chinese government cannot be blamed for putting the Chinese people first.  The Korean government cannot be blamed for putting Korean people first.  Likewise with our friends in Japan.  But my question is: who is looking out for the American people, the AMERICAN WORKER?
 
It's obvious to me that we, the American people, are in need of a
Second American Revolution, a peaceful but powerful revolution to reclaim The American Dream.  We will have to fight for the American way of life that our parents and grandparents worked so hard to provide for us.
 
I will be in touch soon with more specifics and a call to action, if
you are interested.  I also invite you to learn more about fair trade by visiting my Facebook page and reading my CNN.com commentary at the links below:
 
http://www.facebook.com/pages/Virg-Bernero/23362628189
 
http://www.cnn.com/2009/POLITICS/02/09/am.bernero.trade.reform/
 
Thanks so much.  Keep the faith.
 
Virg Bernero
Mayor of Lansing
 
 
Office of Mayor Virg Bernero
City of Lansing
City Hall - 9th Floor
124 W. Michigan Avenue
Lansing, MI  48933-1694
517:  483-4141/Phone
517:  483-6066/Fax
517:  483-4479/TDD
mayor@lanisngmi.gov
www.lansingmi.gov
"Believe in Lansing"

*******Editors Note: This response is a little scary especially for the Canadian Autoworker as it hints that Canada (Even though not mentioned specifically) is also seen as a foreign threat to the AMERICAN WORKER. Maybe the present ploy of Chrysler/Ford asking outrageous demands with the threat of pulling out of Canada is being orchestrated in order to justify bringing work back to the USA and in turn blaming the CAW.