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May 1, 2009 to July 27, 2009





A Message to CAW
Members at Ford Canada




July 27, 2009

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

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

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

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

In Solidarity,
Kim Clout
Plant Chairperson


UK Review of the New Ford Fiesta -
Not Your Normal Review


Taurus ads to take on luxury cars

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Mulally plans to stay in
driver's seat at Ford
Alan Mulally

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

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

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

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

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

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

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

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

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

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

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

Big changes since 2006

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

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

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

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

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

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

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

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

"The family feuds could start again."

Making change permanent

Mulally says he is making sure they will not.

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

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

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

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

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

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


Delphi to drop pensions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


2010 Ford Flex EcoBoost:
More power, less engine
The EcoBoost engine in the Ford Flex adds 35 per cent more horsepower, which increases acceleration and does so without compromising the Flex’s fuel consumption.

Flex muscles ahead of its competition with dynamic turbocharged V6

Jul 29, 2009

Jim Kenzie

Special to the Star

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

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

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

Not bad at all, is the answer.

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

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

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

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

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

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

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

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

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

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

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

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

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

But it sure is fun to watch.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Strong performance, decent handling, smooth quiet ride.

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

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

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

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

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


Ford, CAW to start labour
talks on Sept. 8

Reuters Last updated on Wednesday, Jul. 29, 2009

Labour talks between Ford Motor Co. and the Canadian Auto Workers are scheduled to begin Sept. 8, the union said yesterday, with the company aiming for cost cuts and the CAW looking for job and product commitments. "I'd prefer to call them exploratory talks, but they could lead to full-blown bargaining," CAW President Ken Lewenza said. Ford has been pushing for the negotiations since the CAW agreed to steep concessions with Chrysler and General Motors Co. in April and May to help those companies qualify for billions in emergency government aid. Ford has said it has enough liquidity to survive the steep downturn in the automotive industry, but insists it needs the same cost structure as its competitors if it is to maintain its manufacturing presence in Canada.

F-N (NYSE) rose 49 cents to $7.27.


Car firms took our cash,
but salaries a secret

Jul 29, 2009 04:30 AM

Tony Van Alphen
Business Reporter
Toronto Star

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Tuesday, July 28, 2009

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

David Shepardson / Detroit News Washington Bureau

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

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

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

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

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

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

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

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

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

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

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


Restore sanity - and regulation
to the Canadian airline industry

Air Canada is once again teetering on the brink of bankruptcy protection in 2009 after emerging from it in 2003. Peggy Nash of the CAW argues the federal government should take an equity stake in the airline to restore its long-term financial stability.

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

Jul 27, 2009
Peggy Nash
Toronto Star

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Sunday, July 26, 2009

July selling rate bodes well
for '09 auto sales

Christine Tierney and Bryce G. Hoffman / The Detroit News

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


GM board members' pay 'unconscionable and excessive'

Joe Comartin, NDP member for Windsor-Tecumseh, is critical of the $200,000 retainer, as well as a company vehicle, members of the board of directors at General Motors Corp. are receiving.

July 25, 2009

WINDSOR, Ont. -- A $200,000 retainer as well as a company vehicle for members of the board of directors at General Motors Corp., is “unconscionable and excessive,” critics said Friday.

“This is a part-time job,” Joe Comartin, NDP member for Windsor-Tecumseh, said Friday. “There’s no way the average citizen would say that’s fair compensation. What we’re up against here is just this horrendous pattern we’ve developed in North America of grossly disproportionally compensating our members of the board.”

The Detroit automaker, which recently completed a U.S. bankruptcy filing, is being supported by the Canadian and Ontario governments, which provided US$9.5 billion worth of loans and hold 12 per cent of the revamped automaker’s common shares. The U.S. government controls GM with a 60 per cent stake.

Carol Stephenson, Canada’s nominee on the 13-member board, defended her compensation. “I didn’t set it, first of all,” said Stephenson, who will be retaining her post as dean of the Richard Ivey School of Business at the University of Western Ontario as well as membership on a number of government and corporate boards.

“But, this is a multibillion-dollar corporation. They have recruited some excellent board of directors, which is important because I think that will be instrumental in the turnaround. So, I think it’s commensurate with the experience of the people they’ve recruited and also the market. You don’t pick these people out of the air.”

According to GM, board members who are not company employees, also will receive $10,000 for service as chair of any board committee, $20,000 for service on the audit committee, $150,000 for service as the chairman of the board.

The new board, which holds its first meeting the week of Aug. 3, will take over after US$88 billion losses since 2004, when GM last posted an annual profit.

GM is facing the worst domestic auto market since the early 1980s and a streak of monthly sales declines dating to October 2007.

Meetings will be held monthly, although board members will be expected sit on committees and be on call 24-7, said Stephenson.

“It’s a challenge, but also historic in terms of the time to be involved in the auto sector because the revitalization is so important to the economy, as you know in Windsor,” said Stephenson.

“I think the goal of all the board members is to return to profitability as quickly as possible and to complete the turnaround as quickly as possible. To me, once that is accomplished, everyone wins –– certainly investors which are the governments in the U.S. and Canada as well as employees, dealers and parts suppliers. This industry has an impact on so many people.”

Stephenson said board members are being given vehicles to become familiar with GM products. “The reason they want you to drive their product is they want feedback, and what you as a customer think.”

Joseph D’Cruz, professor of strategic management at the University of Toronto Rotman School of Management, said the compensation level was reasonable within the corporate boardrooms of North America.

“I don’t see it as being surprisingly large,” said D’Cruz. “These are very talented individuals and being a board member today, particularly for GM or Chrysler, would involve a lot of time just keeping up with all the issues and reading all the materials for all the meetings they have to attend.”

But Ken Lewenza, president of the Canadian Auto Workers union, expressed outrage. “It’s unconscionable,” said Lewenza. “It’s ridiculous for anybody to be making $200,000 to attend meetings at this time of crisis.”

Earlier this year, the CAW was forced back to the bargaining table with GM and Chrysler Group LLC where it agreed to cut all-in labour costs by $19 an hour.

“Under these circumstances, workers were put under a microscope,” said Lewenza. “It’s a disappointment to see that board of directors aren’t held to the same standard of scrutiny.”

Other new members to the GM board include, TPG Capital LP founder David Bonderman, Carlyle Group’s Daniel Akerson and two former chief executive officers –– Robert D. Krebs of Burlington Northern Santa Fe Corp. and Patricia F. Russo of Alcatel-Lucent SA.

Chrysler Group LLC refused Friday to disclose compensation for members of its board of directors.

“That information is confidential,” said Max Gates, spokesman for the Auburn Hills, Mich., automaker.

Under its previous owner, Cerberus Capital Management, Chrysler was not a publicly traded company. However, it now is part of Italy’s Fiat SpA, which is a publicly traded company.

Joe Comartin, NDP member for Windsor-Tecumseh, called on Chrysler to reveal the information in the wake of billions in loans it has received from the U.S. and Canadian governments.

“There’s no question they have to disclose that information given the contribution the Canadian taxpayers have made to that corporation,” said Comartin. “I’m not surprised by that attitude ––that arrogance is still there. It’s the attitude that got them into the problem that they had.”

© Copyright (c) The Windsor Star


'Cash for clunkers'
US program expands

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

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

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

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

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

Another 148 applicants had been rejected.

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

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

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

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

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

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

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

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

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

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


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

July 24, 2009

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

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

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


$2.3B profit boosts outlook for Ford

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

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

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

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

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

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

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

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

Ford's loss narrows

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

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

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

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

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

Economy among obstacles

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

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

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

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

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

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

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

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

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

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

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

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

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



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

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

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

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

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

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

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



Ford posts second-quarter
profit of $2.3 billion

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

bhoffman@detnews.com (313) 222-2443

Thursday, July 23, 2009

Pension Fund Corp. takes over Delphi retirement benefits

David Shepardson / Detroit News Washington Bureau

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

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

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

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

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

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

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

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

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

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

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

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

That brought harsh words from Michigan members of Congress.

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

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

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

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

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

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

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

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

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


July 22, 2009

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

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

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

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

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

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

In Solidarity,
Kim Clout
Plant Chair
CAW Local 584


Worst is over, Ford exec says
Alan Mulally, left, and Mark Fields

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Bank application a priority

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

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

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

Gaining an edge in quality

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

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

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

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

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

High marks in crash
tests for two-doors

Ford Focus, Volvo C30 receive top scores in U.S. tests

Jul 22, 2009

Ken Thomas
The Associated Press

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

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

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

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

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

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

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

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

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


Ford tops in quality survey

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

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

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

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

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

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

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

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

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

Toyota says it's no longer
profitable in North America
Yoshimi Inaba, Toyota's executive vice president, refuses to rule out layoffs or plant closings. (Stephen Shaver / Bloomberg News)

David Shepardson / The Detroit News
July 21, 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Magna has favoured Opel bid

A worker carries an Opel logo sign at a junkyard near Budapest, on June 2, 2009.

'Geo-political factors' favour Canadian bid over rivals'
offers for GM subsidiary

Tony Van Alphen

Business Reporter

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Monday, July 20, 2009

Congress puts microscope
on GM, Chrysler

David Shepardson / Detroit News Washington Bureau

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

"My view is it's fundamentally unfair."



Chrysler, GM market
shares will decline

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

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

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

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

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

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

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

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

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

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

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

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

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


Despite losses, Ford feels confident

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


CAW’s Nash Seeks NDP Presidency
Peggy Nash

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

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

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

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

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


J.D. Power new car satisfaction survey
Ford Flex

Detroit automakers gain
in new J.D. Power survey

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

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

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

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

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

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

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

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

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

Derrick Kuzak, Ford's group vice president of global product development2, said the Dearborn automaker has been working hard to improve the basic reliability and performance of Ford vehicles and is now trying to equip models with features designed to delight the customer.

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

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

Among the other findings:

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

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

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

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

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

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




House okays measure to
restore car dealerships

Jul 17, 2009 04:30 AM

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

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

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

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

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

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

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

Associated Press


Ford Taurus grows up strong

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

Thursday, July 16, 2009

Scott Burgess: Auto review Detroit News

Nothing lasts forever.

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

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

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

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

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

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

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

The 2010 Taurus is so much better.

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

Here's just a sampling:

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

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

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

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

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

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

The great indoors

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

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

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

There's more luxury than you'd expect.

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

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

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

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

Impressive power

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

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

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

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

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

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

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

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

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


No need to wait
2009 Ford Focus

New Focus is coming, but the 2009 model stands up well


From Thursday's Globe and Mail Last updated on Thursday, Jul. 16, 2009

An all-new Ford Focus is waiting impatiently in the wings to make its debut on the North American stage this fall, but there are still plenty of the current generation on dealers' lots.

Does it make sense to buy one, or should you wait for the new models to arrive?

The next Focus, which will be available in both four- and five-door versions, is based on the latest technology developed under the company's new "One Ford" global policy, and like the subcompact Fiesta that will also arrive next year, will be a fully up-to-the-minute motor car.

The current Focus is essentially a decade-old design. It did receive a significant upgrade, including new styling, for the 2008 model year, but now comes only in coupe or sedan form. But it's still a popular and more-than-competent-enough vehicle, and for those looking for something with that new-car smell, one that's being marketed aggressively.

The 2009 Focus we'll look at here is a manual-gearbox-equipped SES model that came with the optional $1,200 sunroof, a $700 six-CD/MP3 Audiophile audio system, and an $80 block heater, which, along with delivery charges, brought its price to $23,371.

The restyling efforts of a couple of years ago gave the Focus a modern look outside and a much upgraded and improved interior, which received new and quite comfortably shaped seats, new instrument array, new and neat-looking centre stack and console, a more efficient heating/ventilation/AC system and much improved noise/vibration/harshness elimination measures that included thicker windscreen glass and more insulation.

Interior materials on the SES don't look cheap; there's a leather-wrapped wheel, cruise control, remote keyless entry, air conditioning, power windows and power heated mirrors and heated front seats. There's decent room up front, good headroom front and rear, the car is acceptably quiet at highway speeds, and the rear seat, which is easily accessible, is roomy for two while capable of holding three.

Trunk capacity of 391 litres lets you haul plenty of stuff. Safety systems now include front, side and side-curtain airbag systems as well as ABS.

On the mechanical side, the Focus now comes with only one engine, the 2.0-litre Duratec inline, twin-cam, four-cylinder, which is rated at 140 horsepower at 6,000 rpm and makes 136 lb-ft of torque at 4,250 rpm. The five-speed manual that gets this to the front wheels has well-chosen ratios, and shifts cleanly and quickly (a four-speed automatic is optional).

Around-town drivability is fine, with enough torque available that you don't have to row it around with the gear lever.

Fuel economy isn't bad either, rated at 8.5 litres/100 km city and 5.7 highway.

The suspension also received some work in the recent remake, with new springs, dampers and anti-roll bars and bushings. The result - at least on the sportier SES model, which comes with a performance version of this suspension - makes this the best-handling and -riding Focus I've ever tested.

In fact, the 2009 Focus SES is definitely the best of the breed, although it took Ford a decade to get it to this level. I don't see any reason not to buy one, assuming you want a coupe or sedan (if you're a Ford fan and want a hatchback you'll have to wait for the 2010 models) and can hammer out a very good deal for yourself.




Type: Compact four-door sedan

Base Price: $19,991; as tested, $23,371

Engine: 2.0-litre, DOHC, inline-four


143 hp/ 136 lb-ft

Transmission: Five-speed manual

Drive: Front-wheel-drive

Fuel economy (litres/100 km): 8.5 city/5.7 highway; regular gas

Alternatives: Kia Spectra5, Mitsubishi Lancer, Nissan Sentra, Volkswagen Golf, Honda Civic, Suzuki SX4, Subaru Impreza, Saturn Astra, Chevrolet Cobalt, Pontiac G5, Toyota Corolla, Mazda3, Hyundai Elantra, Dodge Caliber



The exterior styling looks sharp

The interior is user-friendly, comfortable and attractive

Powertrain gets the job done efficiently

Don't Like

It's an end-of-the-line model, which doesn't make it up-to-the-minute cool and could affect resale value down the road


Insurers drive up
rates for motorists

Some premiums jump as high as 17 per cent with more hikes forecast

Jul 16, 2009 04:30 AM
James Daw
Business Columnist

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Big 3’s heaviest debt load
now falls on Ford

By Patrice Hill / The Washington Times
July 15, 2009

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

"How long will memories last?" he asked.



Ontario looks to jolt
electric car market
McGuinty government expected to offer purchasers incentives of up to $10,000

Karen Howlett and Greg Keenan

Globe and Mail Update Last updated on Tuesday, Jul. 14, 2009 07:46PM EDT

The Ontario government will help take the sting out of buying pricey electric cars by offering purchasers incentives of as much as $10,000, Premier Dalton McGuinty is expected to announce today.

The financial incentives, which will be available to buyers beginning next year, are part of the Ontario government's ambitious plan to be in the vanguard of the next generation of the auto industry.

Mr. McGuinty, who is to unveil the government's strategy today at a Toronto Chevrolet dealership, is rolling out the incentives just as the battle heats up among auto makers to offer the first and most advanced hybrid-electric and battery-powered vehicles on the market.

The strategy includes a commitment by Ontario that plug-in or electric vehicles will make up 20 per cent of the government's fleet by 2020, sources familiar with the program said yesterday.

In addition, Mr. McGuinty will reiterate a promise made in 2007 that such vehicles will gain access to high-occupancy lanes on expressways and special parking spaces at GO Transit and government lots, as well as be given a green licence plate.

The first plug-in hybrids – also known as extended-range electric vehicles – are scheduled to arrive later this year when Toyota Motor Corp. makes available a plug-in version of its Prius. But the highest-profile hybrid-electric event will be the appearance on the roads next year of the Chevrolet Volt from General Motors Co.

The key barrier for purchasers is cost, mainly because the lithium-ion batteries that are the key component of both plug-ins and electric vehicles cost about $7,500 (U.S.) apiece. That price tag means the U.S. and Canadian governments will need to subsidize purchasers, industry executives have argued.

“We're expecting that [subsidy] to be no less than $10,000 to make it competitive with other modes of transportation,” said industry analyst Bill Pochiluk, president of consulting firm AutomotiveCompass LLC of West Chester, Penn.

A rebate of $10,000 would reduce the expected price of the Volt to about $30,000 from $40,000, closer to what Americans and Canadians are willing to pay for a mainstream, everyday car.

The Premier had announced in January that his government planned to look at speeding up the introduction of battery-powered cars to Ontario's roads and highways. His officials have examined a variety of options, including financial incentives, access to high-occupancy vehicle lanes and replacing the government's fleet of cars with electric ones.

“[Today] is obviously the next step in that,” a government source said. Cost, however, isn't the only issue. Some industry analysts question whether consumers will agree to give up their comfort and familiarity with internal-combustion engines to switch to plug-ins – with a range of about 60 kilometres in the case of the Volt – with a back-up gasoline engine.

Oil has to be in the range of $80 to $100 a barrel, putting a gallon of gasoline at a minimum of $3 in the U.S., for such technology to truly excite consumers, Mr. Pochiluk said.

GM has begun test drives of the Volt, which will start rolling off production lines late next year. Toyota plans to put 500 plug-in hybrid Prius models on the road around the world late this year. They will be leased to fleet customers, allowing Toyota to assess the performance and durability of its first-generation lithium-ion batteries. The auto maker will launch a battery-powered electric vehicle by 2012 for urban commuter markets.

Ontario took its first tiny steps to position itself for the coming revolution in electric cars by joining forces with California high-tech company Better Place, which is working with partners to build battery recharging stations for electric cars. Better Place plans to open a demonstration centre in Toronto next year.

“I think one of the most important things we can do is demonstrate that we are truly an electric-car-friendly jurisdiction,” Mr. McGuinty said at the time.


Big Three hope for
profits in small cars
Some observers say Ford has a head start on its Detroit 3 rivals on shifting attention to small cars, like the Fiesta subcompact. (Bill Pugliano / Getty Images)

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

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

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

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

It has to be.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


The perils of financial memory loss

Is that a ‘double dip' recession we see? Not in the real economy

Jim Stanford

Tuesday, Jul. 14, 2009

Wouldn't it be nice to get back to the way things used to be? Faced with unfortunate events, that response is understandable (if not particularly practical). That kind of wishful thinking was behind the financial markets' exuberant but short-lived rebound in the spring.

Back on March 10, the CEO of Citibank revealed the then-astounding news that his company would actually make a profit in the first quarter. On reflection, this shouldn't have been too surprising - after all, his bank, with other U.S. financial institutions, is the recipient of $1-trillion in no-risk government handouts. That'll help the bottom line any day.

Nevertheless, after months of doom and gloom, the prospect that banks could make big bucks again set markets on fire. And that sparked a cycle of self-fulfilling optimism that, for a while, heralded a return of the magnificent bull market that preceded the crash of 2008. The Toronto Stock Exchange rose 35 per cent in three months; other bourses rose even faster. Commodities, hedge funds and currencies went along for the ride.

Imagine making a 35-per-cent profit in three months, just by correctly timing the market's bottom. That sure beats working for a living. Brokers dared to dream again of bonuses and BMWs. Forget hard lessons learned the last time we tried fuelling economic growth on a tank of financial exuberance. Let the good times roll.

Of course, there's a lot more to economic recovery than bank profits. And the collective optimism of financial investors can't do the trick, either - unless and until there's something real to underpin it. Economic recovery actually requires getting people working again and producing stuff. And on that score we're still going backward, not recovering.

Just when happy days seemed here again, the party-poopers at the U.S. Department of Labour marched in and took away the punch bowl. Its latest employment report showed the U.S. is still losing jobs at an awesome pace: almost half a million a month. Canada's jobs numbers, released on Friday, were not much better. We lost 48,000 full-time jobs in June, only partly offset by new part-time work and self-employment.

The appropriate response to a collapsed financial bubble is not to sit back, cross our fingers and hope it reinflates. We must ask deeper questions about the basis for economic growth. Aggressive leveraging and wanton credit creation can generate quick profits for some. If properly managed, leveraging and credit can also facilitate real economic progress for us all - but only if funds are channelled into productive investments (not paper schemes), and debt loads don't get out of control.

But that kind of prudence was all forgotten on Bay Street this spring. Smarting from last year's massive losses, and itching to do something with idle cash, the speculators jumped in with both feet. For a while, mass psychology itself can power markets upward. It's like Wile E. Coyote, who runs off a cliff, yet stays suspended in mid-air; only when he looks down and realizes nothing's holding him up does he plunge to the canyon floor. Brutal job numbers, along with other indications that real recovery is still months, if not years, away have now caused the markets to look down.

In the wake of this renewed pessimism, some pundits now predict a “double dip” recession. But this metaphor isn't quite valid - because in the real economy (as opposed to the paper one), the first recession wasn't remotely over. Only in a self-contained financial casino, with no windows looking out at the real world, could anyone possibly believe recovery had already arrived.

And hence it's only the financial sector that will suffer a double dip. Indeed, anyone who piled back into the markets this spring, blinded by contagious greed but without reflecting on the pain and hardship that still mark the real economy, deserves the double-dip losses they are now poised to incur.

It'll take real spending on real goods and services to put real people back to work and end this recession. A reinflated financial bubble can't do that. So let's put more emphasis on putting money into motion in the real economy (like actually building new infrastructure projects, and actually allowing unemployed people to collect EI), instead of waiting for another mood swing from the same people who got us into this mess.

Jim Stanford is an economist with the Canadian Auto Workers union.

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

By Phil Wahba

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

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

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

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

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

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

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



Ford sales are up around the world

Reorganization plan bears fruit in Europe, Asia, Canada, Australia


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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


General Motors: Starting
over in Oshawa
The cars to be produced in Oshawa include the new Cadillac XTS, top, the Buick Regal, a redesigned Chev Impala and the retro Camaro, above.

Ontario's plant gets four models in revived GM
but they may be too big and too thirsty to last

Jul 12, 2009 04:30 AM
David Olive

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



Chrysler keeps shift in Windsor

Jul 11, 2009 04:30 AM

Craig Wong

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

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

"Today we're celebrating," Lewenza said.

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

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

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

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

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

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

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

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

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

Lewenza noted the minivan has remained a winner for Chrysler.

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

JULY 10, 2009

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

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

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

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

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

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

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

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

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

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

In Solidarity,
Kim Clout
Plant Chair
CAW Local 584


The rebirth of General Motors

Jul 10, 2009

Madhavi Acharya-Tom Yew
Business Reporter

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

With files from the Star's wire services


Big-ticket safety features,
at a lower price
New Ford Taurus

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


KNOXVILLE, TENN. — From Thursday's Globe and Mail Last updated on Thursday, Jul. 09, 2009 03:18AM EDT

Since the invention of the brake and, much later, the anti-lock brake system (ABS), new technology has been introduced in expensive cars and then worked its way down into more affordable vehicles.

Much of the high cost associated with developing these systems is borne by those able to afford the latest and best. Fortunately for the rest of us, as unit costs come down the technology becomes more widely available, benefiting a much larger group of consumers.

The 2010 Taurus is a perfect example. This big family car runs the price gamut from $30,000 to $40,000 for the cooking version and reaches $50,000 for the hot twin-turbo SHO version. Yet even at the lower trim levels, it has, or is available with, a remarkable array of high-tech safety features previously available in their entirety only on much more expensive and exclusive vehicles.

Most of them were developed by Ford's Volvo division and initially offered there and through Ford luxury divisions Aston Martin, Land Rover and Jaguar. Ford has sold off most of these assets, but kept the technologies.

Many of the technologies are already available in even less expensive Ford vehicles and you can bet they will be included in upcoming newcomers.

ADAPTIVE CRUISE CONTROL: A phased array radar - similar in concept to that used in the F16 fighter aircraft - is located behind the front fascia to look for moving objects.

If the closing distance between you and another vehicle or object is judged to be worrisome, a red warning light is flashed upon the windshield through an HUD (heads-up display) and a buzzer sounds. The system also pre-charges the brake system in anticipation of an emergency stop.

The same radar system separates stationary from moving objects a couple of hundred metres ahead and varies throttle and brake input to maintain a set distance to the vehicle ahead.

The system works at speeds as low as 32 km/h, is useful in heavy traffic and has four settings, allowing the driver to set various distance, speed and time gaps.

BLIND SPOT SYSTEM: There are two more of these radar units, one located in each rear quarter panel; they keep an eye on motion, i.e. traffic, alongside the Taurus.

When another vehicle enters a pre-determined area - the "blind spot" - whether approaching from behind or when being passed, a light flashes in the corresponding side mirror.

CROSS TRAFFIC ALERT: While the use of radar in the above trio of applications has the potential to avert some high-speed incidents, the use of the two in the rear quarter panels will prevent many a minor crash - and probably be appreciated by drivers more often.

By looking to the sides for moving objects, they can alert the driver to traffic approaching from either side when reversing out of a tight parking space. This common problem results from not being able to see what is coming until you have backed out far enough to see the traffic lanes - by which time most of your vehicle is sticking into them.

With Cross Traffic Alert, you have a pair of "eyes" at the rear of the vehicle that will warn you of anything coming within three car widths. It operates only when the transmission is in reverse.

POWER STEERING WITH PULL-DRIFT COMPENSATION: The electric power steering system - no belts, pumps or hoses - monitors what the driver is doing with the steering wheel. If a crown in the road or cross wind is resulting in a slight directional shift, the system compensates automatically. The driver feels nothing other than a slight reduction in the pull of the wheel.

REAR-VIEW CAMERA: This has become a rather widespread feature in the industry and its appearance here shows the driver the scene behind in a portion of the rear-view mirror or, if equipped, on the big navigation system screen.



Boeing notice needlessly
panics retirees

Jul 09, 2009 04:30 AM

James Daw

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


The growing cost of an aging world
The demographic challenge facing developed nations is expected to dwarf the cost of recent financial stimulus

Brian Milner and Heather Scoffield

Toronto, Ottawa Globe and Mail Update Last updated on Thursday, Jul. 09, 2009 06:20AM EDT

More than two centuries ago, economic theorist Thomas Malthus issued a famously grim forecast that population growth would outstrip the capacity of the world to feed itself, and that the result would be widespread famine and a sharp rise in mortality rates.

He was wrong on that count. But he was right about demographics becoming one of the most worrisome – and prohibitively expensive – challenges on the global stage.

“The new Malthusian nightmare is approaching,” U.S. economist Edward Yardeni said in a note to clients yesterday. “Today's much more realistic and dismal demographic scenario is that the number of older people will grow faster than younger ones almost everywhere in the world.”

This, in turn, is putting enormous pressure on governments, already stretching their fiscal capacity to the limit to cope with the fallout from the global financial crisis and ensuing economic slump. United Nations estimates show that birth rates have fallen below replacement levels in more than 70 countries, including most of the developed world, at a time when ever larger numbers of people are living well into old age.

No wonder alarm bells are beginning to sound in policy-making circles from Beijing to Washington.

The International Monetary Fund warned in a report yesterday that governments must contrive clear exit strategies from their massive stimulus packages because the exorbitant costs of supporting aging societies are breathing down their necks.

Costs of aging population

The costs associated with aging are 10 times larger in the Group of 20 countries than the tab for the current crisis, the IMF said in a document attached to its latest world economic assessment.

The fatter that governments allow their debts to grow as they try to put an end to the recession, the harder it will be to cover those costs in coming decades, the IMF said.

“Action is all the more critical, in that progress in one key pillar of a strategy to address these pressures – reducing budget deficits and lowering public debt levels in the short-term to make room for future entitlement spending increases – has been undermined by the crisis,” the IMF said.

In Canada, Finance Department officials are already crunching numbers to figure out how soon the big bills associated with aging will hit, and how much time Ottawa has to get spending and revenues back in balance. The aging argument is expected to figure prominently in Finance Minister Jim Flaherty's plea to balance the budget sooner rather than later, insiders say.

Canada's ratio of aging costs compared to crisis spending is probably considered one of the highest in the world by the IMF partly because the crisis costs have not been huge, compared with those of other countries, said William Robson, president of the C.D. Howe Institute.

But it's also because the cost of aging is expected to rise sharply, according to calculations Mr. Robson has made.

“The transition will be large and abrupt,” he warned, because Canada's fertility rate plunged after the baby boom. The dependency ratio – which shows the number of people over the age of 65, compared with those younger than 65 – will rise from about 20 per cent today to about 40 per cent over the next two decades, he said.

He figures the added costs to health care, Old Age Security, government pensions and other age-sensitive spending to amount to about $1.5-trillion in today's dollars – a burden that will mostly be borne by the provinces, particularly in Eastern Canada.

But compared with the likes of rapidly aging Japan, Russia and a handful of Western European countries such as Italy, Canada is in relatively good shape, economists say.

“Some countries have a bigger issue than others,” said Douglas Porter, deputy chief economist at BMO Nesbitt Burns. How big depends not only on the size of their demographic challenge but on how bad their debt situation was to begin with, he said.

Canada has the lowest net government debt-to-GDP ratio among the leading industrial countries and more favourable demographics than most, thanks partly to a large immigrant population.

Another plus for Canada is that since the mid-1990s, a growing number of people past the age of 55 have been staying in the work force. The participation rate for this age group has risen 12 percentage points to a record 35 per cent, a trend that may help the Canada Pension Plan stay above water, BMO says.


The IMF expects most developed countries will see their debt loads explode by 36 percentage points by 2014 (as a percentage of gross domestic product), because of the costs of huge stimulus packages, the rising demand for automatic stabilizers such as employment insurance, falling revenues and asset prices, as well as higher interest payments.

“It is essential to prepare the ground now for an orderly withdrawal of stimulus once signs of recovery have firmed, particularly as key reforms – for example, to pension and health care systems – will take time to bear fruit,” the IMF said.

If governments fail to design and communicate sound exit strategies, concerns about inflation will prompt interest rates to rise further, exacerbating the debt burden and making it even harder to support an aging population.

The conundrum is weighing heavily on policy makers, who don't want to withdraw stimulus too soon – or even talk too much about it – for fear of destabilizing a fragile recovery that has barely begun to take hold.

Aging will also have a marked impact on geopolitics.

Based on their growing economic power fed by the large, expanding pools of young people under the age of 25, countries like India and Brazil will soon wield considerably more clout in global affairs, while Russia's influence, with its rapidly falling birth rate, will be diminished.

It's also an issue for China, where the one-child policy has spawned both a lower birth rate and a higher ratio of males to females.

“Demography is very rapidly going to change power relations,” said Mr. Yardeni, president of New York-based Yardeni Research.


The new buzz in MBA class
Buzz Hargrove

'It's clear we have to concentrate on how we resolve disputes quickly'

Mary Teresa Bitti, Financial Post  July 08, 2009

What does a retired national leader of the country's largest private-sector union do when he retires? That was the question Buzz Hargrove contemplated in September after he stepped down as president of the Canadian Auto Workers. Ironically, it was Mr. Hargrove who helped set the retirement age at 65. Yet, there he was, pushing up against 65 with no desire to stop.

"I have too many ideas. I wondered what I would do," Mr. Hargrove says. "I kept checking to see if my phone was broken because it had stopped ringing." And then Sheldon Levy, president of Ryerson University, called. By January, Mr. Hargrove started his academic career at Ryerson's Ted Rogers School of Management as a distinguished visiting professor.

He couldn't be more thrilled. "As part of my role as national president of the union, I've travelled all over Canada and the U. S. lecturing at universities on labour management, political, social and economic issues. It's consistent with what I've done all along."

As a former union leader, Mr. Hargrove brings a perspective that management students say had been lacking.

"He provides our students with a remarkable insight," says Ken Jones, dean of the school of management. "If you go into business, you are going to have to deal with labour, whether it's unionized or not. Labour issues are talked about in HR, in the school of management; they are talked about in politics departments, in history departments. My point is we have to provide our students with an understanding of the environments they are going to work in. Certainly, I don't know of a business that doesn't have labour or management. And who better to talk about those issues than Buzz Hargrove?"

Becky Reuber, a professor in strategic management at the Rotman School of Business, sees Mr. Hargrove offering a fuller picture to students preparing to enter executive ranks. "The more perspectives that come into the classroom, the more the students are able to compare and contrast and enrich their academic life," Ms. Reuber says.

"One of the things one wants to do with businesses is to look strategically at where companies are going and how they can get and maintain competitive advantage. A huge aspect of that is labour. Mr. Hargrove is able to offer insights few can. There are not a lot of people with his experience. The skills he brings will apply more generally as well. The business contacts/ network that he can bring into the classroom is also very valuable."

That network is already being put to use. In addition to lecturing, Mr. Hargrove is also working with the dean's office to organize an all-day conference in November that will focus on revitalizing Canadian manufacturing. "Buzz, through his contacts, can bring people to the table from the labour, government and management side that few people could," Mr. Jones says. "It profiles our school, builds our brand and provides students with valuable insights."

"Manufacturing is never going to be the same, so what's the next phase of manufacturing?" Mr. Hargrove asks. "We've lost our greatest strength-- the auto sector. The question is can we be on the leading edge of the new wave of alternative-fuel vehicles and electric cars? There are opportunities. You know where the world is heading. If you don't support those initiatives, you fall behind. Our conference will bring about ideas for government to pursue in terms of assisting business in moving forward."

All of this, Dr. Jones says, provides a better educational experience to students and at the same time establishes the role the Ted Rogers School of Management is playing in the business education and business community. "We are all about connections: connections to business to community to students -- and this is one way to connect, by building these bridges between prominent Canadians and our school."

Perhaps Mr. Hargrove's biggest impact will come with the creation of the Canadian Institute for Labour Management Relations at the university. With the number of labour disputes playing out, the timing could not have been better.

"It's clear we have to concentrate on how we resolve disputes quickly and I'm hoping if we can get the right people to support this idea that we can have a lasting impression on labour management relations throughout the country," Mr. Hargrove says.

There will be courses, research opportunities for faculty and others to collaborate and look at best practices around the world. "This will be an independent place where people can go for unbiased information and advice," Mr. Hargrove says. "The goal is to improve labour-management relations and make our economy more competitive."

Financial Post

CAW, automakers agree
on health trust

Groundwork laid; GM, Chrysler contributions to
fund benefits for retirees due next year

Jul 08, 2009 04:30 AM
Kristine Owram

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

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

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

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

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

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

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

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

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

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

Canadian Press Promises to Recognize Ford Bramalea
in Future Articles


Ford wants same deal union gave GM, Chrysler: CAW
Article by Kristine Owram
The Canadian Press

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

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

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

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

Chris Wilski
CAW Local 584
Retirees Chair


June 13, 2009
Re: Important Ford Location Always Omitted

Dear Kristine Owram:

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

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

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

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

Thanks for your attention in this concern.

Chris Wilski
CAW Local 584
Retirees Chair



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

Hi Chris,

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

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

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

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


OFFICE: 416-507-2147
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Ford wants same deal union gave GM, Chrysler: CAW

Jul 07, 2009 06:03 PM

Kristine Owram

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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




Pension panic subsiding

Jul 07, 2009 04:30 AM

James Daw

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


RETIREES Rally at MPP Dwight Duncan's office May 15th, 2009. Mr. Duncan agrees to meet with a group of retirees to discuss their concerns regarding the future of the pension fund.


Amazing Story About an 89 year
old woman and her Mercury Comet 



Kim Clout
June, 2009

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

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

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

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

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

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

Kim Clout
Plant Chairperson
CAW Local 584



JUNE, 2009

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

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

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

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

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

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

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

In Solidarity,
Kim Clout
Plant Chairperson
CAW Local 584



Court ruling clears path for
GM to restructure
GM closer to emerging from bankruptcy  A bankruptcy judge says GM can sell the bulk of its assets to a new company, clearing the way for the automaker to quickly emerge from bankruptcy. The Detroit car maker's Chapter 11 filing on June 1, 2009 was the fourth-largest in U.S. history. (July 6, 2009)

Jul 06, 2009

Michael J. de la Merced

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


CAW to press Ford on staying in Canada



The Canadian Auto Workers union will insist that Ford Motor Co. maintain its current manufacturing footprint in Canada as part of negotiations about helping the auto maker cut its costs here, CAW president Ken Lewenza says.

"We're not going to go into early bargaining just because GM and Chrysler went into it," Mr. Lewenza said yesterday. "We've got to get something in return and the only thing you get in return at this particular time is a commitment to product and that's exactly what we're going to work on."

The Canadian manufacturing operations of Ford represent about 13 to 14 per cent of its North American manufacturing, he said.

That includes the St. Thomas Assembly Plant near London, Ont., which makes full-sized sedans, but has no new vehicles earmarked for it and is widely believed by industry analysts and sources to be doomed early in the next decade. Other Ford manufacturing operations in Ontario include two engine plants in Windsor and a complex in Oakville that assembles such crossover utility vehicles as the Ford Edge and Flex and Lincoln MKX.

But finding a new product for St. Thomas will likely represent the toughest part of any negotiations, Mr. Lewenza said.

The union's Ford council will meet with Ford manufacturing chief Joe Hinrichs next month before making a final decision on whether to reopen the contract, he said.

The auto maker must be fully competitive to maintain its manufacturing footprint in Canada, Ford Motor Co. of Canada Ltd. president David Mondragon responded yesterday.

"We're not competitive now in Canada with other North American jurisdictions for Ford, so we're not competitive with the U.S. and we're not competitive with our other competitors in Canada, be it the Japanese or domestic competitors," Mr. Mondragon said.

One reason for that is the concessions the CAW gave Chrysler LLC and General Motors Corp., which were ordered by the federal and Ontario governments as a condition for providing the two companies with about $14-billion in taxpayer money as they went into Chapter 11 bankruptcy protection in the United States. Those concessions reduced hourly labour costs for the two companies to about $50 from about $70 in contracts signed in 2008.

Mr. Mondragon said Ford Canada will kick off a special marketing program this week that includes employee pricing and a $100 payment to Canadians who test drive a Ford then decide to buy a vehicle from a competitor.

"We're so confident in Ford vehicles that we believe once you drive a Ford, you won't want to drive anything else," he said.

The employee pricing program will run until the end of August. The savings amount to as much as $15,000 on one 2009 version of the F-350 pickup truck and $4,300 on one 2010 model of the Fusion sedan.

"We've established great momentum throughout the year and we want to continue that momentum," Mr. Mondragon said, adding that market share figures for June are "very promising."

Ford has gained 1.2 percentage points of market share as of the end of May. Its share stood at 13.8 per cent, compared with 12.6 per cent in the first five months of 2008.



Grocery worker pensions in jeopardy

Commercial Workers Industry pension plan faces heavy losses,
benefit restructuring likely necessary

Jul 04, 2009 04:30 AM

Tony Van Alphen
Business Reporter

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


Ford bests rivals after 60 years, as new order emerges
Auto maker's sales jumped 25 per cent in Canada in June, while those of GM slumped 31 per cent


Greg Keenan

Globe and Mail Update Last updated on Friday, Jul. 03, 2009

A new order emerged in the Canadian auto market last month, with Ford Motor Co. of Canada Ltd.on top.

A sales surge sent Ford roaring into first place in vehicle sales in June, for the first time since 1949, ahead of General Motors of Canada Ltd., which usually tops the rankings, but has now been knocked out of first place twice in 2009.

Ford, often overlooked amid the massive publicity generated by the bankruptcy filings of its two Detroit-based rivals, has been quietly outperforming the market for most of the year, buoyed by the troubles at Chrysler LLC and General Motors Corp. and its decision to avoid seeking government financial help.

Its sales jumped 25 per cent in Canada in June, while those of GM slumped 31 per cent. In another industry first, Hyundai Auto Canada Corp. surpassed Chrysler Canada Inc. in monthly sales.

The changing of the guard was sparked in part by the collapse of GM and Chrysler's parent companies into bankruptcy protection and a resulting shutdown of all of Chrysler's North American assembly plants and most of GM's factories in June.

The shutdowns starved their Canadian dealers of vehicles, even though the Canadian market has been outperforming the U.S. market this year, with declines in the 20-per-cent range and the teens, compared with slumps surpassing 30 and 40 per cent in the United States.

Industry analyst Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc., noted Ford's jump into first place is probably not sustainable, because sales at Chrysler and GM are expected to recover once they bounce back from their Chapter 11 bankruptcy filings.

But Ford Canada president David Mondragon has put the pedal to the metal to try to keep Ford ahead, offering employee pricing for Ford buyers for the next two months and a $100 cheque to people who test-drive a Ford vehicle but buy a competing product instead. “It's about momentum, this momentum that we've established all year,” Mr. Mondragon said in an interview yesterday.

Ford is reaping the benefits of staying out of Chapter 11 protection and not being forced to seek the tens of billions of dollars in Canadian and U.S. government assistance doled out to Chrysler and General Motors.

“Consumers recognize the fact that Ford has not asked for government assistance,” Mr. Mondragon said. “That is a contributor for a lot of consumers who are coming in saying ‘Hey, we respect the fact that you haven't taken government assistance and we want to give your product a look,'” he said.

Ford has been able to weather the storm that has crushed its Detroit-based rivals in part because it shored up its balance sheet in 2006 by borrowing more than $20-billion (U.S.) by pledging virtually all its assets, including its Blue Oval logo. That gave the auto maker a head start on Chrysler and GM by allowing it to step up the pace of plant shutdowns and job cuts designed to match production more closely with demand.

“We've restructured aggressively and those efforts are starting to pay off,” Mr. Mondragon said.

Mr. DesRosiers said there is no doubt Ford is having a good year, with market share gains and a resurgence into second spot behind GM in the yearly rankings.

“But the reason Chrysler was No. 1 in February was because GM collapsed and the reason Ford was No. 1 in June was because GM and Chrysler collapsed,” he said.

While Chrysler's sales plunged 58 per cent in June, Hyundai sales jumped again – 25 per cent last month – to underline what has been the best performance of any auto maker in Canada this year.

Hyundai's six-month sales jumped 21 per cent, compared with a 13-per-cent decline for the overall market.

The 13-per-cent decline was the smallest drop so far this year, making June the best month in a brutal first-half for auto makers in Canada.


Bailouts put brakes on car sales

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

Jul 03, 2009

Tony Van Alphen

Business Reporter

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Toronto Star


Magna may face Chinese
rival over Opel
Frank Stronach - Beijing Automotive Industry Holding Co. may lodge a bid in the coming days, source says

FRANKFURT/MOSCOW — Reuters Last updated on Thursday, Jul. 02, 2009 08:20AM EDT

Opel frontunner Magna's consortium partner Sberbank said the race to acquire the carmaker was all but over, though Beijing Automotive Industry Holding Co (BAIC) may still lodge a bid in the coming days.

After visiting Opel's data room in Ruesselsheim last week, Daimler's Chinese partner is working out details of an offer to be submitted before a July 15 deadline with its advisers Deutsche Bank and PriceWaterhouse Coopers, a source familiar with the matter said on Thursday.

General Motors has heightened the pressure on Magna, considered to be a shoo-in for the Opel deal, by talking up rival offers from BAIC and Belgian investment firm RHJ International in the run-up to July 15, when Magna wants to be able to sign a deal.

BAIC told Reuters it had no knowledge of the matter.

In Moscow, Sberbank Chief Executive German Gref told reporters on Thursday that BAIC, RHJ and a third rival, Fiat, were all effectively out of the race.

“I do not see any serious competition. The choice has been made and the question now is of how to structure the deal,” he said.

Speaking in Germany's Bild newspaper on Thursday, Klaus Franz, head of the Opel works council, was quoted as saying GM was playing a high-stakes game in a bid to improve the terms of the sale, adding that he knew of no new offer.

That followed comments from Mr. Franz in the Wall Street Journal report, in which he expressed strong reservations about any sale to Beijing Automotive.

“They only want technology and have no experience in global auto production,” the paper reported Franz as saying.


Union rejects Air Canada
tentative agreement

Surprise move puts Canadian carrier's financial future in further jeopardy

Brent Jang

The Globe and Mail July 1, 2009

Members of Air Canada's largest bargaining unit have narrowly rejected management's proposal for a pension funding moratorium, a move that puts the brakes on the cash-strapped airline's recovery plans.

After absorbing a series of pay cuts over the past six years, the workers are upset at the prospect of making more sacrifices, said Bill Trbovich, a spokesman for the International Association of Machinists and Aerospace Workers.

The IAMAW's technical, maintenance and operational support unit voted 50.8 per cent against a tentative pact that also would have frozen their wages until March 31, 2011, Mr. Trbovich said in an interview Tuesday night.

Mechanics, baggage handlers, cargo agents and electricians are part of the unit, which has more than 10,000 members.

Labour leaders had urged members of the unit to ratify the proposed 21-month collective agreement. The previous six-year contract expired Tuesday.

“We need to go back and regroup, and figure a way out of this,” Mr. Trbovich said, noting that the rejection vote also threatens to delay Air Canada's efforts to gain federal approval to defer most of its pension payments for 21 months.

One option could be bringing back former Ontario judge James Farley to mediate. Ottawa appointed Mr. Farley as the mediator in early June to persuade five unions to support Air Canada's proposal to skip a $100-million pension payment due on July 30, another $60-million due on Aug. 14 and suspend further contributions until the spring of 2011.

The Montreal-based airline says it needs immediate pension relief, and it's also seeking $600-million in loans to survive the recession. Analysts say Air Canada faces the possibility of filing for bankruptcy protection for the second time in six years if it doesn't get the pension break and new loans.

Two smaller units at the IAMAW overwhelmingly supported their proposed contracts, with finance staff voting 87.5 per cent in favour and clerical workers voting 93.2 per cent to ratify.

While the largest IAMAW unit has rejected its tentative deal, if the votes of all three units are combined, then there would be a narrow approval of the pension funding moratorium, one industry official said.

Two other Air Canada unions, representing customer service agents and dispatchers, have already ratified their 21-month labour agreements. Another two unions, representing pilots and flight attendants, are scheduled to wrap up their ratification votes by mid-July.


GM in talks that may leave
Magna alone at the altar

July 1, 2009
THE New York Times

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

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

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

Yesterday, Siegfried Wolf, a Magna chief executive, expressed confidence that a deal would be reached and said that he "wants to come to an agreement by July 15," Associated Press reported.

Initially, Fiat had been favoured as the probable buyer, but Magna edged out the Italian automaker because of German union and government fears that a Fiat deal might mean significant job cuts in Germany. Many analysts argued that the Fiat deal made more commercial sense because consolidation was needed in an industry suffering from overcapacity amid the worst sales slump in decades.

Fiat CEO Sergio Marchionne has said that the Italian company will not raise its bid but that it remains interested if the talks falter.

While Fiat remains in the background, GM has quietly begun talking with RHJ International, a Brussels-listed industrial holding company that owns auto-parts businesses in Japan and Germany, as well as Beijing Automotive Industry Holding.

Beijing Automotive, owned by the Beijing city government, has been the largely silent local partner for a series of joint ventures with multinational automakers, while showing little interest in developing its own cars. But after recent management changes, it has begun to show an interest in raising its profile.

"Their new leaders are very ambitious," said Yale Zhang, the director of China vehicle forecasts at CSM Worldwide, an automotive consulting firm. "They really want to achieve a bigger role.''

Still, officials doubt that the Chinese company is prepared to take on such a complicated international transaction. Government officials say they consider RHJ the most likely fallback plan if the Magna-Sberbank deal should falter.

By talking with other interested parties, General Motors improves its leverage over Magna and Sberbank, even as the Detroit giant moves through bankruptcy. What is more, the talks provide GM with the ability to quickly move on to a new deal if the Magna talks should founder.

The German government, which is providing Opel with 1.5 billion euros in bridge financing as well as 3 billion euros in loan guarantees, remains the kingmaker.

A spokeswoman for Sberbank declined to comment, while Arnaud Denis, a spokesman in Brussels for RHJ International, said he could neither confirm nor deny his company's interest in Opel.


Ford revs up summer
incentive season

Automaker offers cash to those who test-drive one of
their models, but buy from a rival manufacturer

Jun 30, 2009 04:30 AM
Tony Van Alphen
Business Reporter

Ford Motor Co. of Canada Ltd. will offer $100 to shoppers if they test-drive any one of the automaker's vehicles but then buy a rival's product instead.

Ford said yesterday it is introducing the national promotion tomorrow on a bet that the automaker can increase sales by pulling a lot more potential buyers into showrooms.

It is part of the company's summer incentive program, which will include "employee pricing" and thousands of dollars in savings that Ford and other automakers have offered to consumers in recent years during July and August.

In getting a small jump on the latest summer incentives, Ford president David Mondragon said the company is simply compensating consumers for their time in a company dealership.

"It's a way of introducing our brand and our vehicles," Mondragon added in an interview.

"We're betting on the fact that our vehicles are so good that once you drive a Ford, you won't want to drive anything else."

He said Ford's research shows that once shoppers visit its dealerships, the company's sales success rate is 30 per cent and that it should increase this summer with the latest incentive.

Under the promotion, shoppers will receive $100 if they test-drive any new Ford or Lincoln and then purchase a model in the same segment from another manufacturer.

The promotion is a bigger version of a Ford idea that the company and some dealers have offered on a particular model in recent years.

In 2004, Ford gave visitors at the Canadian International Auto Show a coupon to test-drive the Freestar minivan. Coupon holders who drove the model got $100 if they bought a rival minivan.

In 2006, a Ford dealership in Mississauga offered $100 gift cards to anyone who test drove a Fusion model and then bought a competing Honda, Toyota, or Nissan mid-size car.

Ford is also offering consumers the same lower prices that employees can get for new vehicles. The savings range from about $4,300 on a Fusion car to $15,000 on a F350 Crew Cab pickup truck.

General Motors and Chrysler spokespersons would not disclose any new incentives for July and August.

However several automakers including GM, Ford, Hyundai and Mazda are currently offering cash incentives or no-interest financing.

Meanwhile, Mondragon said he will meet with Environment Minister Jim Prentice again soon to press for "clunker" legislation in Canada that would spur slumping auto sales by encouraging consumers to scrap aging vehicles in exchange for incentives of at least $3,500 to buy new, more fuel-efficient models.


Deadline passes in CAW,
Navistar talks

June 30, 2009


CHATHAM–A midnight deadline passed with a settlement in contract talks between the CAW and the Navistar truck plant here.

The union says despite the failure to reach a new agreement and a wide gap on key issues, it remains open to further discussions.

The CAW says efforts to reach a new deal failed because of "company demands for massive concessions and job cuts."

Union president Ken Lewenza says massive concessions and job cuts would devastate the community.

He says the proposed job cuts would result in more than 1,000 workers now on layoff with little or no chance of recall.

The union will update members on Wednesday on the negotiations and says it is prepared to meet with the company at any time.

GM to accept 'lemon' claims

Jun 29, 2009 04:30 AM


NEW YORK – General Motors Corp. has agreed to take on responsibility for future product liability claims, removing what could have been a sizable roadblock on the automaker's path to a quick sale of its assets and emergence from Chapter 11 bankruptcy as a new company.

As part of its government-backed restructuring plan, GM wants to sell the bulk of its assets to a new company and leave behind unprofitable assets and other liabilities such as product-related lawsuits. A hearing on the proposed sale is scheduled for tomorrow.

But in a concession to consumer groups and state officials who had threatened to block the sale because of product liability concerns, GM will now assume responsibility for future claims on vehicles made by the old company, according to a bankruptcy court filing.

Under the automaker's previous plan, consumers who wanted to file a lawsuit related to a defective GM vehicle would have had to seek compensation from "Old GM'' which likely would not have any assets to pay their claims.


GM to take on future product liability claims

Jun 28, 2009 06:55 PM


NEW YORK – General Motors Corp. has agreed to take on responsibility for future product liability claims, removing what could have been a sizable roadblock on the automaker's path to a quick sale of its assets and emergence from Chapter 11 bankruptcy as a new company.

As part of its government-backed restructuring plan, GM wants to sell the bulk of its assets to a new company and leave behind unprofitable assets and other liabilities such as product-related lawsuits. A hearing on the proposed sale is scheduled for Tuesday.

But in a concession to consumer groups and state officials who had threatened to block the sale because of product liability concerns, the new company will now assume responsibility for future claims involving vehicles made by the old company, according to documents filed in federal bankruptcy court in New York on Friday.

Under the automaker's previous plan, "New GM" would not have assumed any liability for future claims related to GM vehicles made before the sale and creation of the new company. That meant that consumers who wanted to file a lawsuit related to a defective GM vehicle would have had to seek compensation from "Old GM," a collection of mostly unprofitable assets left over after the sale, where there likely would be nothing left to pay their claims.

But under the new plan, "New GM" will not assume liability for already pending claims against the automaker and those people will still be forced to seek compensation from "Old GM.''

"The fact that 'New GM' will protect consumers injured by defective 'Old GM' cars is a positive development for public safety," The Ad Hoc Committee of Consumer Victims of Chrysler and GM said in a statement released Saturday.

But the group said more needs to be done, noting that GM's concession doesn't help people that have already been hurt by its vehicles. It also said consumers hurt by fellow automaker Chrysler LLC still have little recourse.

As part of its plan to sell most of itself to a group led by Italy's Fiat Group SpA and emerge from Chapter 11, Auburn Hills, Mich.-based Chrysler also asked the judge overseeing its case for permission to leave behind its past and future product liability claims.

Consumer groups, as well as several individuals with pending claims against Chrysler, objected and some even took their arguments to the Supreme Court before the sale was ultimately approved and the automaker emerged from court oversight shortly thereafter.

GM, which filed for Chapter 11 on June 1, has said it wants to spend no more than 60 to 90 days under bankruptcy protection and that a key part of meeting that goal will be a quick sale of the company's assets.

Under the deal brokered with President Barack Obama's administration, the U.S. government will get a 60 percent ownership stake in the new GM. The Canadian government will get 12.5 percent, with the United Auto Workers union taking a 17.5 percent share and unsecured bondholders receiving 10 percent. Existing GM shareholders are expected to be wiped out.

Even with the resolution of the product liability issues, GM still faces numerous objections to the sale, including ones filed by a group of its unsecured bondholders, a handful of states and cities and individual retirees and shareholders.

While noting the "painful" sacrifices being made by many parties in GM's bankruptcy process, including individuals injured by GM products, an administration official said Sunday there is nothing "exceptional" about the automaker's bankruptcy terms.

"The outcome for all involved would have been far worse had the government not intervened in the restructuring and General Motors had liquidated," the official said in an emailed statement, declining to be identified.


Organized workers feeling the heat

June 28, 2009
Sandro Contenta

Feature Star Writer

At the foot of the Don Valley Parkway are haggard symbols of the risk workers take when striking in hard times.

Employees of the old Lever Brothers soap factory have been walking the picket line for a year. In February, American owner Korex Don Valley filed for bankruptcy protection. Last month, all 100 strikers received layoff notices.

"We, as the normal common guy, didn't see it coming," David Pal, 48, says of the recession. "We were out in June (2008) and in July we started realizing, holy cow, the economy seems to be in trouble."

And yet, sitting under a makeshift tent at the plant's gate, Pal and a handful of other strikers say they have no regrets.

They accepted a long list of concessions in their last contract seven years ago, including a wage freeze – their average salary is $25 an hour – and the loss of their defined-benefit pensions. Last year Korex demanded much more.

"I'm not going to work in a sweatshop," says Pal, a member of the Communications, Energy and Paperworkers union. "After 30 years of service, some things are worth fighting for."

Not so far away, on Commissioners St., municipal garbage workers feel the same way. They hit the pavement this week with other city employees to fight concession demands, including their decades-old right to bank unused sick days and cash in some of them at retirement.

"They're using the recession as an opportunity to stick it to us," says garbage worker Bill Steele, 44.

Also sticking it to them is the public. Says Steele: "They're jumping on the bandwagon: `Hey, let's beat these guys down.'"

Moments earlier, a woman in a hurry to dump her garbage at the Commissioners St. site – one of several where residents can do so – spit at picketer Tommy Bazkur, 55.

Union jobs have long been seen as the standard-bearers for decent working conditions. But these days, unionized workers are feeling the heat from employers and the public.

With corporate profits down 24 per cent in the first quarter – about the same amount they fell in the last quarter of 2008 – the pressure on employees for concessions is mounting.

Across the private sector, defined-benefit pensions – enjoyed by only 17 per cent of these workers – are under serious threat and proposals to cut wages are making an appearance.

Sharp cuts in benefits to save GM and Chrysler are the most obvious example. In the struggling newspaper industry, The Globe and Mail wants employees to take an unpaid one-week vacation each year and switch to a less secure defined-contribution pension.

The most extreme example comes from abroad: U.K.-based British Airways, which recently reported a pre-tax loss of $760 million, has asked its employees to work one month for free.

Companies struggling to survive make tough choices, sometimes in agreement with unions. But the concessions they demand set the tone for profitable companies too, argues Norene Pupo, director of York University's Centre for Research on Work and Society.

Says Sid Ryan, Ontario president of CUPE, which represents striking city employees: "There's a real trend to pull everybody down to the lowest common denominator. And that's why you'll see long strikes."

Niels Veldhuis, director of the Fraser Institute's Centre for Labour Market Studies, disputes the claim. Expanding companies can't afford to be stingy if they want to attract the most talented people, he says.

Twenty-one unionized workplaces under provincial jurisdiction are currently on strike in Ontario – one less than in June last year, and six less than in June 2007.

In contract agreements between Ontario unions and employees in the private sector from 2007 to April 2009 average annual increases fell from 2.9 per cent to 2 per cent. In public-sector contracts negotiated during this period, wage increases fell from 3.1 per cent to 2.5 per cent.

Unions are facing their own survival challenges. Unionized manufacturing jobs across Canada disappeared at twice the rate of non-unionized ones from 1998 to 2008, according to Statistics Canada. During the past year in Ontario, 53 per cent of the 133,000 manufacturing jobs lost were unionized.

Voy Stelmaszynski, a lawyer with the Ontario Labour Relations Board, has noticed an increase in applications to decertify unions. Most are due to workplaces switching from one union to another, he says.

As the number of manufacturing jobs drop, unions are scrambling to maintain revenues from union dues, Stelmaszynski says. The result is an increase in rival unions "raiding" already unionized workplaces.

"They really are in a struggle for membership," he says.

The bottom for both unions and working conditions depends on the length of the recession, says York University's Craig Heron, a historian of the Canadian labour movement.

"You find much more strength and leverage for unions during boom times and a much weaker ability to negotiate during down times."

With unemployment rising – it hit 9.4 per cent in Ontario in May, the highest in 15 years – employers have a bigger pool of labour to choose from. During the Great Depression, workers who resisted wage cuts were replaced by the many waiting at factory gates for jobs, Heron notes.

The heyday for unions began in the early 1940s, when massive cross-country strikes and the rise of the pro-union CCF party pushed the federal Liberals to pass laws that allowed unions to be recognized.

What followed was an unprecedented period of prosperity and near full employment. Wages and benefits rose steadily, as did union membership. This ended in the 1970s, with wage and price controls and, later, company downsizing.

Along the way, unions set labour standards for most workers. Their gains pushed federal and provincial governments to set labour laws that guaranteed, for example, paid vacations and severance. For years in Hamilton, when the unionized Stelco steel mill struck a deal, its non-unionized competitor, Dofasco, automatically matched it.

"The quality of life that everybody enjoys today is thanks to the labour movement," says Pal, the striking factory worker. "And then people turn their backs on it like it never happened."

The Fraser Institute's Veldhuis argues that improved working conditions have nothing to do with unions. The key is job creation, which he expects will robustly return once we're out of the recession.

The scramble for workers will then intensify as Canadian baby boomers retire, he says.

"There is going to be pressure for workers on all sorts of labour categories, and that obviously means that employers are going to have to do more to attract talent, both in the public and private sectors.

"That is good for workers because it means higher wages, it means better conditions, it means they can demand more. That's what we were seeing before the recession hit."

For now, however, the lack of overt public support for picketing workers is indeed striking when compared to countries like France. Hundreds of thousands there regularly take to the streets to fight proposed labour concessions, creating the impression of a highly unionized country. In fact, only 8 per cent of the French labour force is unionized, compared to 30 per cent in Canada. (If workers in the agricultural sector are counted, the number drops to 25 per cent.)

Canadians are victims of "a politics of envy," promoted all the more during the recession, says sociologist Pat Armstrong.

"People say, `Why should those workers get it if I don't have it,' as opposed to flipping it around and saying, `Why shouldn't we all get it,'" she says.

Canadians should be careful what they wish for, particularly if wages start falling, says Sylvain Schetagne, senior economist at the Canadian Labour Congress.

"People will consume less and you might end up losing your job."

Some argue more focus should be placed on fixing the social safety net – such as boosting employment insurance coverage and the Canada Pension Plan – and reforming economic practices.

Roger Martin, dean of the Rotman School of Business, calls for changes in executive pay structures. He blames much of the economic collapse on the way Wall Street uses stocks to pay the lion's share of CEO salaries. That created a kind of financial Russian roulette, with hedge fund managers and others repeatedly betting on the riskiest investments until they all came tumbling down.

Pupo criticizes what she calls "corporate welfare" – executives getting huge bonuses while workers get cuts. At Nortel, which is under bankruptcy protection, severance pay was cancelled and pension benefits slashed while executives received millions of dollars in bonuses.

Yet even among unionized workers envy makes an appearance. Strikers at Korex can't help but feel their striking cousins in the garbage sector have got it easy.

"Once the garbage starts smelling, after three weeks, it's going to be settled," says David Pal.

"It's just like a little summer vacation for them without pay," adds fellow striker Ron Gaudet, 58.

At the Commissioner St. picket line, garbage workers complain the city wants to take from them what it didn't try to take from police or fire fighters. Jay Gibbs, 37, says people wouldn't envy his sick day plan if they knew what it was like to "slug" 15 to 20 tonnes of garbage a day, four days a week, from 7 a.m. to 5 p.m.

"At the end of the day, I'm absolutely exhausted," says Gibbs, a driver and garbage loader for three years. "These older guys, they're hurting."

Bazkur, who makes $25 an hour, works at a site also used by private garbage collectors. "They get $18 an hour and in a couple of years their knees are gone," he says. "They run them into the ground. Is that what people want to see?"


Auto-parts plant's survival

A look at the day-to-day struggle one auto-parts manufacturer and its staff face as they fight to survive economic turmoil in Canada's recession-weary industrial heartland

Jun 27, 2009 04:30 AM
Tony Van Alphen
Business Reporter

WATERLOO–An equipment operator punches the start button on his high-end lathe and watches it put the finishing touches on a simple metal piece. He's almost alone on the plant floor. Most of the machines around him are silent. He worries.

On the other side of the plant, a glum customer services manager studies a spreadsheet with dwindling contract orders. The data tells her the machines will remain down and layoffs will be longer for a lot of workers.

Nearby, an anxious controller can't plan ahead. There's too much uncertainty. It's hard to keep revenues and costs in line and meet the payroll. He now draws up budgets by the week, not by the month or quarter.

Across the aisle, a frazzled materials manager is on the phone trying to delay payment to a supplier for a few more days. Another supplier is on hold. He hopes to find the money somewhere.

Upstairs, the company's president is preparing to rush off to Europe on a crucial mission. He needs to find contract work and sow the seeds for the company's future. Fast.

And in another office, the company's founder and majority owner feels the weight of all of them on his hunched shoulders.

He's also got everything on the line now, including a personal multimillion-dollar fortune.

Welcome to a day in the life of Maxtech Manufacturing Inc., one of many auto-parts companies in turmoil in Canada's reeling industrial heartland.


Maxtech owner and chief executive officer Kacee Vasudeva has felt the weight and risk increasing for more than two years. At 63, he works longer and sleeps less at night. Playing more golf is a passing fantasy. There is no time for doting on grandchildren.

"Every day is a struggle now," says Vasudeva, slowly removing a set of reading glasses and rubbing his eyes at the end of another gruelling 12-hour day.

"The last few years have been the toughest of my life."

Maxtech's fight for survival is a corporate drama playing out behind the walls of hundreds of manufacturing plants across recession-ravaged southwestern Ontario.

"We're in a war zone here every day trying to keep things going," said materials manager Joe Schneider. "It's extremely hard on everyone. It's difficult for people on the outside to really understand what we're going through."

A higher dollar, plunging demand for exports, intense offshore competition and tighter credit have led to the biggest and quickest economic downturn since the Great Depression.

It has triggered a crash in North American auto sales and hammered the country's manufacturing sector. Empty plants with bankruptcy notices on their doors and "for sale" signs on the gates dot industrial parks across southwestern Ontario.

Surviving manufacturers desperately search for lifelines to stay open another month or week. They wait for a recovery that might not include them.

Owners fret as the losses pile up. Hapless managers cut costs and then do it again to make the numbers work. Employees lose their jobs temporarily or permanently. Families and children suffer. Everyone hurts.

Vasudeva gets phone calls from loyal, long-time employees on layoff wondering when business will pick up and they can return. It pains him to tell them that there's no work yet – again.

Vasudeva always found the cash with understanding lenders, friends or, more often than not, he sunk his own money into the company.

But the recession is dragging on and it is squeezing him more and more. Cash is tight and options are dwindling.

He has become a true entrepreneur in the spirit of the late telecommunications icon Ted Rogers, who said you really aren't one until you mortgage your house. Vasudeva did that in 2007 to resolve a cash crunch.

Maxtech, which operates three plants, including two in the city's north end, makes numerous components ranging from exhaust system parts to gear shift levers for big name suppliers like Mahle, Siemens and ArvinMeritor. In turn, they add other parts or machining for delivery to Chrysler, General Motors and Ford assembly plants.

The company also designs hand- and power-tool accessories that are made in China, sent here and distributed to retailers such as Home Hardware. Furthermore, it is seeking new work in the environmental sector.

"If we can make a bumper part, we can make a rain barrel," says Vasudeva, who prides himself on his company's attention to innovation.

In coping with the downturn, Vasudeva and his partner and minority owner, Atul Bali, don't have to look at financial statements to know the company is struggling. They just turn their ears to the plant floor below the management offices.

A lot of noise means more production and business. It's sweet music to them. But except for the occasional clanging, clunking, thumping or humming sounds from a lathe or screw machine, it is quiet.

"All these machines are asleep," says general manager Isaac Jacob derisively as he walks through one section of a Maxtech plant.

It's a familiar sight in Canadian industry. Utilization rates fell almost six percentage points to less than 70 per cent during the first quarter, the lowest level since Statistics Canada started tracking the data in 1987.

Nothing illustrates the underutilization at Maxtech more than an $850,000 "dial" machine that the company designed and bought to win a contract from Siemens VDO Automotive.

The complex unit drills holes, inserts pins and assembles four different components to create an intake control lever that will end up in the manifold of a Chrysler engine.

The machine has rung up nothing but losses for Maxtech. It has the capacity to produce 14,000 levers a week. But it is the plant's biggest sleeper, pumping out less than 1,000 a week in recent months. On this day, it doesn't move.

The silence of machines and steep decline in the auto market has pummelled Maxtech on the revenue side. In the first quarter, revenues tumbled to $3.5 million from $9.2 million in the same period last year. Operating losses grew to $700,000 in the quarter after the company barely broke even in the same three months of 2008.

The deteriorating financial performance has forced Vasudeva and Bali to slash costs and staff. About 190 employees have lost their jobs, or more than half of the 350 from two years ago. Many remaining hourly-rated employees are working three days a week.

It is the same elsewhere in the beleaguered parts industry. The sector, which is concentrated in southern Ontario, will shrink by more than a third and eliminate a phenomenal 36,500 jobs this year, according to a forecast from the Conference Board of Canada, a leading research agency.

Maxtech managers, including Vasudeva and Bali, are also feeling the impact. They are absorbing a stinging 40 per cent pay cut.

That means they work five days but two of them are effectively free. Some of those workdays stretch into the evenings. The strain is visible on everyone.

Veteran machine operator Murray Luft, a fortunate employee with some work, has never seen Maxtech struggle so much in his 12 years with the company.

"We're holding our breath," says Luft, standing beside his computer numerical control lathe, one of the few machines making noise these days.

Left has gained some extra job time because he's working on a prototype part for Volkswagen, one of Maxtech's new customers.

It is indicative of Maxtech's aggressive approach to diversification away from domestic automakers. The company is pursuing parts work in the European auto market and outside the industry in areas such as flanges and valves for the oil sector, steel spindles to regulate water flow in pipes and even blades to power wind turbines.

Although the strategy shows promise, it will take time, which is something in short supply at Maxtech. A lot more equipment around Luft's lathe needs to run consistently again.

Customer service manager Sunita Gandhi hasn't seen a trend for more business, which would turn those machines on and end some layoffs.

She pulls out a daily production sheet detailing output of small parts for a key customer, and points to spaces with zeroes. There are a lot of them.

"Here's an order for 490, down from 2,220," Gandhi adds. "When you see something like that, you know workers are staying at home and it's sad. Very sad."

Dealing with those sliding orders and volatility causes chronic headaches for Schneider, who has to make sure steel, plastics and tools arrive on time for manufacturing.

Those suppliers are skittish these days about delivering to Maxtech when there are doubts about whether it can make timely payments.

Sputtering automakers exacerbate the problem by reducing or abruptly cancelling orders. It puts Schneider in a tough spot.

"It's crazy here every day," says Schneider, who sports a black and white checkered sweater and seems to wear stress well.

"You can only imagine. I might have a customer who decides to drop his normal parts order by something like 90 per cent. At the same time, I could have a ship of goods (materials to produce the original order) on the ocean coming here.

"When it arrives, we have to pay 70 per cent of the bill for its release. We can't leave it sitting because of the exorbitant storage charges. And I know there will be not nearly enough money later to cover it because of the much smaller order from my customer. Things like that keep me up at night."

Schneider must also deal with suppliers who press for immediate or quick payments while the company waits up to 100 days for money from its customers.

"Right away, we're looking at an imbalance in cash," he says.

Schneider, who describes himself as a "riverboat gambler," has to constantly engage in cajoling, a little psychology and a lot of hard-knuckle bargaining.

If Maxtech can't pay fast enough and a supplier of steel rod holds up delivery, it could trigger a disastrous chain reaction.

First, Maxtech can't make the part. Its customer then can't deliver a cluster of components including the Maxtech part to an assembly plant. Auto production stops immediately. The damage is millions of dollars a day.

It's a reason why Schneider pops by the office of controller Michael Hingley several times daily in the hunt for money to pay suppliers and maintain the flow of critical materials so production can continue.

Hingley's job is almost impossible because he can't get enough accurate information from customers in the current volatile auto market to calculate revenues and draw up proper four- to six-week budgets.

"In the auto industry now, you can reach an agreement one day, but it doesn't mean much the next day," he says. "They (customers) can pull it, and there's no compensation."

Compounding his problems are slower payments by customers and tightening credit when the company needs temporary help.

"Seventy per cent of auto-parts makers our size no longer have commercial lines of credit with a bank," he adds, staring at another set of numbers on his computer screen that are tough to square.

It's now week-to-week budgeting for Hingley. Sometimes, it's day-to-day. He also checks the company's bank accounts daily to make sure there are enough funds to cover costs.

More revenues would ease Hingley's budget pressures, and Bali needs to deliver. Bali, who has also mortgaged his house to help Maxtech, lands in Frankfurt, Germany, the next day in the quest for more business.

Maxtech set up a European office near the city earlier this year as part of its diversification strategy.

Bali and Silke Apfel, the company's European manager, race 3,800 kilometres through four countries in a Peugeot over seven days.

Later, Bali and Apfel clinch a big deal with Volkswagen for Maxtech's unique fittings for exhaust systems. The fittings, or so-called sensor bosses, are made of recycled steel, and Maxtech's design and technology reduces machining, eliminates scrappage and produces savings for automakers.

The duo secure a total of six contracts on the trip, including one for plumbing parts that will generate annual revenues of more than $10 million starting next year.

"We're going the right way in reducing our dependence on the North American auto industry," says a happy but tired Bali.

Vasudeva, who waited anxiously for daily progress reports from Europe, returns to his office where a board on the wall is crammed with reminders and ideas.

He catches up on some calls and turns to a file dealing with patents. A few minutes later, he gets up to leave and turns off the lights. It's 8 p.m.

There will be more work tomorrow – and more challenges.


Judge gives automaker
access to bailout funds

June 26, 2009

A bankruptcy judge ruled yesterday that General Motors Corp. can have access to its full $33.3 billion (U.S.) in bankruptcy financing.

Judge Robert Gerber gave final approval to the financing after he had given preliminary approval earlier this month for GM to use $15 billion of the total. The billions in U.S. and Canadian government financing is intended to keep the automaker going until it can sell its assets to a new company and emerge from Chapter 11.

The U.S. government will take a 60 per cent stake in the new company, and the Canadian government would get 12.5 per cent. The United Auto Workers union and GM's unsecured bondholders would own the rest.

At a hearing yesterday, Gerber also denied a request from a committee of people with asbestos-related claims against GM to appoint a "tort czar" who would oversee all future claims against the old GM, not just those related to asbestos.



Ford suppliers face tough times

June 25, 2009

DEARBORN, Mich.–Ford Motor Co.'s top executive for auto parts purchasing said Wednesday the number of the automaker's suppliers that are under distress, bankruptcy protection or under observation has more than doubled in the last year.

Tony Brown, Ford's vice president for global purchasing, declined to give an exact number of distressed suppliers, but said in a briefing that more suppliers are in the category of being monitored as slumping auto sales force automakers to slow production and order fewer parts.

Brown said he had several teams of people looking at ways to aid distressed suppliers operationally, as Ford has limited funds to financially support the ailing companies.

"You could expect Ford to take the appropriate action given the situation and it could include providing financing," he said. ``And it could include simply having an engineer go in and clean up their process.''

The Dearborn-based automaker has pledged to provide at least $125 million in debtor-in-possession financing to its former subsidiary, Visteon Corp., which is under Chapter 11 bankruptcy protection.

Ford said it is accelerating its plans to consolidate the number of suppliers it uses. The company said 850, or 48 percent, of its suppliers will be eligible for future work at the end of the year, down from the 1,683 eligible at the end of 2008.

"We don't need that capacity," he said. "We need a stronger, healthier, profitable supply base. This is our strategy to make that happen.''

Ford will have 1,650 total suppliers at the end of 2009, compared with 2,198 at end of last year. Its goal is to eliminate short-term suppliers, with a target of 750 total suppliers in the coming years. Ford purchases about $90 billion in parts annually.

Brown said the reduction of its suppliers would be "orderly'' and not disruptive to the other automakers that may do business with the companies.

Ford also said it has added 16 companies to its key group of component and service suppliers, including BorgWarner Inc. and Denso Corp. There are now 82 suppliers in the company's Aligned Business Framework, which increases the automaker's collaboration with the companies.

Ford shares rose 27 cents, or 4.9 per cent, to $5.80 in morning trading. Shares of Auburn Hills, Mich.-based BorgWarner rose $1.20, or 3.9 percent, to $31.79.



May 19, 1931  -  June 23, 2009

Mr. Alford Harrington Borden

AL Borden
AL BORDEN (Photo taken at Ford in 1984)

Our Deepest Condolences go out to his family!

He will be resting at:

Dodsworth & Brown
2241 New St.

Visitations will be:
Thursday June 25
2:00pm - 4:00pm
7:00pm - 9:00pm

Funeral service will be on Fri June 26 at 2pm


BORDEN, Alford – Peacefully at home on Tuesday, June 23, 2009.  Alford has rejoined his late wife Ruth.  Leaves behind 3 loving children Cindy, Al and his wife Lori, Timothy and his wife Paula.  Alford will be missed by 11 grandchildren and 4 great-grandchildren.  Alford is also survived by 6 siblings.  The family will receive friends at the DODSWORTH & BROWN Funeral Home, BURLINGTON CHAPEL, 2241 New Street (at Drury Lane), Burlington (905-637-5233) on Thursday, June 25th  from 2-4 & 7-9 p.m.  Funeral Service will be held in the Chapel on Friday at 2 p.m.   Reception to follow. 


Nissan, Ford and Tesla get
fuel-efficiency loans

Jun 23, 2009 12:48 PM

The Associated Press

WASHINGTON– The Energy Department said Tuesday it would lend $5.9 billion to Ford Motor Co. and provide about $2.1 billion in loans to Nissan Motor Co. and Tesla Motors Inc., making the three automakers the first beneficiaries of a $25 billion fund to develop fuel-efficient vehicles.

Energy Secretary Steven Chu announced the loan recipients at Ford's Research and Innovation Center in Dearborn. The loans to Ford will help the company upgrade factories in five Midwest states to produce 13 fuel-efficient vehicles.

Nissan was receiving $1.6 billion to retool its plant in Smyrna, Tenn., to build advanced vehicles and build a battery manufacturing facility. Tesla would get $465 million in loans to build electric vehicles and electric drive powertrains in California.

The loans were designed to help auto manufacturers meet new fuel-efficiency standards of at least 35 mpg by 2020, a 40 percent increase over current standards.

"These loans will help the auto industry meet and even exceed the president's tough fuel standards," Chu said. "This is part of President Obama's commitment to a new energy strategy for America. ... This means the most fuel-efficient cars in the world must be made right here in America.''

Dozens of auto companies, suppliers and battery makers have sought a total of $38 billion from the loan program, which was created last year to provide low-interest loans to car companies and suppliers retool their facilities to develop green vehicles and components such as advanced batteries.

Ford had been seeking about $5 billion in loans by 2011 and a total of $11 billion from the program to invest $14 billion in advanced technologies over the next seven years. The company said it will transform plants in Illinois, Kentucky, Michigan, Missouri, and Ohio.

Ford CEO Alan Mulally said in an interview with The Associated Press that the department approved the company's entire proposal through 2011 and it would help Ford meet the new fuel efficiency standards.

"This is a tremendous development," Mulally said.

He said the loans would help Ford further its strategy to build a wide range of fuel-efficient cars.

"We want to be in every market segment in the U.S.," Mulally said. "Every year forever we want to continue to improve fuel efficiency.''

Ford expects to begin repaying the loans in 2012, with an interest rate based on the current U.S. Treasury rate hovering between 3 and 4 percent, said Ford spokesman Mike Moran.

"If it were at market rates it would be in the double digits,'' he said. "That's a huge thing for us.''

Ford can draw from the loan for work done to retool its plants going back to late last year, Moran said. The plants must build cars that improve fuel efficiency by 25 percent.

General Motors Corp. and Chrysler Group LLC have received billions of dollars in federal loans to restructure their companies through government-led filings for bankruptcy protection, but Ford avoided seeking emergency aid by mortgaging all of its assets in 2006 to borrow about $25 billion.

Mulally said the loans Ford would receive from the Energy Department were part of a government-industry partnership and "had nothing to do with the emergency loans to keep General Motors and Chrysler in business.''

Ford has said it intends to bring several battery-electric vehicles to market. The automaker has discussed plans to produce a battery-electric vehicle van in 2010 for commercial use, a small battery-electric sedan developed with Magna International by 2011 and a plug-in hybrid vehicle by 2012.

General Motors has requested $10.3 billion in loans from the energy program, while Chrysler has asked for $6 billion in loans. Energy officials have said the loans could only go to "financially viable" companies, preventing GM and Chrysler to qualify for the first round of the loans.

Elizabeth Lowery, GM's vice president of environment, energy and safety policy, said GM still must pass the Energy Department's financial viability test before it can receive loan funding and the company hoped to get the money shortly after it emerges from Chapter 11 bankruptcy protection.

Chu said the Energy Department has started discussing details of the loans with Chrysler and has begun reviewing the "technical side" of the loan requirements with GM.

Nissan said the $1.6 billion loan would be used to modify its Smyrna, Tenn., plant to produce zero-emissions vehicles and lithium-ion battery packs to power them. The Japanese company has previously outlined plans to develop an all-electric car with 100 miles of pure battery range for release in late 2010.

"This loan is an investment in America. It will help us put high-quality, affordable zero-emissions vehicles on our roads,'' said Dominique Thormann, Nissan North America's senior vice president for administration and finance.

Tesla, based in San Carlos, Calif., will use $365 million for production engineering and the assembly of the Model S sedan, an all-electric vehicle that is expected to travel up to 300 miles per charge and go on sale in 2011. It will use $100 million for a powertrain manufacturing plant expected to employ 650 workers.

Tesla CEO Elon Musk said the automaker would use the loan ``precisely the way that Congress intended – as the capital needed to build sustainable transport.''


Detroit Three quality edges higher, says survey

Mini worst-performing brand in J.D.
Power survey of 2009 models

Jun 23, 2009
Dan Strumpf
The Associated Press

NEW YORK–Ford, General Motors and Chrysler have made strides in new vehicle quality over the last year, but they still lag behind their foreign competitors, according to a closely watched study released Monday by J.D. Power and Associates.

The initial quality of 2009 model year vehicles sold by the Detroit Three improved by an average of 10 per cent from last year, the marketing and consulting company said. Industrywide, scores improved an average of 8 per cent.

"The Detroit automakers are keeping their focus on designing and building high-quality vehicles, which is a precondition for long-term success," said David Sargent, vice-president of automotive research at J.D. Power, in a statement.

Lexus, Toyota Motor Corp.'s luxury line, was the top brand in J.D. Power's initial quality study, an annual survey of vehicle owners that measures mechanical and design problems in the first 90 days of ownership.

Porsche was the No. 2 brand, followed by GM's Cadillac, then Hyundai and Honda.

Toyota, which supplanted General Motors Corp. as the world's largest automaker last year, also swept 10 vehicle segment awards. Its assembly facility in Higashi-Fuji, Japan, that builds the Lexus SC 430 and the Toyota Corolla took the J.D. Power's top plant award.

The worst-performing brand was Mini, with owners reporting 165 problems per 100 vehicles. Though Chrysler's scores improved year over year, it had no brands above the industry average. It tied for one segment award, with its PT Cruiser Wagon sharing the top award in the compact activity vehicle segment with Honda's CR-V. Chrysler, however, is discontinuing the car.

Cadillac and Chevrolet were GM's only two brands whose 2009 models performed above average. The four brands GM is purging under Chapter 11 bankruptcy protection – Pontiac, Saturn, Hummer and Saab – were the company's worst rated. The Chevrolet TrailBlazer and GMC Yukon SUVs were rated best in their segments.

Jamie Hresko, GM's vice-president for global quality, said the automaker has worked hard to improve vehicle quality over the last five years. Chevrolet and Cadillac account for 70 per cent of GM's volume, he said, and top marks for those segments are an indication the effort is paying off.

"Is it where we need to be? No," Hresko said. "To have our core brands – Cadillac and Chevrolet – be on par with Toyota, we have reached a level of quality that will allow us to change perceptions.''

Ford Motor Co., the only major U.S. automaker that has not filed for bankruptcy protection or accepted government aid, also saw scores improve for three of its four brands: Ford, Mercury and Volvo. But its Lincoln brand's score fell, and only Ford and Mercury performed above the industry average.

The average industry score improved to 108 problems per 100 vehicles, down from 118 in 2008.

J.D. Power credited the improvement to several well-received new models that were launched in 2009. It said vehicles like Hyundai's Genesis, Kia's Borrego, Toyota's Venza and Volkswagen's CC performed better than their segment averages. Several redesigned 2009 models also scored well, J.D. Power said.

The scores come during a tumultuous time for the auto industry, with sales at their worst level in decades and taxpayers stuck funding the restructuring of GM and Chrysler Group LLC to the tune of billions of dollars. Although the two automakers have been pummeled by the economic crisis, many analysts have complained that a shortage of high-quality small car offerings has hobbled their performance in the down market.

GM has several new, small vehicles on the way that industry analysts say should help it better compete with established offerings from Toyota, Honda and other foreign competitors. It plans to start building the subcompact Chevrolet Cruze next year and says it will get about 40 miles per gallon (5.88 L/100 km). It also plans to sell the Chevrolet Spark minicar in the U.S. in 2011.

The road may be tougher for Chrysler. Cars like the sporty 500 made by its new owner, Italy's Fiat Group SpA, won't make it to the U.S. until late next year. The Auburn Hills, Mich., company plans to roll out new versions of its popular Jeep Grand Cherokee SUV and Chrysler 300 large sedan by the end of next year, along with a rechargeable electric vehicle, but these plans likely have been delayed by the bankruptcy process.

J.D. Power's rankings were based on questionnaires from 80,900 people who bought or leased new 2009 vehicles between February and May. The questionnaires ask 228 questions on issues from handling, braking and engine trouble, to seat comfort and stereo systems.

The rankings are closely watched by automakers and consumers, and are frequently used in advertising. However, some critics question whether they show any real statistical difference between automakers. Mini's ranking, for example, equates to 1.65 problems per vehicle. Top-performer Lexus had 84 problems per 100 vehicles, or 0.84 per vehicle. So on average, less than one problem per vehicle separates the best brand from the worst.


Iacocca: GM, Chrysler should
swiftly repay U.S. loans

Former Chrysler CEO says government bureaucracy is unbearable

Tom Krisher

DETROIT — The Associated Press, Monday, Jun. 22, 2009 07:02AM EDT

Former Chrysler CEO Lee Iacocca has some advice for the people who are running his old company, and those who will lead the new General Motors: Get the government out of your business as soon as possible.

Mr. Iacocca, a slick pitchman who became an American hero in the early 1980s when he used over a $1-billion (U.S.) in government loan guarantees to rescue the nearly defunct Chrysler, said in a recent interview with The Associated Press that government intervention was strong motivation to repay the loan early.

“They're on you day and night. Their oversight is just too extreme,” said Mr. Iacocca, who is promoting a new limited-edition customized Iacocca Ford Mustang. “That's why our 10-year loan, we paid it back in three years. We couldn't stand the government. The bureaucracy kills you.”

Now Chrysler and GM, in the midst of a brutal recession and the worst auto sales slump in a quarter-century, each are receiving billions in government loans. Chrysler exited bankruptcy protection in 42 days, while General Motors Corp. remains in Chapter 11.

Already, the Treasury Department's auto task force, which is overseeing the automakers, has forced out both companies' chief executives and is remaking their boards. It engineered Fiat's takeover of Chrysler, which came with a shake-up of top management.

Mr. Iacocca, now 84 and living in Bel Air, Calif., seemed appalled that the government is once again involved in Chrysler's business, but he said without taxpayer money, Chrysler and GM could have collapsed and caused a nationwide unemployment disaster with thousands of additional jobs lost.

He's optimistic that Detroit automakers can rebound and said he has faith that Fiat Group SpA CEO Sergio Marchionne will rescue Chrysler. He said he's also impressed with how Ford Motor Co.'s leadership has kept America's No. 2 automaker free of government loans.

Mr. Iacocca said he would invest in Chrysler now if he could, as well as Ford, but he's apprehensive about GM's future.

“GM's got more serious problems,” he said. “They're just big. They're huge. They've got many more problems than Chrysler has with just sheer size.”

Mr. Iacocca, who was fired by Henry Ford II in 1978, took over Chrysler under circumstances very similar to today's. The company made big, inefficient cars at a time when prices spiked due to the Arab Oil Embargo, and it was unprepared when consumers wanted more thrifty vehicles.

In his 2007 book “Where Have All the Leaders Gone,” Mr. Iacocca said Chrysler had only $1-million in cash and was facing a $200-million payroll. Similarly, late last year, Chrysler's chief financial officer said it couldn't pay its bills without government help.

Mr. Iacocca, though, rolled out new products including smaller, more-efficient K-Car sedans, and went on television to challenge viewers. “If you can find a better car, buy it,” was his famous line in Chrysler's ads.

Although he doesn't know Mr. Marchionne, he said the Italian CEO may have the charisma to pull off a similar feat. Former Toyota executive Jim Press, now Mr. Marchionne's top lieutenant, also has been an impressive salesman, Mr. Iacocca said.

Mr. Iacocca, who introduced the Mustang for Ford at the 1964 World's Fair in New York, said he has contracted with custom car builder Gaffoglio Family Metalcrafters to reshape a 2009 model into a sleek fastback. They'll build 45 of them in the Mustang's 45th year, all silver.

Although the car is unmistakably a Mustang, it has unique wheels, racing brakes and suspension, and the interior has been reshaped to include Iacocca's signature in gold on the dashboard. The car, with a full Ford warranty, will sell for around $60,000 starting in July, only at a Los Angeles-area Ford dealership. There's only one option, a supercharged 4.6-litre V-8 that pushes the horsepower to 400 – 80 more than the standard engine.

Despite higher gas prices and increased government fuel economy standards, Mr. Iacocca said Mustang is still Ford's most recognizable model, with potential for big sales.

He suggests that Chrysler continue to stick with its best-known vehicles: minivans, Jeeps, the Ram pickup and larger sedans like the Challenger and 300. Fiat, he said, can fill in the smaller end of the lineup with its designs and efficient engines.

Although he likes Mr. Marchionne, Mr. Iacocca said a marriage to Fiat still faces challenges, including somehow navigating through what he predicts will be another year of recession.

“It's not a slam dunk,” he cautioned. “You'll have a cultural clash of some kind in different languages. But they'll bring people together and hopefully it will work. They have become a pretty good company under this guy Marchionne.”

His advice for Mr. Marchionne and new GM CEO Fritz Henderson as they try to weather one of the darkest periods in American automotive history?

“Take care of our customers,” Mr. Iacocca said. “That's the only solid thing you have.


GM, Chrysler retirees race
clock to get dental, eye care

Benefits to end July 1; part of UAW givebacks

Saturday, June 20, 2009

Christina Rogers / The Detroit News

General Motors Corp. and Chrysler Group LLC retirees are flocking to Metro Detroit optometrists and dental offices for eye exams and teeth cleanings before those longtime benefits vanish July 1.

The benefit cuts are among broader changes approved by the United Auto Workers in May as GM and Chrysler sought to restructure before filing for bankruptcy protection. The concessions were part of an amendment to the UAW's 2007 agreement with the automakers establishing a union-run health trust fund for retirees, also known as the Voluntary Employees' Beneficiary Association or VEBA.

The cuts affect nearly 350,000 unionized GM and Chrysler retirees and will mean painful changes for those used to rich benefits and fewer out-of-pocket medical costs.

Along with losing dental and vision benefits, retirees will shoulder higher copayments for emergency room visits and prescription drugs. Catastrophic plans will no longer be offered to retirees or their surviving spouses. And retirees will lose some drug coverage, including benefits for erectile dysfunction medication.

The benefits are set to end June 30. Retirees are scrambling to get costly dentures and new pairs of glasses, providing a windfall for dental and vision offices at a time when many patients are delaying care because of higher copayments and tightening budgets.

"It's been nuts," said David Borlas, a dentist in Chesterfield who has been so busy lately he frequently works straight through his lunch hour. "Once the announcement came out, people started coming out of the woodwork. We've got people jammed on top of people."

But these same businesses recognize the rush is temporary and fear work will dry up once the cutbacks go into effect, further eroding a once reliable source of business for many medical providers.

Medical experts also worry retirees will hold off on routine care, which can help prevent minor problems from turning into costlier ones in the future.
Rupert O'Brien, chairman for the retiree chapter of UAW Local 5960 in Orion Township, said members have been rushing to get dental and vision appointments but have run into long waiting lists and encountered offices booked through the month.

"A lot of them don't know what they're going to do," said O'Brien, a GM hourly retiree whose chapter has about 6,000 members.
Medicare, the federal health care program for seniors and people with disabilities, doesn't cover vision or dental. The only way to get the coverage is to buy it, he added.

"It's going to be quite a bit out of a retiree's pocket," O'Brien said, noting that purchasing dental coverage will cost some couples about $80 per month.

Temporary, for now

For now, the cuts are temporary and intended to conserve cash in the VEBA, said Kristin Dziczek, director of labor and industry for the Ann Arbor-based Center for Automotive Research. The changes could be reversed or upheld once the UAW takes over the health trust next year.

"It's a whole new ballgame on January 1," she added.

Still, dentists and vision care specialists already are bracing for the cutbacks. And others in the industry worry the cuts could go deeper, resulting in higher out-of-pocket costs for routine medical visits, a trend quickly becoming the standard for other employer-backed health plans.

"This is our window of opportunity," said Scott VanderVeen, a dentist in Clarkston whose office has extended hours, postponed vacations and added full days to accommodate the influx of patients. "We realize our business will slow down in July."

Borlas, the Chesterfield dentist, who started practicing dentistry before the UAW began offering dental insurance in the mid-1970s, fears retirees will revert to the old mindset of basing medical decisions not on quality but on what they can afford.

"The common theme back then was they're not going to opt for a root canal or a crown for an infected tooth, but ask to pull it, which is a much lower level of dental care. That's what people could afford," said Borlas, an executive director for the Macomb Dental Society. "And then, came along dental insurance. Now, the pendulum is swinging back the other way."

Dentists also affected

Dentists aren't the only health professionals seeing a boom and fearing a bust.

Dr. Kevin Everett, an ophthalmologist with the Henry Ford Medical Group, said his office in Sterling Heights has seen about a 15 percent bump in calls from retirees seeking to make appointments before July 1. Revenue is up by at least 10 percent for optometrist visits, he said.

"Considering the economy, that's pretty dramatic," Everett added.

However, he worries the uptick will soon give way to a lull after July 1. Retirees may stop offices visits, even for illnesses like glaucoma and cataracts, which are covered under their medical benefits. Vision insurance typically only covers routine eye exams and the purchase of glasses or contacts.

"We've always had patients confused about that, but now it's really bad," Everett said. "Many are going to damage themselves sitting home with problems thinking they can't be seen and letting them get worse."


Barry Howard  Passes Away

Barry Howard

Retired: May 1, 1997

1941 - 2009

HOWARD, Barry - Passed away peacefully, Thursday, June 18, 2009, at the age of 68. Predeceased by his wife Irene. Loving father of Danny and Stephen and his wife Lisa. Loving nono of Kristen, Brittany, Casey and Victoria. Dear brother of Bryan and his wife Suzanne, predeceased by brother Warren. Retired employee of 32 years of Ford Motor Company. Visitation to take place at the Andrews Community Funeral Centre (8190 Dixie Rd., Brampton, north of Steeles Ave., 905-456-8190), on Monday from 2-4 and 7-9 p.m. A Funeral Service will be held Tuesday, June 23, 2009 at 11:00 a.m. in the Funeral Home Chapel. Interment to follow at Glendale Memorial Gardens.


Ford CEO says regulation
often hurts innovation

Ford CEO Mulally says innovation is often
hampered by government regulation

June 18, 2009
By Kimberly S. Johnson, AP Auto Writer

DETROIT (AP) -- Ford Motor Co. CEO Alan Mulally said government regulation in many ways has hurt innovation among businesses and manufacturers in the United States.

We've become so stymied with regulation," said Mulally Wednesday during a panel discussion on innovation in manufacturing at The National Summit in Detroit. "We have to say enough is enough and get back to freeing people up."

Pulling on his experience as the head of Boeing and now Ford, Mulally said U.S. businesses need to be at the forefront of innovation again. Corporate scandals, government bailouts and bankruptcy filings have put a blemish on the business sector.

"We've got to make it cool to be in business again," he said. "We really have to re-polish the value of what business brings to mankind."

Nonetheless, Mulally said the recent fuel efficiency and emission standards set by the Obama administration brings a "tremendous benefit" to companies such as Ford when designing new vehicles because it unifies standards set by several states under a federal umbrella.

Mulally said that Ford, the only major U.S. automaker which has not sought government assistance, is working toward profitability and increased market share, particularly with the rollout of new cars such as the 2010 Fusion and Taurus.

"Ford is in a different place," Mulally told reporters following the panel discussion. "People want to be with a company they know is viable and is going to be here for the long-term."

Ford has been in contact with the president's auto task force regarding parts suppliers, many of them struggling as low sales volume has halted production at many Chrysler Group and General Motors Corp. plants.

"The supply base is the most important thing in our industry right now," Mulally said.

With a goal to reach profitability or break even in 2011, Ford has modified its contract with the United Auto Workers union, cut debt by nearly $10 billion and retooled some plants to expand their vehicle production abilities.

Mulally said those efforts would continue, adding that the company will seek to improve its balance sheet even further when it reaches profitability.

Mulally has Ford would likely seek further concessions from its UAW on top of the modified contract ratified in March. GM and Chrysler workers have also modified their contracts, but some of the modifications go deeper than Ford's.

"We continually talk to the UAW and the CAW (Canadian Auto Workers union)," he said, adding that a no strike clause until 2015 is "just one piece of the conversation we're having with them."

GM and Chrysler workers agreed to place a no-strike clause in their modified agreements.

Shares of Ford rose 10 cents to $5.77 in midday trading Wednesday.


Chrysler dealers left
without vehicles
Inventories have fallen, but many Chrysler dealers can't order new cars and trucks because they are still waiting for financing approval from GMAC, which is scheduled to take over dealership financing from Chrysler Financial Canada

Greg Keenan

Globe and Mail Update, Wednesday, Jun. 18, 2009

Chrysler Group LLC will start cranking out vehicles at seven of its North American assembly plants on June 29, but some Canadian dealers say they will be unable to restock their dealerships with new vehicles because they can't get the financing they need.

Inventories have fallen to minimal levels, several Canadian Chrysler dealers said Wednesday, but many of them can't order new cars and trucks because they are still waiting for financing approval from GMAC LLC, (GOM-N15.40-0.13-0.84%) which is scheduled to take over dealership financing from Chrysler Financial Canada.

“We can't buy vehicles,” one high-volume Chrysler dealer said yesterday, because the dealership can't obtain so-called floor plan loans that it uses to finance the purchase of new vehicles from Chrysler Canada Inc.

While Chrysler LLC emerged quickly and relatively easily from Chapter 11 bankruptcy protection in the United States, the aftershocks are still being felt – even in Canada, where Chrysler Canada did not go into protection under the Companies' Creditors Arrangement Act.

One dealer said he is down to fewer than five Dodge Caravan minivans. Another said his inventory has dropped to less than half the usual level of more than 300 vehicles.

A third dealer said he no longer has demonstrator models for customers to drive. (None would agree to be identified.) Some dealers said GMAC approval is being delayed amid a dispute between Chrysler Canada and Chrysler Canada Financial, which is being wound up along with its parent company as part of the Chapter 11 process.

Inventories at dealerships have fallen in part because Chrysler's North American plants were shut almost immediately after the company's U.S. operations were granted bankruptcy protection on April 30, choking off the flow of new vehicles.

AutoCanada Income Fund, which owns 11 Chrysler outlets among its 22 dealerships, said this week it has signed agreements to switch to GMAC from Chrysler Financial that will allow it to finance both new and used vehicle purchases. The deal covers all AutoCanada outlets, which include Hyundai, Mitsubishi, Subaru and Volkswagen dealerships. AutoCanada had been using cash to finance vehicle purchases for some of the non-Chrysler stores.

Minivans and Jeep Wranglers are in short supply, Tom Orysiuk, AutoCanada's chief financial officer, said Wednesday.

One Ontario dealer who was already financed through GMAC before Chrysler LLC went into bankruptcy protection said he is seeking faster deliveries on several vehicles he ordered last week.

Chrysler Canada spokeswoman Mary Gauthier said financing for a number of Canadian dealerships has already been switched to GMAC and “we expect to transition the balance shortly.”

She would not say now many dealerships have been switched to GMAC. There are about 450 Chrysler dealers in Canada.

Nor would she comment on any dispute between Chrysler Canada and Chrysler Financial Canada.

Chrysler Group's two Canadian plants are among the seven that will reopen on June 29. A plant in Windsor, Ont., assembles minivans, while another in Brampton, Ont., turns out the Chrysler 300 and Dodge Charger and Challenger full-sized cars.

Plants that assemble the Chrysler Sebring and Dodge Avenger mid-sized cars, Dodge Ram and Dakota pickup trucks, Wrangler sport utility vehicles and Dodge Journey and Chrysler PT Cruiser crossover vehicles will also restart production.

Airline pension payouts trimmed

Deals with unions buy time for Air Canada, but
the carrier will have to raise $600 million


Jun 17, 2009 04:30 AM

Chris Sorensen
Business Reporter

Air Canada has bought itself some breathing room after hammering out tentative agreements on pension funding with its employees, but observers say it still may not be enough to keep the country's largest airline out of bankruptcy protection.

The airline reached tentative deals with its five biggest unions this week that include a moratorium on pension payments for 21 months, with four of the five unions also agreeing to wage freezes over the same period.

As well, the agreements call for Air Canada to raise $600 million in financing.

That includes $200 million to $300 million in the form of a federal government loan from Export Development Canada and up to $200 million from parent, ACE Aviation Holdings Inc., according a source familiar with the situation.

The loans are needed to keep the airline from being dragged into its second filling under the Companies' Creditors Arrangement Act in less than six years.

Karl Moore, a business professor at McGill University, said the goal appears to be finding a way to "skinny" through a few more months in the hope that the global economy recovers and the demand for air travel returns.

"Is there still a risk of CCAA? Absolutely," he said. "But the risk has gone down significantly over the past week."

Air Canada announced early yesterday that it reached agreements with the Air Canada Pilots Association and the Canadian Union of Public Employees, which represents 6,700 flight attendants. It also reached agreements with three other unions last week. The deals, if ratified, include a provision that would give employees a 15 per cent stake in the airline and a seat on its board.

All of the unions, with the exception of CUPE, have agreed to freeze wages and pension benefits for 21 months.

But David Newman, an analyst at National Bank Financial, warned investors yesterday the airline still must address other notable financial obligations this year – including $617 million in debt repayments – plus the challenge of funding its day-to-day operations when ticket sales continue to plummet due to the weak economy.

"The fundamentals continue to deteriorate, given the recession, the onset of the H1N1 influenza virus, a competitive marketplace and rising fuel costs," said Newman, who still rates Air Canada's shares "underperform," with a 12-month price target of $1.

Shares of Air Canada closed yesterday at $1.62, up 13 cents, on the Toronto Stock Exchange.

Newman said the current quarter looks particularly challenging with "continued economic weakness and pricings pressures." He said his calculations show that Air Canada is on track to burn through one half of its roughly $1 billion in available cash in the third and fourth quarters.

In other words, the bulk of the $600 million in financing that Air Canada is now looking to raise may be necessary just to keep it from running afoul of its covenants, including a recently renegotiated agreement with a credit card processor.

Calin Rovinescu, chief executive of Air Canada, in a statement said the next step is to obtain the necessary federal government approvals for the new pension funding arrangements, which call for fixed payments of $150 million, $175 million, and $225 million in 2011, 2012 and 2013 respectively, while raising money.

"Discussions are ongoing with several potential lenders who are assessing our financing needs."

What the agreements do not address is Air Canada's overall costs, estimated to be at least 30 per cent higher than its main domestic rival WestJet Airlines Ltd.

A source familiar with the negotiations said Air Canada has committed to finding "hundreds of millions" in annual cost savings expected to come mainly from streamlining its processes and procedures.



Air Canada, unions
reach pension deal
Management, pilots and flight attendants reach breakthrough deal late Monday night

Brent Jang

From Tuesday's Globe and Mail, Tuesday, Jun. 16, 2009 07:55AM EDT

Air Canada and its five unions will present a united front to ask Ottawa to defer most of the airline's pension funding obligations for 21 months, after management reached a breakthrough deal with pilots and flight attendants last night.

“We'll be asking the federal government for immediate pension relief,” said Katherine Thompson, president of the Air Canada component of the Canadian Union of Public Employees, which represents more than 6,700 flight attendants.

The country's largest carrier has a pension payment estimated at $110-million due July 30, and at least another $115-million contribution due Aug. 14. Its pension solvency deficit has ballooned to $2.9-billion, compared with $1.2-billion on Jan. 1, 2008.

“We're hoping that Ottawa will be pro-active, given the tight timelines,” Ms. Thompson said in an interview.

She said the Air Canada Pilots Association also reached an agreement last night on broader labour issues with management, and the flight attendants were getting close to resolving their own set of non-pension matters.

Separately, Air Canada and six other federally regulated companies have been lobbying Ottawa for long-term pension relief, including a request for more time to help bridge differences between pension asset values and obligations.

The companies argue that current regulations are making an already tough situation for corporations even worse by forcing huge increases in pension contributions.

Money-losing Air Canada is facing mounting debts, weakening travel demand during the recession and stiff competition from WestJet Airlines Ltd.

Under the joint pension proposal by Air Canada and its unions, “the company will not be required to make past service contributions for 21 months, starting on July 30, 2009, when its next special payment is due,” according to the International Association of Machinists and Aerospace Workers.

The IAMAW, the Canadian Auto Workers and the Canadian Air Line Dispatchers Association agreed on June 8 to support the 21-month moratorium on pension funding, with management agreeing to grant Air Canada shares to the unions.

Air Canada made its last pension contribution on April 30, and would resume payments in 2011.

“Starting Jan. 1, 2011, and until Dec. 31, 2013, the company will make certain lump-sum payments,” the IAMAW said in an internal note.

The five unions will also be able to nominate a labour representative to the carrier's board of directors, and there will be a profit-sharing program for employees in 2010, when the economy is expected to rebound, union officials say.

Unions would be awarded Air Canada shares to be credited to the pension plan, distributed in the following proportions, based on each group's pension values: IAMAW (36 per cent), the pilots' union (31 per cent), CUPE (19.5 per cent), CAW (13 per cent) and the dispatchers' union (0.5 per cent).

Air Canada's top executives would see their salaries frozen – with no bonuses – until the spring of 2011, coinciding with the union members' wage freeze. And there would be no improvements to executive pension plan benefits through 2013.

The CAW, which represents airport customer service agents and call centre staff, had a six-year collective agreement that expired on May 31. The other unions' contracts were set to expire on June 30, but subject to ratification, the labour pacts could be extended until the spring of 2011.

GM says reaches deal to
sell Saab to Koenigsegg

Transaction should close by the end of the third quarter,
includes $600-million in European Investment Bank financing

Veronica Ek and Sven Nordenstam

STOCKHOLM — Reuters, Tuesday, Jun. 16, 2009 07:01AM EDT

Sweden's Koenigsegg, maker of some of the world's most expensive sports cars, has struck a deal to buy loss-making Saab Automobile from General Motors, the companies said on Tuesday.

In one of the most unlikely pairings in automotive history, the tiny sports car firm of 45 staff is expected to take over a company that employs around 3,400 staff, a cherished Swedish brand that became a national icon for stability and reliability.

GM Europe said on its website the deal included an expected $600-million (U.S.) of financing from the European Investment Bank, which would be guaranteed by the Swedish government. Other terms were not disclosed.

“Additional support is to be provided by GM and Koenigsegg Group AB to fund Saab's operations and product programme investments. This includes plans to launch several new products that are in the final stages of development,” GM Europe said.

Like its U.S. parent, Saab has been in bankruptcy protection and GM Europe said the accord was a milestone in the Swedish company's effort to emerge from the process.

Koenigsegg, which produces some of the world's most powerful roadcars, costing around $1-million, came out of nowhere to emerge as a front-runner to buy Saab.

But analysts are sceptical a tie-up makes sense, noting that Christian von Koenigsegg, founder of the firm bearing his name, has no evident experience in owning or running a firm as big as Saab.

Last year Koenigsegg made 18 cars, a number that Saab churns out in a couple of hours.

“There are no economies of scale between Saab and Koenigsegg. This is a constellation of buyers that probably have different interests than GM, which was driven by volume,” said Mikael Wickelgren, an automotive expert at Skovde University, in southwestern Sweden not far from Saab's headquarters.

“This will be a business where one would assume that the owners want to chisel out a personality for Saab. The logic would be in the special and unique. Otherwise I cannot understand this deal.”

The deal would see Saab, which was put up for sale earlier this year, emerge from two decades under the umbrella of its U.S. parent.

Financing will be a key issue.

Saab has said it needs $1-billion to help it overhaul production and launch new models while absorbing expected losses of about 3 billion Swedish crowns ($382-million) this year.

An EIB official said the bank had not yet decided whether to move ahead with the project and that its board needed to have key information some six weeks before a meeting.

“That means we will not be able to have it ready before the meeting in July, and the next meeting is in September,” said Mats Gunnarsson, senior adviser to the EIB management committee.

Sweden similarly said the issue of support remained unclear.

“We do not yet know if Koenigsegg group will need loan guarantees or not,” Joran Hagglund, state secretary for Sweden's industry ministry, told Reuters.

Nonetheless, Industry Minister Maud Olofsson welcomed the news as did Saab union representatives.

“It is good that the owner situation now is becoming clear,” Olofsson said. The minister said in a statement that Saab staff and other residents in the town of Trollhattan, where Saab is headquartered, had been waiting for just such news.

Olofsson separately told Swedish news agency TT that a key criterion was that production remained in Sweden.

Saab Automobile had been in talks with two or three bidders in recent weeks.

Christian von Koenigsegg, who founded Koenigsegg 15 years ago when he was 22, was until recently seen as an unlikely suitor. He is known in the industry as a technology-focused car enthusiast as opposed to a businessman.

Koenigsegg has financial backing from Norwegian entrepreneur Bard Eker, who owns 49 per cent of the car maker.

Saab's sales comprised just over 1 per cent of GM's total sales volume last year. It has been hit hard by the economic downturn that has savaged sales on both sides of the Atlantic.

The Saab Automobile/IF Metall workers' union welcomed the news. “We're not negative to this. We think it is good that this finally got its solution,” union representative Paul Akerlund told Reuters.

GM more a concern than
Chrysler: Ottawa

Eric Reguly

LECCE, Italy — Globe and Mail Update, Monday, Jun. 15, 2009

Finance Minister Jim Flaherty says he's more concerned about the outlook for General Motors Corp. (GM-N0.75----%) than Chrysler because GM lacks a strong partner.

In an interview at the close of the Group of Eight finance ministers' meeting in the southern Italian city of Lecce, Mr. Flaherty said Chrysler's partnership with the Italian auto maker Fiat, led by Italian-Canadian chief executive officer Sergio Marchionne, will give it a restructuring advantage.

“The fact that Sergio Marchionne is going in as CEO of Chrysler makes a difference,” he said.

“He will drive cultural change at Chrysler. GM is more of a concern because there isn't a white knight there.”

Both GM and Chrysler were propped up with billions of dollars in loans from the Canadian, Ontario and U.S. governments. Chrysler emerged from 42 days in Chapter 11 bankruptcy proceedings in the United States a few days ago and is now under the management control of Fiat, which has a 20-per-cent stake in the company and has the right to earn more.

In a rescue attempt

modelled on the one that turned Fiat around five years ago, Mr. Marchionne immediately announced a management shakeup at Chrysler, naming 23 executives, some from Fiat, who will report to him.

The Canadian government, which will share a 2-per-cent ownership of Chrysler with the Ontario government, this week intends to appoint a director to the new Chrysler, ahead of the company's first post-bankruptcy board meeting.

Mr. Flaherty said Ottawa had not yet picked the final candidate as of Saturday. “We have a preliminary list and we're getting close,” he said.

Speculation is that the director is likely to be a former chief executive officer who is not from the auto industry. Mr. Flaherty said he talked to former Manulife Financial CEO Dominic D'Alessandro, but “he wants to take some time off.”

The Canadian and Ontario governments, which together are contributing $9.5-billion (U.S.) to GM, and will own 12 per cent of that company, have the right to appoint one GM director. But the need to find a board candidate quickly is less pressing, because GM is not expected to shed its Chapter 11 status before the end of the summer.

“We need Canadian [board] representatives who are tough-minded, culture change advocates,” Mr. Flaherty said. “GM is a company that, in one generation, went from 40-per-cent market share to less than 20 per cent. This is a major turnaround effort.”

Canada's support for another automotive deal – the proposed takeover of GM's German division, Opel, by a group led by Canada's Magna International Inc. (MG.A-T43.67-0.10-0.23%) and Russia's Sberbank – played a minor role in the G8 Lecce meeting.

On Saturday, German Finance Minister Peer Steinbrueck said both the Canadian and Russian governments back the sales effort. “I have spoken about [Opel] with [Russian Finance Minister Alexei] Kudrin and also with [Mr.] Flaherty,” he told journalists. “Both have made clear that they welcome the deal and that they will support it as much as possible.”

Mr. Flaherty confirmed that he vouched for Magna's credibility, an auto parts company better known in North America than in Europe, in a phone call with Mr. Steinbrueck.

“I told him that Magna's reputation is strong, that it's a global company, innovative, reliable and would be an asset in the car business.”

If the deal goes through, Magna would own 20 per cent of Opel, which is bleeding cash and has about 55,000 employees across Europe. Sberbank, controlled by the Russian government, would own 35 per cent. GM intends to have an equal amount and 10 per cent would be put aside for Opel employees.

The German government picked the Magna-Sberbank group as the preferred bidder for Opel, beating Fiat, which had wanted to merge the Fiat and Opel auto businesses and launch new models on shared platforms.

But the German government is hedging its bets in case the Canadians and Russians can't seal the deal. Last week, Karl-Theodor zu Guttenberg, the German Economy Minister, said at news conference in Berlin that “We are still in contact with other investors.”

One of them, he said, is Chinese auto maker Beijing Automotive Industry Corp. (BAIC). He also said he believes Fiat is still interested in Opel. Fiat recently said it's still keen to merge with Opel, but is focused entirely on repairing Chrysler at the moment.


Ford: Execs, CAW
brass meet on contract

June 14, 2009

Ford Motor Co.'s top labor executives met with the leadership of the Canadian Auto Workers on Friday in an effort to "improve the competiveness" of its contract.

The poor economy, combined with recent contract modifications approved by union employees at Chrysler and General Motors in Canada, makes it necessary to change the existing contract, Ford spokeswoman Lauren More said.

"Just simply to maintain our manufacturing presence in Canada we have to take action now," More said. "We can't afford to wait until 2011 ... when the current contract ends."

Joe Hinrichs, Ford's manufacturing and labor chief, as well as top Ford Canada officials attended, More said.

Ford Canada has about 7,000 hourly employees at two assembly plants and three other plants in Ontario.

Chrysler: Plymouth Road complex shuts

Several hundred Chrysler employees and retirees gathered last week to mark the closing of the Plymouth Road Office Complex. Originally a Kelvinator Corp. refrigerator factory, the U.S. Defense Department converted it to make military helicopters in World War II. Since 1987 when Chrysler bought American Motors Corp., it has been the center of Jeep, pickup truck and rear-wheel drive vehicle engineering.

Now that the sale to Fiat is behind it, Chrysler and its suppliers are expected to announce this week when production will resume at its North American assembly, stamping and powertrain facilities.

GM: Corvettes now number 1,500,000

General Motors has produced its 1.5 millionth Chevrolet Corvette.

The sports car rolled off the line at the Bowling Green, Ky., assembly plant May 28. It was a white convertible 3LT with a red interior and a black top. The company said it was similar to the first, 500,000th and 1 millionth Corvettes built in 1953, 1977 and 1992.


Important Ford Location
Always Omitted

Toronto Star
Tony Van Alphen

June 12, 2009

Re: Important Ford Location Always Omitted

Dear Mr. Van Alphen:

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

In the last Star article of June 6th "Ford Anxious for a new deal within CAW" it stated that there was a parts plant in Windsor which is not true. We had our birth from Windsor some 65 years ago but have been a part of the present operation which started at the Danforth (Toronto) in the fifties and continues to flourish in Brampton today.

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

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


Chris Wilski
CAW Local 584
Ford Bramalea
Retirees Chair


Tony's Response:

I will check but if you're right, it will never be omitted again.


Ford seeks equivalent
union concessions

Wants its costs to be competitive with those ailing GM, Chrysler won

Jun 12, 2009 04:30 AM
Tony Van Alphen
Business Reporter

Ford Motor Co. of Canada will seek labour cost concessions from its main union that would put the automaker on the same competitive level as rival General Motors of Canada and Chrysler Canada, where workers recently accepted significant cuts in compensation.

Senior officials for Ford and the Canadian Auto Workers plan to meet at an airport hotel today for a regular quarterly business update where the company will press for new savings immediately so it can remain competitive.

"We have to take action to be more competitive and maintain our manufacturing presence in Canada," Ford spokeswoman Lauren More said.

The meeting will include Joe Hinrichs, vice-president of global manufacturing and labour affairs for parent Ford Motor Co., and Ken Lewenza, the CAW national president. About 20,000 GM and Chrysler workers overwhelmingly have ratified new contracts that will freeze wages and pensions, cut vacation time and reduce benefits until 2012. They earn an average of about $35 an hour.

The two reeling automakers needed the concessions as a condition to receive almost $15 billion in loans from the federal and Ontario governments amid the industry's worst sales slump in decades. Ford had asked for a standby line of credit of up to $2 billion in December but it later removed the request.

Concessions took effect earlier this month for GM workers and will hit Chrysler staff when production resumes probably later this month.

Chrysler's North American plants stopped production at the end of April when the company gained court protection from creditors in the United States. Chrysler emerged from court this week with a survival plan and a new partner, Fiat SpA of Italy.

Lewenza said the union will not necessarily agree to the same concession terms at Ford as it accepted at the other two automakers.

"We're not going to just open contracts because the boss says so," he added. "We will do our due diligence so Ford won't be at a competitive disadvantage that would affect future investment."

Ford employs about 7,000 including 6,200 union workers at plants in Oakville, St. Thomas and Windsor.

Letter sent to CAW
Ken Lewenza


I am not a member of the CAW.  My husband has been employed by GM for almost 26 years. Before that, he worked in General Motors dealerships from the time he was a teenager. His family have all been employed by GM in roles that have ranged from Upper Managment (Vice Presidents) to front line workers and his father was a GM dealer as was his grandfather.He works at the GM Parts Warehouse and Distribution Center in Woodstock. GM has been a part of his entire life. And it has been intrinsic to our family well being .

As you noted in your recent message in the bargaining report, the pressure and the disrespect of people who have made the autoworkers the scapegoats of the recession has been very hard on all of us. Not just the workers but their families as well.  The let down from our government representatives who only  have to work six years for their "gold plated" pensions and who thought people who have worked a life time should give up their pensions has been unbelievable. Our local MP who has three automotive corporations in our riding ( GM, CAMI and Toyota) has not uttered one word of suport or taken the gauntlet of helping the workers here dispite the fact that as we all know, we are high paying taxpayers in the community.The media has positioned the blame for the economy on the workers and they have facilitated much negativity and disrespect in how they have presented information, not facts or true journalism.  As someone who is not, has not ever been a union member, I have tried to support my husband and all of your work by writing letters to heads of government, Ministers, newspapers etc. We all needed to be a part of the solutions as you so aptly stated in your report.

I work as a Trainer / Facilitator and Employment Counsellor in St. Thomas where the community is ravaged by loss of jobs by companies like Sterling, Magna (Formet and Presstran), Lear and many other plants all related to the automotive industry. I witness every day people who suffer from the impact of these job losses - the loss of their homes, marital break down, increasing depression and family conflict. And most of all, the loss of hope. I know first hand what would lie in store for the GM workers and for the communities that relay on these strong industries. And as a result, I have tried to join your efforts in the ways that are available to me as a citizen, in order to try to be proactive and solution oriented. And I have been very pleased by the tone and the approach that you have all taken. Rather than take a stand from a negative and confrontative place, you stood strong on issues but communicated a willingness to be a part of a problem solving approach to the grave concerns in front of you.

I just wanted to say Thank You.  You and your team have all been pushed to the wall and have not only had to sacrifice time with your families and your personal lives for these many past months but also have worked tremendous hours to fight for our lives and our futures. Your care and dedication to protect the retirees and the pensions has been admirable and as someone who has worked in non profit for a lifetime without benefits or a pension, that pension represents both my husband and my lives as retirees in the not so distant future. We have all understood that given the times and economic challenges, that concessions had to be made. The average person out there truly could not imagine that the governement and the financial stewards could allow GM to go down. The ripple effect is beyond imagining. My son in law works in a secondary industry that supports GM and Chrysler and so his job is now more secure as well thanks to your efforts.

For the first time in months, I hope we can now sleep and feel that we can more forward in our lives in a more normal way. My husband has had a lifetime committment to quality and doing his job well and safely. We joke that he married me because my initials then became GM! LOL!  But more seriously, he too is grateful and our entire family has recognized that your efforts to restore respect and value to the autoworker is critical. We appreciate you for caring about all of us.

Thank you for fighting the good fight. And for seeing through the issues and politics as to what was really important and critical. Your efforts not only have helped workers and thier families but also, our communities and essentially our country.  I am proud of what you have done. Mr. Lewenza, I am not sure your predecessor could have accomplished what you have done. You have created a legacy to be proud of in the most difficult of times. Bless you and bless all of the people in the union who have done so much for so many.

With respect and appreciation

Gail Malcolm
1 Potter's Way
Woodstock, ON
N4S 8Z5

  Interview with Ford C.E.O.
Alan Mulally June 8, 2009


Chrysler to restart production

Carmaker wants to reopen plants in Canada by June 29, union says

Jun 11, 2009 04:30 AM

Tony Van Alphen
Business Reporter

The Grand Caravans, 300s and Chargers could be rolling off the assembly lines at Chrysler Canada plants within three weeks as the company's parent pulls away from bankruptcy protection with a new partner following a two-month shutdown.

Although Chrysler would not confirm dates, the Canadian Auto Workers union said yesterday that company officials have suggested privately they want to reopen the minivan plant in Windsor, a car operation in Brampton and an engine casting factory in Etobicoke by June 29.

"There's no official notification yet, but we are optimistic the plants will be up and running by the end of the month," said Jerry Dias, a senior CAW official. "The company hopes to start by then."

About 8,700 workers at Chrysler Canada Inc.'s operations have been off the job since the end of April, when the parent company gained court protection from creditors in the United States. Thousands of other workers at scores of parts makers that supply the assembly plants have also been idled.

Chrysler had wanted to build autos during a 30- to 60-day bankruptcy period but uncertainty over the process and payments prompted some edgy suppliers to stop deliveries. It disrupted operations here and in the U.S., where about 27,000 more workers are on layoff.

Chrysler spokespersons said yesterday they did not know when plants in Canada or the U.S. would reopen.

Dias, assistant to CAW president Ken Lewenza, said Chrysler wants to start building vehicles as soon as possible to improve consumer confidence.

Chrysler sales crashed in Canada and the U.S. last month partly because of uncertainty over the company's future, according to industry watchers.

Dias said Chrysler has already recalled some staff to ease the transition to work practices set by Italian automaker Fiat SpA, Chrysler's new owner.

"We've already incorporated a lot of the lean manufacturing techniques so it shouldn't be too difficult," he added.

Parent company Chrysler LLC emerged from court protection yesterday after Fiat took ownership of most of its assets, including the Canadian operations.

Chrysler announced Fiat chief executive officer Sergio Marchionne, who grew up in Toronto, would also head the company.

Marchionne spoke to senior staff at Chrysler's headquarters in Auburn Hills, Mich., about the company's push to implement Fiat's fuel-efficient technologies in smaller cars in North America and develop a new corporate culture.

"He told us bureaucracy doesn't build cars," said Lewenza who heard Marchionne's speech. "He really emphasized the need for fewer managers and the need for everyone to help change the culture."

The company announced several management changes – including the appointment of president Jim Press as deputy chief executive – and individual presidents for the Chrysler, Dodge and Jeep brands. Reid Bigland, Chrysler Canada's CEO, will stay in his current post.

Chrysler LLC CEO Bob Nardelli informed staff of his departure while Stephen Landry, executive vice-president of North American sales and a former CEO of Chrysler Canada, confirmed his retirement.


What's next for reborn Chrysler?

Jun 11, 2009

Tom Krisher
The Associated Press

DETROIT–Chrysler was reborn Wednesday under a new Italian parent, but it can't shake the shadows of its past: It's not selling enough cars, its fleet is tilted to trucks and SUVs, and help is more than a year away.

A 42-day stay in bankruptcy court cleansed the company of much of its debt and labor costs, but many analysts say Chrysler's immediate future is bleak. It lost $8 billion (U.S.) in 2008, and sales are down by almost half for the first five months of this year.

Cars designed by its new owner, Italy's Fiat Group SpA, won't make it to the U.S. until late 2010. And even then there are no guarantees American drivers will want the tiny cars Fiat specializes in.

In the meantime, Chrysler is left with few new vehicles headed to its drastically reduced network of dealers. Its aging model lineup is still heavy with bigger vehicles. And its offerings in the growing small and midsize markets haven't caught on.

"The showroom is not going to look terribly different over the next 18 months," said Aaron Bragman, an analyst for the consulting firm IHS Global Insight. "They're going to try and maintain market share in a down market with products, many of which haven't been redesigned in several years.''

Bragman said Chrysler faces tremendous competition, especially from new cars in the works at General Motors Corp. and Ford Motor Co.

Even if the new Chrysler Group LLC can survive, the super-small Fiat cars that were popular in Europe, like the 500 and Grand Punto, could be out of step with Americans who like bigger cars and are used to lower gas prices.

During Fiat's last run at the U.S. market, in the 1970s and '80s, reliability problems led people to suggest the name stood for ``fix it again, Tony.''

"Fiat is really not a known commodity in the U.S. market,'' said David Koehler, a clinical marketing professor at the University of Illinois at Chicago. "It doesn't resonate with the target market.''

The new Chrysler began operations Wednesday morning after the U.S. Supreme Court refused to hear an appeal of lower court decisions that allowed the transfer of most of the old Chrysler's assets to Fiat.

Fiat CEO Sergio Marchionne was named chief executive of the new company, and Chrysler CEO Bob Nardelli said farewell to employees and ended his tumultuous 20-month reign.

Marchionne quickly shook up the management, replacing Chrysler's chiefs of marketing, finance and product development and cutting layers to make the company more focused on individual brands, such as Jeep, Chrysler and Dodge.

Jim Press, who was Toyota Motor Corp.'s top U.S. executive until he joined Chrysler in 2007, was named deputy CEO and will probably run the company when Marchionne is in Italy.

In an e-mail to Chrysler's 54,000 workers, Marchionne acknowledged the company's problems and said he was determined to repair them. Five years ago, he wrote, he stepped into a similar situation at Fiat, perceived at the time as a failing bureaucracy that made poor cars.

"Through hard work and tough choices, we have remade Fiat into a profitable company that produces some of the most popular, reliable and environmentally friendly cars in the world," he wrote. "We can and will accomplish the same results here.''

Marchionne's more immediate problem is weak offerings in the market for small and midsize cars. Its smallest vehicles, the Dodge Caliber and Jeep Compass and Patriot, sell far less than the Toyota Corolla, the nation's top-selling small car.

Work is already under way to convert Chrysler factories to produce small Italian-designed cars. Neither Chrysler nor Fiat would say which models would come first or how many would be imported to the U.S.

"The need is now, but unfortunately, it'll be at least a two- to three-year process," said Michael Robinet, vice president of CSM Worldwide, a Detroit-area auto industry consulting firm.

Chrysler plans to roll out new versions of its popular Jeep Grand Cherokee SUV and Chrysler 300 large sedan by the end of next year, along with a rechargeable electric vehicle. But Bragman said those were probably delayed in the bankruptcy process, making the next 18 months look iffy.

The good news for Chrysler is that it has cut its expenses enough that it can break even with lower sales, said Gary Dilts, senior vice president of global automotive operations for J.D. Power and Associates.

He said much of the drop in sales this year for Chrysler came from cuts in its sales to rental car companies. Chrysler actually made small gains in market share in sales to individuals in the first five months of 2009.

The struggling company has offered the heftiest rebates and other incentives to buyers recently. But it remains to be seen whether Chrysler can produce amazing cars, not just amazing deals.

The U.S. government has committed roughly $8 billion more to help Chrysler as it leaves Chapter 11 bankruptcy protection, and the Obama administration acknowledges Chrysler will probably lose money until Fiat rides to the rescue. But the government believes the company will be viable in the long term because of Fiat's management expertise.

Aside from the electric vehicle, Chrysler's upcoming new models are not particularly fuel-efficient, and they could suffer if gas prices keep climbing. Those same gas prices could help Chrysler benefit from Fiat's small-car technology.

Marchionne has said Fiat could start selling a successful, North America-made remake of the 500 minicar as soon as next year. Fiat also plans to relaunch the sporty Alfa Romeo brand in North America.

The new Alfa 149 midsize five-door hatchback, to be unveiled next year, would be built in North America as a successor to the larger Alfa 159, Marchionne has said.

But Toyota and Honda remain the champs of midsize cars, and Fiat still has to prove itself to American drivers.

"A lot of us have residual memories of Fiat that are less than stellar," Dilts said. "But I think the product looks good. They've got some great small engine capabilities. With a little bit of pressure on gasoline, I think they're going to give Fiat a look.''


Courts OK Chrysler dealer cuts, rapid sale to Fiat SpA

Deal will terminate if sale not arranged by June 15 deadline

Jun 10, 2009 04:30 AM
Associated Press

NEW YORK–A bankruptcy judge yesterday approved Chrysler's plan to terminate 789 of its dealer franchises, and the Supreme Court cleared the way for its partnership with Italy's Fiat SpA, rejecting a plea by a trio of Indiana pension plans and other secured creditors to block the sale.

U.S. Judge Arthur Gonzalez's order says the franchises, represent about 25 per cent of the dealer base, can no longer act as authorized Chrysler, Dodge and Jeep dealers, effective immediately. A written ruling explaining the decision was to be filed later.

The sale of Chrysler's assets to Fiat Group SpA was expected to close more than a week ago, but Supreme Court Justice Ruth Bader Ginsburg decided Monday to delay the sale to study an appeal by three Indiana pension and construction funds that threatened to derail Chrysler's rapid restructuring.

In a brief filed with the Supreme Court yesterday afternoon, Chrysler and Fiat warned the deal will terminate if it does not close by June 15. Though a new agreement could be negotiated, there is no guarantee one would be reached or that Chrysler would be able to be jump-start its operations after the deadline, they said.

Late yesterday, the Supreme Court cleared the way for Chrysler's sale to Fiat. It issued a brief, unsigned opinion explaining its action. To obtain a delay, or stay, someone must show that at least four of the nine justices find the issue raised serious enough to warrant hearing a full appeal and that a majority of the court would conclude the lower court decision was wrong.

"The applicants have not carried that burden," the court wrote.

Earlier in the day, more than 25 attorneys representing hundreds of dealers from across the country argued in court that little would be gained by terminating the franchises, while Chrysler maintained the move is a necessary part of its plan to cut costs and quickly emerge from Chapter 11 protection from creditors.

Many dealers were trying to sell the last cars on their lots and preparing to shut their doors for good at the end of the day, while others planned to sell used cars or other brands after severing ties with Chrysler.

Chrysler attorneys said the automaker would extend until Monday its program to help affected dealers send unsold vehicles to others.

"Given Chrysler's precipitous state, every day past June 15 increases the risk that Chrysler's business will not be able to restart successfully," the company said.

The Obama administration warned in a separate filing that each day of delay consumes more of the financing provided by the government.

If the closing is delayed by more than 10 days, the government will need to "either to increase its overall funding to the detriment of taxpayers, or abandon its role in the transaction,'' the administration said.

Production at Chrysler's manufacturing plants remains halted pending the closing of the sale. Chrysler says it is losing $100 million every day its plants are closed. Under the deal, leading to Chrysler's April 30 Chapter 11 filing, Fiat will get up to 35 per cent of the automaker, in exchange for sharing the technology Chrysler needs to create smaller, fuel-efficient vehicles. The United Auto Workers gets a 55 per cent stake to fund its retiree health-care obligations, while the U.S. and Canadian governments will receive a combined 10 per cent stake. The secured debtholders would get $2 billion (U.S.) in cash, or about 29 cents on the dollar, for their combined $6.9 billion in debt.


GM 'wind down' offer irks dealers

Franchises say $900,000 average payment from automaker won't cover closing and severance costs

Jun 10, 2009 04:30 AM
Tony Van Alphen
Business Reporter

General Motors of Canada dealers losing their franchises under the automaker's survival plan will receive an average $900,000 each under terms of a confidential offer, but they say it won't cover steep closing costs in many cases.

A copy of GM's "wind down agreement" obtained by the Toronto Star reveals cash compensation for Canadian dealers based on 2008 sales of new vehicles plus an allowance of up to $35,000 for the removal of store signs. Small dealers will get $1,600 for each sale; middle-level owners will receive $1,800 per car and big stores $2,000 a vehicle.

The automaker would not reveal last year's individual dealer sales and the range of compensation for small and big retailers, but industry statistics show GM stores sold an average of 497 vehicles last year.

That would work out to a payment of almost $900,000 plus the signage allowance to closing dealers with average sales.

At the same time, one Toronto region dealership manager, who spoke on condition of anonymity, noted yesterday many mid-level retailers generated sales much lower than that figure and would qualify for less than the average payout.

The agreement contains a ``confidentiality" clause prohibiting dealers from discussing the contents publicly without GM's consent.

Another dealer said GM's payments could range anywhere from less than $200,000 to more than $1.5 million, but it could still leave them with losses after paying shutdown costs. Staff severance costs would alone push some owners into bankruptcy, he said.

Other dealers said colleagues that spent heavily to upgrade stores in recent years because GM insisted on "imaging" now won't be able to recover their investments and are bracing for financial ruin.

GM would not disclose the overall bill for the downsizing but if average sales are an indication, the cost could easily surpass $200 million.

GM, whose sales have plunged in the past year, informed about 240 dealers last month it would not renew their franchise agreements when they expire in October next year because the automaker needs to become more viable quickly. The company also plans to trim its network by another 50 stores through attrition before the end of 2010.

The federal and Ontario governments had pressed GM to announce cuts in its dealer network before a May 31 deadline to qualify for $10.5 billion in loans.

In letters accompanying the offers, GM said it had identified necessary "attributes" for future dealers and reviewed "sales effectiveness," customer-satisfaction scores, capitalization, profitability, location, facilities, market factors and an analysis of the operation.

"The dealer network consolidation is far more complex than most people appreciate," GM Canada spokesperson Stew Low said yesterday.

"It takes time to do the analysis to ensure we did the best job possible given the unique markets across the country."

In exchange for the payments, GM placed several conditions that include releasing the company from liabilty and agreeing not sue the automaker.

Under the agreement, dealers would close by the end of this year rather than next fall and receive four payments, including a final one of 55 per cent.

Government sources say more than 80 per cent of dealers who received the offer signed it after consulting with counsel. Some will remain open as independent used auto dealers.

Dealers complained about the compensation in view of closing costs; the pressure to accept the offer within six days; the number of closings and decisions on some stores.

A senior executive at a Toronto-area dealer that received a termination notice said GM's criteria for keeping some dealers open and closing others doesn't seem to make any business sense.

"How GM can choose to terminate some of their most successful retailers – when every sale counts – over some of their lesser performing dealers is beyond me."

Government loans will save GM and thousands of assembly and parts jobs but the store closings will kill more than 12,000 jobs at dealerships across the country, he said.



NDP sweeps Nova Scotia vote
Nova Scotia NDP Leader Darrell Dexter celebrates with supporters in Dartmouth, N.S., after historic election win.

After slow, steady climb, New Democrats to
form their first government in Atlantic Canada

Jun 10, 2009
Michael MacDonald

HALIFAX – Voters in Nova Scotia made history yesterday, electing the first NDP premier in Atlantic Canada as they delivered a decisive majority win to a party offering a modest platform that promises to balance the books.

NDP Leader Darrell Dexter, a lawyer and former journalist, persuaded voters to ignore dire warnings from the ruling Conservatives, who demonized the Opposition party as a shifty band of irresponsible, free-spending radicals.

The win ends 10 years of Progressive Conservative rule and, most likely, the short political career of Premier Rodney MacDonald, a former professional fiddler and gym teacher whose awkward style in public seemed to leave voters cold after three gaffe-prone years in power.

The NDP won 31 seats in the Legislature, while the Progressive Conservative caucus was reduced to 10 seats.

The Liberals will form the official Opposition with 11 seats.

At a Halifax-area hotel, Dexter thanked throngs of supporters for the party's slow but definitive ascent to governance.

"Who would believe that NDP ridings would cover Nova Scotia?" Dexter said.

"Friends, Nova Scotians decided that at this historic moment of challenge, it was time for historic change.

"I'm humbled by the trust so many Nova Scotians have placed in the NDP," he said.

In his Cape Breton riding, MacDonald said he would meet with party officials before the end of the week.

When asked if he would be stepping down, he replied, "It's going to be time to turn the next chapter for the people of the province."

The victory was the result of a long, steady climb. The NDP had been relegated to third-party status in every election it contested until 1998, when a young, charismatic leader, Robert Chisholm, led the NDP to the brink of power by winning 19 seats – a tie with the ruling Liberals.

The party under Chisholm would lose traction in the election the following year when it was revealed in the final days of the campaign he had been convicted of drinking and driving as a young man. As a result, country doctor John Hamm would lead the third-party Tories to a surprising majority win.

But the NDP has remained in contention ever since, as Dexter offered his solutions to several hot-button problems such as rising gas prices, health-care wait times and emergency room closings.

Under Dexter, the party won 15 seats in 2003 and 20 seats in 2006 as Liberal fortunes waned.

A firmly moderate, centrist platform helped.

Since Day 1 of the latest election race, the NDP waged an overtly careful and positive campaign aimed at persuading Nova Scotians that the New Democrats could be trusted to deliver on their promises without blowing the bank.

Despite a global recession and mounting job losses in Nova Scotia, Dexter has pledged to balance the province's budget in 2010-11.

The NDP had been ahead in the opinion polls for more than two years and was pulling away from its rivals as the 35-day campaign drew to a close.

Liberal Stephen McNeil, contesting his first election as party leader, devoted much of his time to courting the small business sector, which supports about half of the province's entire workforce.

At dissolution, the Tories held 21 seats in the 52-seat Legislature, the NDP had 20 and the Liberals nine. There was one vacancy and one Independent.


Fiat commits to Chrysler deal


MILAN — The Associated Press, Tuesday, Jun. 09, 2009

Italian automaker Fiat said Tuesday it will not turn its back on a deal to acquire a controlling stake in Chrysler despite a U.S. Supreme Court stay on the sale.

Under terms of the agreement, Fiat has the option to abandon the deal if it is not completed by June 15.

“Fiat won't walk away from Chrysler,” Fiat spokesman Gualberto Ranieri said.

The U.S. Supreme Court decision on Monday to hear a challenge by three Indiana pension and construction funds could ultimately scuttle the sale. But the delay could also only be temporary. Justice Ruth Ginsburg could decide on her own to end the stay or ask the full court to decide.

If Fiat were to walk away, Chrysler would have little option but to liquidate.

The trio of funds, which hold a small part of Chrysler's debt, have been fighting the sale, claiming that it unfairly favors Chrysler's unsecured stakeholders ahead of secured debtholders like themselves.

Chrysler claims the agreement with Fiat is the best deal it can get for its assets and is critical to the company's plan to emerge from bankruptcy protection.

Fiat has offered its small car and environmentally friendly engine technology, as well as management expertise, in exchange for an initial 20 per cent stake in Chrysler, which will grow to 35 per cent in 5 per cent increments. Fiat CEO Sergio Marchionne, who was in Detroit on Tuesday laying the groundwork for the transition, will also become Chrysler's chief executive when the deal is complete.

Mr. Marchionne, who is responsible for Fiat's turnaround from a loss-making company with a string of failed models, also is expected to bring fundamental changes to the Chrysler management structure – doing away with hierarchy and making a quicker decision-making process.

Fiat plans to launch its hugely popular Fiat 500 (Cinquecento in Italian) in the United States, as well as the Alfa Romeo brand.

Mr. Marchionne also remains interested in Germany's Opel, part of General Motors Corp.'s European operations, in case negotiations fail with the leading bidder, Canadian auto parts supplier Magna International Inc.


Air Canada, unions reach
deal on pension funding

Agreement struck for 21-month moratorium

Brent Jang

Tuesday, Jun. 09, 2009

Air Canada reached a tentative deal Monday night with three unions for a 21-month moratorium on pension funding, with management agreeing to let employees become part-owners of the airline.

The International Association of Machinists and Aerospace Workers said it signed the agreement along with the Canadian Auto Workers union and the Canadian Airline Dispatchers Association.

Four days ago, Ottawa appointed former Ontario judge James Farley as mediator in the dispute between management and labour over the cash-strapped carrier's proposal to halt its pension contributions until early 2011.

Industry analysts have warned that Air Canada could file for bankruptcy protection for the second time in six years unless it can reduce costs, including delaying large pension payments due in July and August.

The Air Canada Pilots Association and the Canadian Union of Public Employees, representing flight attendants, were not part of Monday night's agreement.

But the deal with three of five unions should help build momentum for labour peace, IAMAW spokesman Bill Trbovich said in an interview. “Each union would be granted an equity stake in the company, too,” he said.

The CAW, which represents airport customer service agents and call centre staff, had a six-year collective agreement that expired on May 31.

The other unions' contracts are set to expire on June 30. Mr. Trbovich said new 21-month contracts for the IAMAW, CAW and dispatchers association have been negotiated.

“The pension agreement calls for a moratorium on past service contributions and fixed payments thereafter for 2011 through 2013,” he said, adding that a news release would be issued by this morning by Air Canada and the three unions that have signed so far.

Air Canada still needs to obtain new financing to clear the way for the labour agreement.

Management and union leaders will be presenting their request for a pension funding moratorium to the regulator, the Office of the Superintendent of Financial Institutions, as well as to the federal Finance Department. A federal order-in-council will be needed to amend Air Canada's pension regulations to approve the proposed moratorium.

An industry official said management and labour leaders were closing in on a deal even before Mr. Farley's appointment, and that Monday night's pact would place pressure on the pilots and flight attendants to also reach a settlement.

Money-losing Air Canada is facing mounting debts, weakening travel demand and stiff competition from WestJet Airlines Ltd.


Investors ask U.S. court to halt Chrysler-Fiat deal

June 8, 2009


WASHINGTON–Indiana pension funds asked the U.S. Supreme Court Sunday to immediately delay the sale of bankrupt automaker Chrysler LLC to a group led by Italian carmaker Fiat SpA while they challenge the deal.

The request, which moves the legal battle to the highest court in the United States, was filed after a U.S. appeals court in New York approved Chrysler's sale to a group led by Fiat, a union-aligned trust and the U.S. and Canadian governments.

The Chrysler ruling could set a precedent for the case of General Motors Corp, which is using a similar quick sale strategy in its bankruptcy in New York.

The appeals court late Friday stayed the closing of the sale until Monday afternoon, giving the pension funds time over the weekend to ask the Supreme Court to block the sale while they appeal.

The pension funds, which hold about $42 million (U.S.) of Chrysler's $6.9 billion in secured loans, have argued the sale unlawfully rewarded unsecured creditors such as the union ahead of secured lenders and that Chrysler was pursuing an illegal reorganization plan through a sham sale.

"The need for the court to review the profound issues presented by Chrysler's novel bankruptcy sale far outweighs the cost of delaying" a sale, lawyers for the pension funds and the Indiana attorney general said in seeking an immediate stay.

The three state pension and construction funds also argued the U.S. government, which kept Chrysler afloat with emergency loans before the automaker's bankruptcy and financed its Chapter 11 filing, overstepped its authority by using bailout funds Congress intended for banks.

"The public is watching and needs to see that, particularly, when the system is under stress, the rule of law will be honoured and an independent judiciary will properly scrutinize the actions of the massively powerful executive branch," the lawyers said.

"The issues presented by this case are of immediate and enduring national significance," they said.

Without a stay from the Supreme Court, the sale will close on Monday, the lawyers said.

A federal bankruptcy judge in New York and the three-judge panel of the appeals court rejected the funds' arguments in approving the sale.

Attorneys for Chrysler, the U.S. government and Fiat all have argued the sale should be allowed to go forward. Fiat can walk away from the deal if it does not close by June 15.

The request to stay the deal was filed with Supreme Court Justice Ruth Bader Ginsburg, who has responsibility for such emergency matters from the New York-based appeals court.

Ginsburg could act on her own or could refer the matter to the full court. A stay from the full court would require the votes of five of the nine Supreme Court members.


Ford 'anxious' for
new deal with CAW
Auto maker says it is hurting following union's cost-cutting deals with rivals GM, Chrysler

Auto maker says it is hurting following union's
cost-cutting deals with rivals GM, Chrysler

Kristine Owram

Toronto — The Canadian Press, Friday, Jun. 06, 2009

Now that Chrysler Canada Inc. and General Motors of Canada Ltd. have redrawn the labour landscape of the Canadian auto industry, Ford Motor Co. of Canada Ltd. is “anxious” to begin negotiations with its workers, the company's chief executive officer says.

Ford is the only one of the Detroit Three that hasn't asked for a bailout or filed for bankruptcy in the United States, but Ford Canada president and CEO David Mondragon said the new cost-cutting labour deals at Chrysler and GM are hurting the company's ability to compete.

“We are very anxious to sit down with the CAW. We need to act now to be competitive in the global auto industry,” Mr. Mondragon said Friday in an interview with The Canadian Press.

“We do not have a cost of productivity advantage today in Canada versus other North American jurisdictions, so we've got to bring ourselves in line, not only with our competitors here in Canada but with our other manufacturing facilities in the United States as well.”

In the past, pattern bargaining assured the unionized Detroit Three that a labour concession given to one of them would soon apply to them all, but that changed when governments asked GM and Chrysler to pare costs as a condition of billions in bailout loans.

In Canada, GM initially reached a deal with the Canadian Auto Workers union in March that cut its labour costs by about $7 an hour, but governments almost immediately said that didn't go far enough. Threats that GM and Chrysler could vacate Canada without major labour concessions forced the CAW to sign new agreements that slashed both companies' labour costs – Chrysler's by about $19 an hour and GM's by about $22 an hour.

Mr. Mondragon wouldn't give details on the specific concessions Ford will request from the CAW, but it's likely it will aim to forge a deal similar to GM's and Chrysler's.

Ford's decision to stay out of the bailout game appears to have been the right one. Rather than applying for government loans, Ford mortgaged most of its assets and sold the rest to build up cash.

Mr. Mondragon said the company made some “very difficult decisions internally and externally” three years ago to streamline its operations and those have helped it weather the global slump in auto sales.

“Our stakeholders – our dealers, our bondholders, our shareholders – have made great sacrifices over the years, but nobody has made more sacrifices than our own employees,” he said.

“We've drawn down 17 plants, we've let go over 60,000 employees at Ford, and we've right-sized our business and now we have opportunities in the market that should allow us to grow.”

Mr. Mondragon said parent Ford Motor Co. (F-N6.36----%) has launched seven new vehicles in North America this year – more than any other auto maker – and will follow that with another 12 over the next two years. Many of these will be smaller, fuel-efficient vehicles Ford already produces in Europe.

Consumers have rewarded Ford for restructuring its operations without turning to taxpayers for help. In Canada, Ford has increased its market share for seven consecutive months to 13.8 per cent and now ranks No. 2 after GM compared to No. 4 after GM, Chrysler and Toyota Canada Inc. in 2008.

Mr. Mondragon said Ford is attracting more so-called “conquest customers,” or buyers who have never owned a Ford before, than it has in more than a decade and many of its vehicles now compete directly with Toyota and Honda Canada Inc.

Ford is reshaping its image to be more than just the producer of “built Ford tough” F-150 trucks, but also an innovative, green car company, Mr. Mondragon said.

“Our opportunity going forward is to reinvent ourselves and reintroduce ourselves to consumers as a great car company,” he said, adding that 80 per cent of Ford's investments are now in cars and crossover vehicles.

Canada will benefit from Ford's new focus on cars when it rolls out the new Lincoln MKT at its Oakville, Ont., plant next month. Ford is also working on developing a line of electric vehicles, including an electric car that will be produced jointly with Canadian auto parts company Magna International Inc. (MG.A-T40.251.935.04%) and introduced in 2011.

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

The Oakville plant produces the Ford Edge, Ford Flex and Lincoln MKX and will soon begin producing the Lincoln MKT. In St. Thomas, Ford produces the Ford Crown Victoria, Mercury Grand Marquis and Lincoln Town Car.


Maximizing your benefit
as CPP changes


Jun 06, 2009 04:30 AM

James Daw, Toronto Star

Advice on when to start collecting from the Canada Pension Plan to get the most money before you die is getting beyond mere mortals.

Even Malcolm Hamilton, the brilliant (and helpful) Mercer actuary, had to confer with chief CPP actuary Jean-Claude Ménard. Canada's finance ministers are proposing to improve "fairness" by phasing in changes between 2011 and 2016, as my colleague Ellen Roseman outlined Wednesday.

These changes would benefit workers to different degrees, depending on their age, history of earnings and ability or desire to work past age 60. They would:

Shrink pensions started before age 65, eventually by an extra 1.2 per cent a year, while boosting pensions started after 65, eventually by an extra 2.4 per cent per full year worked.

Allow people to collect pensions before age 65, while continuing to work without the two-month break in employment or reduction in earnings that is now required to collect and work.

Anyone who starts a CPP pension in 2012 or later would have to contribute to the CPP up to age 65 if they continued or returned to work, and would have the option to continue contributing beyond 65 when that would have a bigger impact on monthly benefits.

Allow people to drop from the calculation of their average earnings since age 18, nearly an extra year of low or zero earnings, up to a maximum of eight (not counting years for pregnancy and child rearing). This will help low-income earners come closer to the maximum CPP pension, which is $10,905 for 2009.

Hamilton says it now costs CPP more to pay a lifetime pension to someone who starts collecting before age 65 than after. That will change, but not immediately.

So someone like me who turns 60 this year could have a range of choices before and after 2012.

What Hamilton gathered after talking to Ménard is that by 2016, the cost to CPP of pensions started before age 65 will fall somewhat more than will be needed to make the system neutral.

The nature of the changes may shift the advantage to retiring later for those who need more years to qualify for a maximum benefit, but not for those who need extra income right away, or those who can afford to quit working early and, by quitting, avoid counting additional years of zero earnings in the calculation of their benefit.

But Hamilton wonders who could advise someone who intends to continue working whether or not to delay taking a pension once it's possible to both collect a pension and contribute to earn a larger benefit.

"In most instances it will be better to continue working and draw the benefit later, but not in all instances," he suspects.

Before 2012, when you would not have to keep contributing to the CPP while collecting a pension, it may be better in more cases (but not all) to apply early.

To calculate what's best, an adviser would "need to have an intimate knowledge what people are going to earn going forward, when they are going to retire and their entire earnings history under the CPP; about all the dropout provisions and phase-in reductions," says Hamilton.

What will be required, he says, is an upgraded online calculator of the sort Service Canada already provides.

Personally, I'd rather anticipate a long life, keep working and wait for a bigger, inflation-protected CPP pension than take a chance of collecting early and investing.

Penske Automotive offers GM undisclosed sum for Saturn brand

Ex race car driver thinks `distribution model will be profitable day one'

Jun 06, 2009 04:30 AM

NEW YORK–General Motors Corp. has a tentative deal to sell its Saturn brand to former race car driver and dealership group owner Roger Penske, both companies said yesterday.

Penske has signed a memorandum of understanding that would give his dealership chain, Penske Automotive Group, Saturn's 350 U.S. dealerships, the firms said. Penske said he expects to offer all the dealers new franchise agreements to sell Saturns exclusively and to retain all 13,000 Saturn employees for the immediate term.

In embarking on a due diligence process, Penske told the Star's Tony van Alphen one of the first priorities is to review the opportunity to continue the Saturn dealer network in Canada. There are 51 Saturn dealers here.

"I would expect that the model that we're putting together, the distribution model, will be profitable day one," Penske told Associated Press. "We'll have less costs. We'll not be in the manufacturing side.''

Penske would take over the separate Saturn parts factory in Spring Hill, Tenn., to continue making Saturn components.

Neither firm would say what Penske is paying for the brand. Penske expects the deal to close in the third quarter.

Initially, GM would make on contract the Saturn Aura sedan and the Vue and Outlook SUVs. He is in talks with global car makers to build future Saturns.

Unveiled in November 1983, Saturn was described as a revolutionary new way to build and sell small cars in America. But the brand did not launch officially until 1990. Its iconic tagline was "a different kind of car company.''

GM hoped Saturn would attract younger buyers with smaller, hipper cars to better compete with Japan's imports. A new plant in Spring Hill devoted to Saturn production had more flexible work rules. Now, production is scattered. The Aura's made at Kansas City, the Outlook in Lansing, Mich., and the Vue in Ramos Arizpe, Mexico.

Despite a cultlike following that drew thousands to annual reunions in Spring Hill, the brand never made money for GM.

"Saturn was kind of an unpolished gem at GM," said Brad Coulter, director at turnaround firm O'Keefe and Associates.

Associated Press



Premiers rally behind Harper in fight against Buy American

Provincial leaders form 'united voice' against creeping U.S. protectionism, with some signing on to PM's new trade pitch

Brian Laghi, Campbell Clark, Steven Chase and Barrie Mckenna

OTTAWA — From Friday's Globe and Mail, Friday, Jun. 05, 2009

Canada's premiers have agreed to back Prime Minister Stephen Harper as he moves to exempt the country from Buy American policies that are freezing out Canadian companies from U.S. stimulus funding.

In a late-afternoon conference call yesterday, sources said the premiers agreed on the need for a co-ordinated effort as the country battles against increasing protectionist sentiment within the United States.

Mr. Harper's idea for a new deal between the countries to open up local procurement policies on both sides of the border also got a boost, when New Brunswick and Alberta offered encouragement. The provinces have not yet, however, agreed unanimously to commit to seeking such a deal.

“ ... there's a realization that getting in a tit-for-tat protectionist war is not in the interest of Canadian families or businesses”


“The premiers are going to support the Prime Minister in opposing Buy America and give the Prime Minister as strong a position as possible so he can speak with as unified a voice as possible,” said a provincial official at the end of the 30-minute conference call.

“I think, in the end, that there's a realization that getting in a tit-for-tat protectionist war is not in the interest of Canadian families or businesses.”

Canadian firms are reporting increasing difficulty in winning contracts in U.S. cities because of the Buy American provisions of President Barack Obama's stimulus package. Later today, federal Trade Minister Stockwell Day is expected to warn a meeting of Canadian mayors to avoid retaliation against the United States by restricting domestic contracts to Canadian suppliers.

New Brunswick Premier Shawn Graham said yesterday he likes the idea of a deal that would open local procurement to outside bidders.

The North American free-trade agreement does not include spending by local jurisdictions, which are spending a vast amount of the stimulus cash.

“The government of Canada is proposing looking at some measures to strengthen the NAFTA and I'm open to that, and as Premier of the province of New Brunswick, I'm a firm believer in free trade.”

He added he will encourage other premiers to press U.S. governors to ensure barriers aren't erected.

The Alberta government said it's also open to negotiations with the Americans on the condition the U.S. comes to the table willing to grant Canadian firms equal access to state and local procurement opportunities.

“If Canada enters into new negotiations with the U.S., Alberta believes there must be full reciprocity in state and local procurement opportunities,” said Tom Olsen, director of communications for Alberta Premier Ed Stelmach.

The support of the premiers is a positive domestic sign for the Mr. Harper, who can claim wide support for his stand against Buy American.

But while the concerns are shared by most jurisdictions, it's still not clear how quickly many want to push forward with a new deal.

Sources said, for example, that Ontario Premier Dalton McGuinty wants to emphasize issues such as boosting pensions and entitlements for the unemployed. Some premiers also have to be concerned about offending domestic supporters, such as organized labour.

Federal officials conceded yesterday that a deal may take some time.

“I think one has to be realistic about the timelines with respect to this,” said Kory Teneycke, a spokesman for Mr. Harper.

“One would need agreement amongst our provinces and then there would need to be agreement with the United States and U.S. states. … This is a complicated problem and not one that will be solved overnight.”

He added it's too early to say whether any new agreement would mean reopening NAFTA, an idea that some premiers reportedly do not support.

Also yesterday, Mr. Harper was pressed by Canadian business to secure from Mr. Obama a waiver from Buy American provisions by offering up the possibility of the broader trade deal.

“It's an urgent issue. The onus is on the Canadian government to propose a workable solution to the President,” said Jayson Myers, president of Canadian Manufacturers and Exporters.

Mr. Myers penned a letter to Mr. Harper applauding the idea of negotiating a trade deal for local-government procurement, but asked him to press Mr. Obama for a more immediate exemption.

However, Canadian officials conceded that kind of quick fix is unlikely, because other countries would demand similar treatment. Moreover, by the time a deal is done, the billions in stimulus money would likely be spent.

Still, Canada is doing the right thing in seeking a better deal from the Obama administration right now, said Maryscott Greenwood, executive director of the Canadian American Business Council, based in Washington.

But while there are people in the Obama administration, including National Economic Council director Lawrence Summers, who understand how destructive the Buy American restrictions are to companies that operate in both countries, many in Congress and elsewhere in the White House still don't, she pointed out.

“There are other spheres, even within the West Wing,” Ms. Greenwood said.

Gary Hufbauer, a former top U.S. Treasury department official, agreed that Canadian companies are getting a raw deal under Buy American rules.

“President Obama should do the right thing and issue a clear executive order that spells out the rights of the NAFTA partners,” said Mr. Hufbauer, now a senior fellow at Peterson Institute for International Economics in Washington.

U.S. trade officials were not immediately available to comment.

Meanwhile, some of the unintended consequences of Buy American are starting to get attention.

For Canadians, the defining moment that galvanized anger over Buy American laws was the recent removal of an Ontario-made pipe fitting at the Camp Pendleton U.S. Marine Corps base in California. For Americans, it's the layoff of 600 workers at a Duferco Farrell Corp. steel plant in Pennsylvania after the company lost orders from its biggest customer because some of its products are made outside the U.S.

With a report from Rhéal Séguin


MPs - all of 'em - mum on GM

Chantal Hébert

June 5, 2009

MONTREAL—The $10.6 billion General Motors bailout announced by Prime Minister Stephen Harper on Monday is the largest federal rescue mission of a private-sector operation in the recent history of Canada.

Accounting for one fifth of the expected deficit for this fiscal year, the assistance package to the Ontario car industry is also the biggest single red ink blot on the federal government's books.

By the Prime Minister's own admission, it is a loan in name only, with little expectation that the money will eventually be reimbursed. Meanwhile, the federal capacity to stimulate other sectors of the economy has been reduced.

At the same time, the package is so big that it has instantly raised the bar against which inter-regional fairness will be measured in the future in Canada.

And yet, the expensive operation was set in motion with little more than a swoop of the governmental pen and an Ottawa-Queen's Park leap of faith.

An orchestra looking for federal assistance to finance a tour would have to document its application with more paperwork than what has so far been brought to the fore to back up the pertinence of bailing GM out.

Unsurprisingly, the initiative inspires deep reservations in a majority of Canadians. Even those who support the bailout have many questions about its underlying assumptions and potential outcomes.

It seems they should not count on the parties whose mandate it is to hold the federal government's feet to the fire to get those answers.

Since the bailout was announced, a cone of silence has fallen over it in the House of Commons.

On Monday, Frank Valeriote, the Liberal junior industry critic, asked whether the government would guarantee a return on the billions Canadians were putting into GM.

The answer he received was really a non-answer, delivered not by a minister but by a parliamentary secretary. It apparently was enough to satisfy the Liberals.

On Tuesday, with the Prime Minister and the leader of the Opposition in the House for the first time this week, Michael Ignatieff focused on the isotope shortage triggered by the shutting-down of the Chalk River nuclear reactor.

By Wednesday, he and his party were hot on the trail of ministerial blood and the two subsequent question periods were spent asking for the resignation of Natural Resources Lisa Raitt for leaving some documents behind at an Ottawa TV station.

Given the NDP's long-standing ties with the union movement, it would have been a surprise if Jack Layton had picked up the slack and he did not.

With an eye to the next election, neither of the two national opposition parties is eager to get on the wrong side of an Ontario-driven bailout. As for the Bloc Québécois, it mostly sees the GM bailout as fresh evidence that the federal balance is tilted against Quebec.

And thus, it seems that no party will step forward to kick the tires of the bailout on behalf of the taxpayers. If it is possible to have a non-position on an issue of this magnitude, that term best describes the Liberals' body language.

Ignatieff is hardly the first official opposition leader to be selective in the due diligence he exercises on the government. But at a time when the Liberals are out to demonstrate that the Conservatives lack the rigour expected of a competent government, their own unwillingness to exhibit the vigilance expected of a competent official opposition makes them look like they are throwing stones from a glass house.



Auto assembly, parts jobs plunge
to lowest levels in 36 years

Sector's employment tumbles 20%, or 25,122 jobs,
largely in Ontario and with more losses expected

Jun 04, 2009
Tony Van Alphen
Business Reporter

Employment in Canada's auto assembly and parts sectors, which are concentrated in southern Ontario, have fallen to their lowest levels since the early 1970s after a huge plunge in the past year.

Net auto manufacturing employment dropped a stunning 25,122 jobs, or 20 per cent, to 99,684 jobs in the first quarter, according to figures from Statistics Canada.

The employment level at the end of March marks the lowest point for jobs in the sector since 1973 when the Middle East oil embargo hammered auto production in North America.

The job losses are expected to continue piling up because of the recent closing of the General Motors of Canada truck plant in Oshawa and the effect on scores of suppliers in the region.

Chrysler Canada will also eliminate a shift at its assembly plant in Windsor later this summer, which will also cut production for numerous suppliers.

Industry watcher Dennis DesRosiers added the current restructuring of GM Corp. and Chrysler LLC will lead to smaller companies that will adversely affect Canadian parts makers who supply their operations on both sides of the border.

"More bad news is to come over the coming months," said DesRosiers, who described the latest job levels as "scary."

Reeling GM and Chrysler have received about $14.4 billion in loans from the federal and Ontario governments to stay alive and rebuild their companies, but the terms do not include job guarantees.

In announcing the aid earlier this week, Prime Minister Stephen Harper and Ontario Premier Dalton McGuinty said that without it, the remainder of GM and Chrysler operations would disappear to the United States, where the American government has provided the two companies more than $60 billion (U.S.) since January.

"The governments felt they had no choice but to try to save some of these jobs," DesRosiers said in a note to clients. "It is hard to disagree with this logic from a political perspective. There are serious issues with the deals but the political logic was crystal clear."

The industry is currently weathering the worst downturn in sales in more than a quarter-century. The economic shock has also affected the plans of rival automakers such as Toyota Canada Inc., which cancelled a shift at its new plant in Woodstock last year before the operation even opened.

Employment in the Canadian assembly and parts sector peaked at 157,130 in 2001 but has declined steadily since then, primarily because of lower demand for vehicles from the Detroit-based automakers GM, Chrysler and Ford Motor Co. Ltd.

Honda Canada Inc. and Toyota Canada Inc. have increased their job levels and the fortunes of some parts makers here, but they have not overcome the losses by the Detroit companies.

The StatsCan figures show employment at assembly plants has slid 13.4 per cent in the past year to fewer than 37,500 workers, the lowest level since the temporary oil embargo. Parts sector jobs have dwindled by a startling 23.7 per cent in only a year to about 62,200, the smallest number since 1982.


Top auto figures may
take a pension hit

Wednesday, June 3, 2009

David Shepardson / Detroit News Washington Bureau

Washington -- The bankruptcy filings of General Motors Corp. and Chrysler LLC will likely cost former and current top executives including Rick Wagoner, Robert Lutz and Lee Iacocca big money.

Wagoner, fired by President Barack Obama more than two months ago as GM chairman and CEO, remains on the payroll.

But it's not his $1 salary for 2009 that's in dispute.

It's Wagoner's $22 million pension agreement, which now will be decided after the company emerges from bankruptcy. GM's board of directors and the auto task force have been reviewing the matter, but the board didn't take action before GM filed for bankruptcy Monday. The financial issue is the only snag that is keeping Wagoner on the payroll.

The deposed GM boss, like a number of former senior execs, is likely to lose some of his pension.

Chrysler cuts under way

Chrysler is leaving some of its former executive pensions behind, in bankruptcy. But GM didn't follow suit. GM spokeswoman Julie Gibson said Tuesday the pensions for former execs -- known as supplemental employee retirement plans -- will be brought to the new company emerging from bankruptcy.

GM said in a statement that "the amount of non-qualified pension for some executive retirees may be affected."

Gibson said benefits won't be reduced until GM emerges from bankruptcy.
Last Thursday, Chrysler CEO Robert Nardelli confirmed that former Chrysler Corp. CEO Lee Iacocca was losing a company car and his supplemental executive pension. Just how much wasn't made public, because Chrysler is privately held.

Lutz, a legendary auto figure who is retiring as GM vice chairman this year, is a former president and CEO of Chrysler; he also worked at Ford Motor Co. and BMW AG. Reached by e-mail, Lutz confirmed that his Chrysler pension had been reduced, but he declined to elaborate.

The firm sent letters to several former executives telling them to turn in their company vehicles.

In a May 14 letter, Chrysler told former executives and directors with company-provided vehicles that they'd have to turn them in, or buy them at fair market value by May 31.

"In light of the many contributions you have made to Chrysler over the years, we regret the need to take this difficult action," Chrysler wrote.

Other former top execs at Chrysler also have lost supplemental pensions.

Wagoner, 56, a 32-year veteran of GM, had a pension with total accrued benefits of $22.1 million as of Dec. 31. The pension is to be paid in five annual pension payments of $4,523,400, with the first monthly instalment due upon his retirement. Wagoner could have collected about $900,000, if he had retired immediately.

Wagoner also is owed a $68,900 annual pension that is likely to be honoured by GM and the bankruptcy court.

The $22 million owed Wagoner is in addition to about $535,000 in deferred compensation -- a portion of his income that he agreed to be paid at a date after which it was earned. Wagoner's deferred compensation account was worth $766,000 at the end of 2007 but has fallen along with GM's stock value. The deferred compensation could be lost in bankruptcy.

Some executives sold off most or all of their GM stock in anticipation of the bankruptcy filings.

It's unclear what, if anything, GM will make public about the payments since the company will be privately held after it clears bankruptcy.

GM has dealt with other pension issues and faces a $20 billion shortfall, according to the Pension Benefit Guaranty Corp. GM, using different accounting rules, estimates its shortfall at about $12 billion and says it expects to need to make $6 billion pension payments in 2013 and 2014 to make up the difference.

Wagoner's compensation has totalled about $65 million since 2003, including $40.2 million over the past three years.

GM noted that because the precipitous drop in the company's stock price, the stock and options the automaker awarded to Wagoner declined dramatically: For the $11.9 million in stock and options awarded to Wagoner in recent years, GM said the actual value as of Dec. 31 is $682,000.

Wagoner became CEO in 2000 and added the title of chairman of the board in 2003.

Bankruptcy already stings

Bankruptcy already has stung Chrysler execs.

About 1,200 Chrysler retirees who received large pensions under the company's Supplemental Employee Retirement Program got their checks cut off after the April 30 bankruptcy filing.

They're lumped in with more than 100,000 other unsecured creditors to whom Chrysler owes money. The bankruptcy court will determine how much, if anything, they will receive.

Chrysler also said in court papers it wouldn't honor "retiree benefits or severance arrangements provided under certain individual agreements, American Motor Co. employment agreements, retired officer benefit arrangements and retired board of director benefit arrangements." Chrysler purchased American Motor Co. in 1987.

For some former senior execs, Chrysler said, there are "contractual retiree health care benefits that will nevertheless not be assumed by" the new company.

CPP reforms will
squeeze early retirees

Jun 03, 2009

Ellen Roseman

Big changes to Canada Pension Plan benefits, announced last week, were overshadowed by news of a larger-than-expected federal deficit.

The new rules, to be introduced gradually starting in 2011, will give lower pensions to retirees who start collecting CPP from age 60 to 65.

Those who delay claiming CPP benefits until after age 65 will get larger pensions.

There will also be more flexibility for people 60 and older, who now must stop work or significantly reduce their earnings to receive their CPP retirement benefit.

In future, "those who choose to work while receiving the benefit will participate in the CPP and increase their pension," said a statement by the federal and provincial finance ministers.

"Their employers will also be required to participate," it added.

CPP is a contributory pension, financed by both employees and employers, and is adjusted for inflation once a year.

If you retire at age 65, your maximum pension for 2009 would be $908.75 a month, or $10,905 a year.

The average pension, however, is $501.82 a month, or $6,021.84 a year.

Your CPP pension amount is based on the number of years you work and contribute to the plan, as well as your salary or wages.

Why do governments want to give a weaker incentive to collect pensions before 65 and a stronger incentive to wait until after 65?

In a big demographic shift, more Canadians are retiring early and starting CPP before 65. Yet, the age-related adjustments have not changed since 1987.

Under the current system, you can apply for CPP starting at age 60. Your pension is permanently reduced by 0.5 per cent a month, or 6 per cent a year, depending on your age.

Suppose you start CPP at 60. While you lose 30 per cent of your pension, you get pension money for five more years than you would if you waited until 65.

You can go back to work after starting to collect the pension and not have CPP contributions deducted from your salary.

The current system also lets you delay applying for CPP. You get an extra 0.5 per cent a month, or 6 per cent a year, if you start collecting benefits beyond age 65.

Adjusting CPP pensions this way "no longer ensures actuarial fairness," said an information paper released last week.

Here's what would happen under the proposed changes:

The early pension reduction will be increased gradually to 0.6 per cent a month for each month the pension is taken before age 65. This will be phased in over a five-year period, starting in 2012.

The late pension augmentation will be increased gradually to 0.7 per cent a month for each month that the pension is taken after age 65, up to age 70. This will be done over a three-year period, starting in 2011.

The changes will not affect current retirees collecting CPP or those taking their benefit before the changes start coming into force.

Amrita Caceres, a fictional nutritionist used as an example, will turn 65 in 2014. She expects her CPP benefit will be $6,220.

If she works another year and delays taking her CPP pension until she's 66, her basic pension amount of $6,410 in 2015 will be increased by 8.4 per cent – rather than 6 per cent without the proposed change.

So her pension will start at $6,498 and grow with the cost of living.

Governments hope that boosting CPP benefits for those who wait will be fairer to retirees – and will help Canada's public pension system accommodate the baby boomers' retirement plans.


Ford revs up production,
market share

But bankruptcy may help GM cut costs, debt, dealers faster

Bryce G. Hoffman / The Detroit News

June 2, 2009

Ford Motor Co. is boosting production for the second time this quarter -- an action in sharp contrast to the factory shutdowns taking place at its bankrupt cross-town rivals.

But General Motors Corp.'s bankruptcy filing, which will eliminate much of that company's debt, also creates new challenges for the Dearborn automaker, particularly with the financing of its vehicles.

Ford, which will announce today that it is increasing its North American plant output by another 10,000 vehicles, is gaining market share as customers shy away from GM and Chrysler LLC, and it stands to gain more as GM moves to eliminate or sell its Pontiac, Hummer, Saturn and Saab brands. Chapter 11, however, allows those companies to eliminate much of their crippling debt, close dealerships in overcrowded urban markets and secure more favourable terms from the United Auto Workers.

Ford has addressed some of its issues outside of bankruptcy court. In March, the automaker renegotiated the terms of its UAW contract and convinced bondholders to forgive billions of dollars of debt for pennies on the dollar. But bankruptcy will allow GM and Chrysler to do more.

Asked if Ford was being left at a disadvantage, an administration official said no.
"Ford has ample financial resources," he said. "Ford has been very successful in growing its market share during this period."

But a senior Ford executive, who spoke to The Detroit News on the condition of anonymity, said the company is being hurt by the government's restructuring of GMAC LLC as a bank holding company. That allowed GMAC, which is now the lending arm of GM and Chrysler, to receive taxpayer money -- money it is already using to give customers no-interest loans.

"They've just got an unlimited spigot," the source said. "The scary part is all will be forgiven and they will have cleared their books better than us."

The Treasury Department has been slow to act on Ford's application to allow Ford Credit to become an industrial bank. That still would not give Ford access to federal money, but it would allow Ford Credit to secure financing at more favourable rates.
Ford is confident it can get terms similar to GM's from the UAW, and it will sell more stock to pay off its remaining debt. Though its sales are down sharply with the rest of the industry, the family-run company is eager to avoid any move that would subject it to government control.

Analysts agree Ford is in a relatively strong position.

"GM will still emerge with leverage. They're still going to have some debt and in terms of employee obligations. But they also still have years of restructuring to realign their manufacturing and product offerings," said Mark Oline, managing director of Fitch Ratings. "Ford is much farther along in that process, and so is much closer in our view to being competitive and being able to generate positive cash flow."

Grand Theft Auto: How Stevie
the Rat bankrupted GM

by Greg Palast
Monday, June 1, 2009

ant-farm_2Screw the autoworkers.
They may be crying about General Motors' bankruptcy today.  But dumping 40,000 of the last 60,000 union jobs into a mass grave won't spoil Jamie Dimon's day.

Dimon is the CEO of JP Morgan Chase bank.  While GM workers are losing their retirement health benefits, their jobs, their life savings; while shareholders are getting zilch and many creditors getting hosed, a few privileged GM lenders – led by  Morgan and Citibank – expect to get back 100% of their loans to GM, a stunning $6  billion.

The way these banks are getting their $6 billion bonanza is stone cold illegal.

I smell a rat.

Stevie the Rat, to be precise.  Steven Rattner, Barack  Obama's 'Car Czar' - the man who essentially ordered GM into bankruptcy this morning.

When a company goes bankrupt, everyone takes a hit:  fair or not, workers lose some contract wages, stockholders get wiped out and creditors get fragments of what's left.  That's the law.  What workers don't lose are their pensions (including old-age health funds) already taken from their wages and held in their name.

But not this time.  Stevie the Rat has a different plan for GM: grab the pension funds to pay off Morgan and Citi.

Here's the scheme:  Rattner is demanding the bankruptcy court simply wipe away the money GM owes workers for their retirement health insurance.  Cash in the insurance fund would be replaced by GM stock. The percentage may be 17% of GM's stock - or 25%.  Whatever, 17% or 25% is worth, well ... just try paying for your dialysis with 50 shares of bankrupt auto stock.

Yet Citibank and Morgan, says Rattner, should get their whole enchilada - $6 billion right now and in cash - from a company that can't pay for auto parts or worker eye exams.

Preventive Detention for Pensions

So what's wrong with seizing workers' pension fund money in a bankruptcy?  The answer, Mr. Obama, Mr. Law Professor, is that it's illegal. 

In 1974, after a series of scandalous take-downs of pension and retirement funds during the Nixon era, Congress passed the Employee Retirement Income Security Act.  ERISA says you can't seize workers' pension funds (whether monthly payments or health insurance) any more than you can seize their private bank accounts.  And that's because they are the same thing:  workers give up wages in return for retirement benefits. 

The law is darn explicit that grabbing pension money is a no-no.  Company executives must hold these retirement funds as "fiduciaries."  Here's the law, Professor Obama, as described on the government's own web site under the heading, "Health Plans and Benefits."

            "The primary responsibility of fiduciaries  is to run the plan solely in the interest of participants and beneficiaries  and for the exclusive purpose of providing benefits."

Every business in America that runs short of cash would love to dip into retirement kitties, but it's not their money any more than a banker can seize your account when the bank's a little short.  A plan's assets are for the plan's members only, not for Mr. Dimon nor Mr. Rubin.

Yet, in effect, the Obama Administration is demanding that money for an elderly auto worker's spleen should be siphoned off to feed the TARP babies. Workers go without lung transplants so Dimon and Rubin can pimp out their ride. This is another "Guantanamo" moment for the Obama Administration - channeling Nixon to endorse the preventive detention of retiree health insurance.

Filching GM's pension assets doesn't become legal because the cash due the fund is replaced with GM stock.  Congress saw through that switch-a-roo by requiring that companies, as fiduciaries, must

            "...act prudently and must diversify the plan's investments in order to minimize the risk of large losses."

By "diversify" for safety, the law does not mean put 100% of worker funds into a single busted company's stock.

This is dangerous business:  The Rattner plan opens the floodgate to every politically-connected or down-on-their-luck company seeking to drain health care retirement funds.

House of Rubin

Pensions are wiped away and two connected banks don't even get a haircut? How come Citi and Morgan aren't asked, like workers and other creditors, to take stock in GM?

As Butch said to Sundance, who ARE these guys?  You remember Morgan and Citi.  These are the corporate Welfare Queens who've already sucked up over a third of a trillion dollars in aid from the US Treasury and Federal Reserve.  Not coincidentally, Citi, the big winner, has paid over $100 million to Robert Rubin, the former US Treasury Secretary.  Rubin was Obama's point-man in winning banks' endorsement and campaign donations (by far, his largest source of his corporate funding).

With GM's last dying dimes about to fall into one pocket, and the Obama Treasury in his other pocket, Morgan's Jamie Dimon is correct in saying that the last twelve months will prove to be the bank's "finest year ever."

Which leaves us to ask the question:  is the forced bankruptcy of GM, the elimination of tens of thousands of jobs, just a collection action for favored financiers?

And it's been a good year for Señor Rattner. While the Obama Administration made a big deal out of Rattner's youth spent working for the Steelworkers Union, they tried to sweep under the chassis that Rattner was one of the privileged, select group of investors in Cerberus Capital, the owners of Chrysler.  "Owning" is a loose term.  Cerberus "owned" Chrysler the way a cannibal "hosts" you for dinner. Cerberus paid nothing for Chrysler - indeed, they were paid billions by Germany's Daimler Corporation to haul it away.  Cerberus kept the cash, then dumped Chrysler's bankrupt corpse on the US taxpayer.

("Cerberus," by the way, named itself after the Roman's mythical three-headed dog guarding the gates Hell.  Subtle these guys are not.)

While Stevie the Rat sold his interest in the Dog from Hell when he became Car Czar, he never relinquished his post at the shop of vultures called Quadrangle Hedge Fund. Rattner's personal net worth stands at roughly half a billion dollars.  This is Obama's working class hero.

If you ran a business and played fast and loose with your workers' funds, you could land in prison. Stevie the Rat's plan is nothing less than Grand Theft Auto Pension.

It doesn't make it any less of a crime if the President drives the getaway car.


Economist and journalist  Greg Palast, a former trade union contract negotiator, is author of the New York Times bestsellers The Best Democracy Money Can Buy and Armed Madhouse.  He is a GM bondholder and card-carrying member of United Automobile Workers Local 1981. 



DEARBORN, Mich., June 1, 2009 – Today's announcement that GM is filing for Chapter 11 bankruptcy is another important development during this unprecedented period for the auto industry and the global economy.

The Ford team continues to monitor the industry environment and plan for all contingencies to ensure our transformation plan remains on track. At this time, we do not expect any major disruptions to our operations as a result of today's news.

We share President Obama's hope that GM's bankruptcy will be controlled and orderly, and we continue to believe it is important that our governmental leaders and the U.S. Automotive Task Force remain focused on the stability of the supply chain and on ensuring that a healthy U.S. auto industry emerges from this difficult economic period. We look forward to working with the Obama administration to ensure that the government's majority ownership of GM will not change the industry's competitive dynamics and that a level playing field will be maintained.

Ford remains absolutely committed to continuing to make progress on our transformation plan without accessing emergency taxpayer assistance from the U.S. government. We have been executing our plan for several years and now gaining market share and new customers with an unprecedented number of new high-quality, fuel-efficient vehicles, such the new Ford Fusion, F-150, Lincoln MKS and Lincoln MKZ. Coming soon are the highly acclaimed Ford Taurus, Lincoln MKT and Transit Connect.


Letter Sent to GM Employees
June 1, 2009

First and foremost, I would like to thank each and every one of you for your unwavering support during these unprecedented times.  The dramatically changing global landscape and economic conditions have created the urgent need, and the opportunity, for GM Canada to reinvent our company.  

The Governments of Canada and Ontario have approved our comprehensive plan, enabling GM Canada to complete our restructuring without the need for court supervision.  We will launch a more competitive, stronger, new GM Canada building on our foundation of award-winning vehicles.

General Motors Corporation has announced it will complete its reinvention through a court-supervised process in the U.S.  Let me assure you that we do not expect GM Canada’s operations to be impacted by the U.S. court filing.  GM U.S. and GM Canada expect that customer service, manufacturing, and supply chain will continue with minimal disruption.

What does this mean for you?

Retirees and surviving spouses will continue to receive pension and post-retirement health care benefits without interruption.  At this point, we do not anticipate making any further changes to benefits affecting retirees and surviving spouses.

What does this mean for our customers and partners?

While GM Canada is restructuring, the company intends to carry on business as usual.  GM and GM Canada’s customer service, manufacturing and supply chain are expected to continue with minimal disruption:

GM Customers - The Company’s warranties and other service commitments, such as OnStar®, XM Radio™ and customer financing options remain in full effect.

GM Manufacturing - GM Canada will continue to produce high quality GM vehicles and powertrains as previously announced.  

GM Suppliers – GM Canada’s suppliers will continue to be paid for the delivery of products and services.  We expect supply from our key suppliers to continue without interruption.  Canadian supplier activities will continue to be coordinated through GM’s Global Purchasing and Supply Chain group.

GM Dealers – GM Canada will have the strongest and broadest dealer network across Canada and dealers will continue to service our highly valued customers and have access to financing options, parts and warranty coverage as GM Canada carries out its restructuring plans.  

Where do I go if I have questions?

I know that you will have many questions.  Although we may not be able to offer answers right away, we encourage you to keep checking this website (www.gmclrestructuring.com) for access to retiree Q&A’s and other information.  Using the information found on the website, you can be a helpful voice in assisting others in understanding the actual context and nature of today's actions which will complete the restructuring and strengthening of GM Canada.

What does this mean for the future of our company?

The new GM Canada will emerge from this restructuring a cost-competitive and innovative company that will continue to put customers first.  It will remain one of Canada’s leading auto marketers and manufacturers.  It will focus on Chevrolet, Buick, GMC and Cadillac, and continue to invest in green, energy-saving technologies and will be supported by a stronger balance sheet due to a significantly lower debt burden and operating cost structure.

The many sacrifices by all our stakeholders including employees, retirees, the CAW, our dealers and others, have made it possible to lay the foundation for a new GM Canada.  I greatly appreciate your ongoing dedication and perseverance during these most challenging times.  At GM Canada, we are well on our way to reinventing our company and emerging even stronger.

Thank you for your continued support.

Arturo Elias
General Motors of Canada Limited


'The General' surrenders at last

Woman walks by bumper sticker to buy Canadian in Oshawa June 1, 2009 as GM files for bankruptcy protection in New York

GM files for protection, signalling the end of an era
and fresh resolve to get things right this time

Jun 02, 2009
David Olive

 "The skeleton frames of burned-out Chevrolets"

– Bruce Springsteen, "Thunder Road"

Few products have done more to help shape American culture than those of General Motors Corp., which filed for Chapter 11 bankruptcy protection yesterday in the largest industrial bankruptcy in U.S. history.

"The General," as it was known at the height of the Auto Century it long dominated, inspired the tunesmiths of Tin Pan Alley and later, the Beach Boys and the Boss.

But by late last year, GM, the world's biggest automaker for 77 years until it was overtaken by Toyota Motor Corp. in 2008, could no longer pay its bills. It was just another deadbeat, stringing along many of its more-than-3,000 suppliers for as long as it could.

When Dinah Shore sang "See the U.S.A. in your Chevrolet" in the 1950s, GM held the whip in an oligopoly shared with Ford Motor Co. and Chrysler Corp.

The early GM decided its cars would have covered bodies, and later automatic transmissions, and still later outrageous tail fins.

Soon almost all American cars had these things. The GM mystique then expanded to its leading role in the "arsenal of democracy" as a prodigious arms supplier in two world wars.

But an arrogant Detroit went into denial at the dawn of the import era, and remained fixated on big, heavy gas-guzzlers well into the 21st century. Americans long ago abandoned Detroit brands for more fuel-efficient foreign makes.

Today, GM is mocked as "Government Motors." Washington, Ottawa and Queen's Park have taken a 72 per cent ownership stake in the reorganized GM, set to emerge from bankruptcy in about six months, in return for about $72 billion (U.S.) in state loan assistance, $9.5 billion of it from Canada.

In a recent public-opinion survey released last week, two-thirds of Americans opposed the use of taxpayer funds to bail out GM, regarded as a textbook case of chronic failure of free-market managers. The dwindling popularity of GM products relegated its market share to "flyover country," the less-populated interior American states.

The allegiance of motorists on the coasts is to Toyota, Honda, BMW and other foreign makers. GM's overall market share has plummeted to 19.1 per cent. In the most heavily populated states such as New York and California, GM's market share is even lower than that. In detailing Washington's turnaround scheme for the company, built by the legendary Alfred Sloan, who was an implacable foe of FDR's interventionist policies, U.S. President Barack Obama described yesterday what he called "a credible plan that is full of promise."

That it may be, since it expects a "new GM" to be capable of making a profit even during the current 27-year low in auto sales.

Yet ,this phoenix-like rebirth will require another round of drastic downsizing at a GM that already has been shrinking at a desperate pace. Fourteen more plants are to be boarded up, another 21,000 jobs eliminated and a remarkable 40 per cent of GM dealerships closed.

Washington is widely accused of throwing good money after bad in its long-shot rescue bid of a company that managed to lose $88 billion over the past four years. "I think this is going to be Obama's Vietnam," U.S. auto historian Bob Elton told Reuters on Sunday. "Every time he turns around, there goes another $20 billion."

Indeed, it will take some doing to renew America's affection for Chevys, Buicks, Cadillacs and GMCs, after a restructured GM has shed its Pontiac, Saturn, Saab, Hummer, Opel and Vauxhall brands. (Control of the last two, GM's European brands, was tentatively won by Magna International Inc. last weekend.)

GM had begun its death spiral about a decade before Michael Moore's 1989 breakout classic, Roger & Me. The film misses the point in savaging then-GM chief executive Roger Smith for his alleged insensitivity to laid-off GM workers in Moore's native Flint, Mich. Smith's real crime was failing to cut deeper and reduce GM's overcapacity. Instead, Smith and his successors continued to flood the market with vehicles North Americans didn't want.

And so came yesterday's great reckoning. For all that Americans have spurned GM in the showroom, the parlous state into which GM has steadily slipped over the past three decades is, for many, as unthinkable as the earlier demise of Penn Central, Pan Am and the Great Atlantic & Pacific Tea Co.

"The phrase `bankrupt General Motors,' which we expect to hear uttered on Monday, leaves Americans my age in economic shock," P.J. O'Rourke wrote in a Wall Street Journal essay over the weekend. "The words are as melodramatic as `Mom's nude photos.'"


Highlights of the GM plan


60 per cent U.S. government.

12.5 per cent The Canadian and Ontario governments.

17.5 per cent United Auto Workers.

10 per cent Unsecured bondholders.

0 per cent Existing GM shareholders.


On top of $20-billion in taxpayers' money GM already has already received in the form of low-interest loans, GM will rely on:

$30-billion from U.S. Treasury Department.

$9.5-billion from Canada.


-GM will move forward with four core brands — Chevrolet, Cadillac, Buick and GMC — and cut four others.

-The company plans to cut 21,000 employees, about 34 per cent of its work force, and reduce the number of dealers by 2,600.

Assembly plants scheduled to close:

-Wilmington, Del. Scheduled to close in July. Cars produced at the plant include the Pontiac Solstice, the Pontiac Solstice Coupe, the Saturn Sky and the Opel GT.

-Pontiac, Mich. Set to shut its doors in October. Produces the GMC Sierra, a sports utility vehicle, and the Chevrolet Silverado.

Assembly plants expected to be idled:

-Orion, Mich. Assembles Chevrolet Malibu and the Pontiac G6. Will halt production in September.

-Spring Hill, Tenn. Assembles Chevrolet Traverse. Will halt production in November.

Two new stamping plants, which mould sheets of steel into different auto parts, are set to close permanently:

-Mansfield, Ohio. Will close in June 2010.

-Indianapolis. Will close in December of 2011.

One stamping plant will be idled:

-Pontiac Metal in Pontiac, Mich. Expected to shut down at least temporarily in December of 2010.

Five plants where powertrain systems are produced are scheduled to close:

-Livonia Engine in Livonia, Mich. Will close in June 2010.

-Four other powertrain plants will close in December 2010: Flint North Components in Flint, Mich.; GM's Willow Run Site between Ypsilanti and Belleville, Mich.; Parma Components in Parma, Ohio (near Cleveland) and Fredericksburg (Va.) Components.

Three service and parts warehouses and parts distribution centres are also on the closure list:

-Warehouses in Boston, Jacksonville, Fla. and Columbus, Ohio. Set to close on the last day of this year.


Name of GM creditor and amount of claim.

Starcom Mediavest Group $121.54-million (U.S.).

Delphi Corp. $110.88-million.

Robert Bosch $66.25-million.

Lear Corp. $44.81-million.

Renco Group $37.33-million.

Enterprise Rent A Car $33.10-million.

Johnson Controls Inc. $32.83-million.

Denso Corp. $29.23-million.

TRW Automotive Holdings Corp. $27.52-million.

Magna International Inc. $26.75-million.

American Axle & Manufacturing Holdings Inc. $26.74-million.

Maritz Inc. $25.65-million.

Publicis Groupe SA $25.28-million.

Hewlett Packard Co. $17.01-million.

Interpublic Group of Cos Inc. $16-million.


GM's bankruptcy filing is the fourth-largest in U.S. history and the largest for an industrial company. The company said it has $172.81-billion in debt and $82.29-billion in assets.

Here are the top U.S. public company bankruptcy filings by assets:

1. Lehman Brothers Holdings Inc.

2. Washington Mutual Inc.

3. WorldCom Inc.

GM Questions


2nd June 2009


No, the American parent company has filed for a form of bankruptcy protection in the U.S. called Chapter 11. It means a court will decide which groups GM owes money to (shareholders, banks and bondholders) will be paid, and how much they will get. When the court is finished its work, GM will emerge as a newly restructured company.


The Canadian arm of GM is totally owned by the U.S. parent company but it doesn't trade on the stock market like the U.S. company does. The Canadian company hasn't filed for bankruptcy protection in Canada because it managed to strike a deal with its creditors by paying them an unspecified amount of cents on the dollar for debt owed.


If you bought your car "during the restructuring period" the Canadian and U.S. governments will back up your warranty completely, even if GM ultimately fails. For Canadian buyers, that means you're covered if you bought their car or truck from April 7 onwards. Governments have yet to say when the end of the restructuring period will be.


You will still have your warranty honoured, but only if GM manages to survive when it emerges from court in the U.S. Should GM collapse a few years down the road, only those who bought their cars "during the restructuring period" will have their warranties backstopped by the government.


The bottom line: Taxpayers are now owners of GM. The Canadian government is taking an 11.7% ownership stake in the company and another US$403 million of preferred shares in GM. Should GM's restructuring plans fail and the company goes belly-up, the Canadian and Ontario governments will be in bankruptcy court here waiting to see how many cents they get on the dollar for the $10.6 billion they are now committed to investing in GM.


Letter Sent to GM Employees June 1st from GM Canada President


GM files for bankruptcy

Jun 01, 2009 08:20 AM

Kevin Krolicki, John Crawley
Reuters News Agency

DETROIT/WASHINGTON – General Motors Corp. filed for bankruptcy on Monday, forcing the 100-year-old automaker once seen as a symbol of American economic might and dynamism into a new and uncertain era of government ownership.

The bankruptcy filing is the third-largest in U.S. history and the largest ever in U.S. manufacturing.

The decision to push GM into a fast-track bankruptcy, and provide $30 billion (dollar figures U.S.) of additional taxpayer funds to restructure the automaker, is a huge gamble for the Obama administration.

But in a sign of progress in the government's high-stakes effort, a bankruptcy judge approved the sale of substantially all of U.S. automaker Chrysler's assets to a group led by Italy's Fiat SpA in an opinion filed late on Sunday.

Chrysler's bankruptcy, also financed by the U.S. Treasury, has been widely seen as a test run for the much bigger and more complex reorganization of GM.

The GM plan is for a quick sale process that would allow a much smaller GM to emerge from court protection in as little as 60 to 90 days.

"Now the hard part begins, which is making GM and Chrysler competitive. If they don't do that, then we'll be doing this all over again in a few years," said Christopher Richter, auto analyst at CLSA Asia-Pacific Markets in Tokyo.

"The immediate implication is that the companies are going to get smaller and so market share is up for grabs, which means that rivals like Toyota, Honda, Nissan and Hyundai are going to gain share."


Since the start of the year, GM has been kept alive with government funding as a White House-appointed task force vetted plans for a sweeping reorganization that will be undertaken with $50 billion in federal financing.

By taking a 60 percent stake in a reorganized GM, the Obama administration is gambling that the automaker can compete with the likes of Toyota after its debt is cut by half and its labour costs are slashed under a new contract with the United Auto Workers union.

The governments of Canada and Ontario agreed to provide another $9.5 billion to GM in a late addition to the plans for the bankruptcy.

GM plans to close 11 U.S. facilities and idle another three plants. It has not provided an updated target for job cuts but had been looking to cut 21,000 factory jobs from the 54,000 UAW workers it now employs in the United States.

The UAW would have a 17.5 percent stake in the "new GM." The Canadian government would own 12 percent and GM bondholders would get 10 percent.


Officials involved in the planning for GM said the White House was a "reluctant investor" in GM but had to prevent a liquidation that analysts say would have cost tens of thousands of jobs at a time when the economy is mired in recession.

GM alone employs 92,000 in the United States and is indirectly responsible for 500,000 retirees.

"We want a quick, clean exit (from bankruptcy) as soon as conditions permit," Treasury Secretary Timothy Geithner told students at Peking University in Beijing. "We're very optimistic these firms will emerge without further government assistance."

President Barack Obama is due to speak on the auto industry shortly before noon on Monday. A news conference by GM Chief Executive Fritz Henderson is to follow.

U.S. officials said there was no plan to provide any further funding for GM and insisted that all of the Detroit Three could survive. Ford Motor Co has not sought emergency federal aid.

"We do believe, and completely endemic in the president's decision, was a belief that this country can support three domestic successful viable auto companies," a senior Obama administration official said.

In the case of GM, the goal of restructuring is to allow it to return to profitability if U.S. industry-wide auto sales recover even slightly to near 10 million annually.

Until now, to stop losing money, GM had counted on a recovery to the 16 million mark the industry last saw in 2007, officials said.

Even if GM and Chrysler emerge swiftly from bankruptcy this summer, the autos task force will stay in business – shifting to an investment management role.

Senior administration officials said on Sunday there was plenty to keep the task force staff busy, monitoring the government's stake of about 60 percent of GM and less than 10 percent in Chrysler.


GM's bankruptcy is the most carefully orchestrated Chapter 11 filing in the history of American business.

The automaker's final descent started with President George W. Bush administration's emergency aid announcement on Dec. 19 and accelerated in late March when the new Obama government gave it 60 days to restructure.

While the "new GM" is expected to emerge quickly from court protection, its shuttered plants, stranded equipment and other spurned assets would be left to liquidation in bankruptcy.

Al Koch, a managing director at advisory firm AlixPartners LLP, will be appointed chief restructuring officer in charge of liquidating those GM assets.

A veteran restructuring adviser, Koch has had prominent roles in Kmart Corp's restructuring and other turnarounds.

Over the weekend, GM won support for the government's plan from investors representing 54 percent of the company's $27 billion in bondholder debt.

Bondholders could take up to 25 percent of GM if it recovers to be worth what it was in 2004.

Founded in 1908, GM rose to dominate the U.S. and global auto industries under the stewardship of pioneering chief executive Alfred Sloan, who famously pledged that the automaker would deliver "a car for every purse and purpose."

By the mid-1950s, at the peak of its success, GM had some 514,000 employees. It accounted for about half of U.S. car production and its sales were twice as large as the No. 2 corporation, Standard Oil.

GM's stock fell to 75 cents on Friday, a level last seen during the Great Depression.

'New GM' to emerge
from bankruptcy

Ailing automaker seeks court protection today

Jun 01, 2009 04:30 AM

Tony Van Alphen

Canadian taxpayers will provide reeling General Motors Corp. with $9.5 billion (U.S.) in aid and take a 12 per cent stake in the once mighty automaker, which will seek court protection from creditors today.

In the biggest corporate rescue package in Canadian history, Prime Minister Stephen Harper and Ontario Premier Dalton McGuinty will announce in Toronto this afternoon the repayable loan and what taxpayers will get in preferred and common stock under a restructuring plan to save the automaker and turn it into the "New GM."

GM, once the biggest company in the world, will file for court protection under Chapter 11 of the U.S. Bankruptcy Code in New York but it hopes to emerge in 60 to 90 days. It is not clear if GM of Canada Ltd. will file for protection here.

Protection in the U.S. will be automatic. A judge will decide during the 90 days who all the creditors are and will resolve disputes about how much holdout GM bondholders will get for their debt, payments to other creditors and expenditures by the company.

Under the plan, the money from both governments will be used during the bankruptcy process and subsequent transition into a healthy company.

U.S. President Barack Obama will announce about $30.1 billion in extra loans for the company. In return, American taxpayers will get $8.8 billion in debt and a 60 per cent interest in the company. In addition to its 12 per cent stake in the company, the Canadian government will get $1.7 billion in debt.

There will be a new GM board with a minority of existing directors and a majority of new members, including one from Canada.

Obama and Harper will emphasize at separate news conferences that the aid should put GM on sound financial footing with a viable plan that takes into account conservative projections for the future of the industry.

They will also say there are no plans for further aid and it is their intent to sell government-held stock in GM as soon as appropriate.

"The government has no desire to own equity stakes in a company any longer than necessary," one U.S. official said last night.

The moves come after GM submitted a new restructuring plan to the governments with more concessions from stakeholders, additional plant closures and lower projections on sales and market share.

Under the North American government aid package, Ottawa and Ontario will contribute $9.5 billion or $10.58 billion (Canadian), far more than the $3 billion the two governments promised in December. At that time Harper acknowledged taxpayers would probably need to provide more help.

The U.S. has already pumped $19.4 billion (U.S.) into GM, whose sales have plunged in the past year.

Government leaders in both countries have said that allowing the collapse of GM and rival Chrysler would push the Canadian and U.S. economies into a much deeper recession and cost millions of jobs.

GM will announce 11 more plant closures and idle three operations as part of the restructuring. However, industry insiders say the moves will not affect Canadian operations.

Chrysler LLC, also surviving on a government lifeline, gained court protection in the U.S. last month and hopes to emerge within days in a partnership with Italian automaker Fiat SpA. Their Canadian subsidiary did not seek court protection.

GM has not indicated it will stop production in the U.S. or Canada during bankruptcy proceedings.


GM's rebirth begins now
General Motors Vice Chairman Bob Lutz is interviewed by the Associated Press in Detroit, May 27, 2009.

By hatching new ideas and strategies, auto giant can dominate once again

May 31, 2009 04:30 AM
David Olive

In the weeks leading up to the expected bankruptcy of this century-old icon, majority sentiment in the U.S., and to a lesser extent here, has been hostile about rewarding a chronically incompetent enterprise with a taxpayer-funded bailout.

And, to be sure, it does take a special kind of genius to lose $88 billion (U.S.) over the past four years, to have your shareholder value evaporate during that time from $30 billion to $702 million; lose to Toyota Motor Corp. the crown of world's biggest automaker after a 77-year run as No. 1.

Tough to say which is more remarkable: that perhaps half a dozen GM chief executives since 1980 alone, when GM claimed half the North American market, could bring about the near ruination of an enterprise that even today accounts for a full 1 per cent of U.S. GDP; or that American regard of failure and incompetence as shameful is so deeply ingrained that a mere 18 per cent of Americans support a government-backed rescue of GM and Chrysler.

So should Washington, Ottawa and Queen's Park pony up some $60 billion (U.S.) to finance GM's restructuring under bankruptcy?


A humbled GM can change its ways, as a then-arrogant Fiat SpA did in pulling itself back from the brink only five years ago. (Fiat is now Chrysler's planned saviour.) And if a global credit crunch leaves government as the sole source of bailout financing, so be it.

As part of its restructuring, GM will close 14 plants, part ways with about one-quarter of its dealers (something it should have done years ago), and lay off yet another 21,000 employees. Yet, post-bankruptcy, a leaner and much healthier GM will continue to put bread on the table for tens of thousands of employees, about 4,000 suppliers, and several thousand dealership employees that often are the business mainstay in small-town North America.

GM remains the U.S.'s biggest manufacturer, still a powerhouse of engineering and technological breakthroughs, most visibly with its all-electric Chevrolet Volt. GM is America's biggest purchaser of information technology. Entire states in the industrial Midwest and Canadian cities such as Oshawa, Oakville, Windsor and St. Catharines rely on GM and its employees for an outsized portion of their property and income-tax revenue.

All of which is moot, if GM is ultimately destined, as many believe, for the scrapyard in the sky. Somehow, I don't think so.

GM will emerge from bankruptcy with only one-quarter or so of the debt it held earlier this year. It finally will be liberated from the burden of active and retiree health-care costs that have added an average $1,500 or so to the cost of each vehicle GM produces. (The health-care burden has been shifted to union-administered trusts financed in a one-shot deal by GM and with a top-up from government.)

GM's hourly wage costs, after enormous concessions by the Canadian Auto Workers and the United Auto Workers, are now in line with wage rates at "transplants" – the U.S. and Canadian factories operated by foreign-based automakers. The UAW has given up its right to strike until 2015.

After the waves of GM layoffs of recent years, and further reduction in capacity during the restructuring, GM will have cut its fixed costs to levels enabling it to compete on price with foreign-based rivals.

CEO Fritz Henderson told reporters last week that GM will be able to turn a profit even in the current dreadful market – with North American sales at a 27-year low of just 10 million vehicles and a GM market share of only 18.5 per cent, a slight reduction from the current 19.1 per cent.

"We will come out of this rid of some of the historic legacy costs that have been dragging us down for the last 20 years or so," Bob Lutz, GM vice-chairman, said in a Thursday speech. "We will come out of it with an all-new focus on product development."

In an off-the-record briefing of reporters that same day, an Obama administration official said: "GM should be highly, highly profitable given the new cost structure that is being put in place, given the vast reduction of liability that has been achieved."

Fact: "Auto companies rarely die," CEO Henderson reminded reporters last week.

He's not whistling in the dark, having overseen in the past few weeks the drastic makeover of GM that critics have demanded for decades. And he's right – out of national pride, France, Germany, Japan, China, Russia and others routinely subsidize profit-challenged local automakers.

Focused on just four brands rather than eight, Buick and GMC will no longer be deprived of new-product development funds. For the first time, Buick will have close to a full line of models. And GM will have a $1.3-billion annual marketing budget for each of Chevrolet and Cadillac, double the current ad spend, and close to what Toyota commits to its namesake and Lexus brands. That's crucial, because GM quality and reliability have vastly improved in the past decade (Buick typically tops or is near the top of J.D. Power quality surveys), but GM has lacked the money to tell that story to potential customers that first turned away from GM decades ago. A clean-slate GM has a decent shot at winning customers among Gen Y motorists (ages 22 to 32). At 70 million people, that group is larger than either Gen X or the baby-boom generation. Certainly GM has the J.D. Power- and Consumer Reports-acclaimed vehicles for making converts, including the Chevy Malibu, Impala, HHR and the Cadillac STS sedan.

One of the nice things about not being No. 1 is that rivals aren't all gunning for you. With half the market, GM had the most to lose over the past three decades. Now everyone from Kia Motors to Ford Motor Co. will have Toyota in their sights, instead. And Toyota, which lost more than $1 billion last year, has stumbled badly from overexpansion, several embarrassing recalls, and market-share reversals in Asia. The myth of Toyota's invincibility hasn't been shattered among potential customers. But Detroit finally has an opening to exploit.

And Detroit has a spokesman in Barack Obama, who at a news conference two weeks ago sang the praises of the Ford hybrid parked in his Chicago garage.

"A year or two of Obama emphasizing the restructured GM and Chrysler," U.S. marketing consultant Dennis Keene told Business Week recently, "which he has staked his reputation and taxpayer money on, and you could start to see Gen Y take a lot more interest in these brands and looking at them in a new light."

Alluding to some of the unexpected roles he has taken on as President, Obama joked at the annual White House Correspondents' Dinner a few weeks ago that Car & Driver had named him its "CEO of the Year."

We can only hope.

Opel newest gem in Frank Stronach's crown
Frank Stronach, front, and employees, 1977.

Coup for him as his auto parts giant gains control of GM European unit

May 30, 2009
Tony Van Alphen

Frank Stronach, who once made parts and then delivered them in his own car to General Motors in Oshawa, and a Russian partner have gained control of the auto maker's giant European subsidiary.

The 76-year-old founder and controlling shareholder of Aurora-based Magna International Inc. and Russian lender Sberbank reached the framework of a deal yesterday that will put them in the driver's seat at Opel AG, GM's main operating unit in Europe.

Top Magna officials, including Stronach, hammered out terms with the German government and teetering GM on an unidentified investment to save Opel, a well-known European brand that could boost the Canadian company's international fortunes dramatically.

Under the deal, Magna will take a 20 per cent stake in Opel and the Russian-owned Sberbank will take a 35 per cent stake, giving their consortium a majority. GM will retain a 35 per cent holding, while the remaining 10 per cent will go to Opel employees.

The investment caps a brilliant business career for the hard-driving Stronach, an Austrian immigrant who opened a tiny tool and die shop in the Dufferin-Dupont Street area in 1957 and dared to dream big.

Over the years, many observers have acknowledged his talents in building an auto parts powerhouse. But few predicted Stronach would ever actually own a major international vehicle manufacturer.

"Without knowing all the details, this has got to be a big coup for Frank, for Magna and for Canada," said Ed Lumley, a former federal industry minister and company director. "He is one of our country's great success stories."

"It keeps Canada on the map in the global auto industry," added Richard Cooper, vice-president of J.D. Power and Associates.

"I think Magna has picked up a strong brand and should do well."

It marks the first time that a Canadian company has held a significant stake in a major international auto maker.

"I can't think there would have been anyone else," said auto historian Walter McCall, of Windsor.

The brash and sometimes flamboyant Stronach holds only a small percentage of equity in Magna but controls the company through the magic of multiple voting shares.

As a budding entrepreneur he worked alongside his small staff in stamping out sun visor brackets at his shop. Sometimes, they worked around the clock.

Stronach's fledgling shop quickly gained traction and steadily won more contracts.

He formed Magna in the early 1960s and the company took off with a combination of skilled trades people and an entrepreneurial culture that always emphasized "a better part at a better price."

Annual revenues hit $100 million in 1978 and topped $1 billion in 1987. Magna had become a job creating machine with thousands of workers and scores of plants in the Toronto region.

But Magna hit a big bump in the early 1990s because of over expansion, a heavy debt load and an industry downturn.

The company recovered and embarked on phenomenal growth in Canada and abroad. Sales reached a stunning $26 billion (U.S.) in 2007 before slipping to $23.7 billion last year. The company employs more than 70,000 workers in 25 countries.

After its brush with bankruptcy in the early 1990s, Stronach vowed he would never expose Magna to a significant debt burden again and that has turned into a huge advantage.

Magna currently has $1.7 billion in cash on hand to weather the industry's storm and bid for ailing companies such as Opel.

During the last decade, Magna has pushed its prowess in auto parts to assembling entire vehicles on contract for companies ranging from BMW to Chrysler.

The company bid on Chrysler two years ago but lost to U.S.-based Cerberus Capital Management.

Chrysler is now relying on U.S. and Canadian government aid to stay alive and is restructuring under court protection from creditors.

Under the latest deal, Magna would provide undisclosed short-term financing to become the preferred negotiating partner for Opel.

The German government would invest $2.34 billion in a bridge loan and make Opel an independent company.

That would shield it from creditors in looming bankruptcy court proceedings involving parent GM Corp. in the U.S.

Dennis DesRosiers, a veteran industry watcher, said the investment represents an "unprecedented opportunity" for Magna with high risk.

"It's a pure risk-reward situation. If it works, then Magna will win big. If Magna loses, it loses big."


Feds paid more than $20M in pensions to retired MPs

By ALTHIA RAJ, National Bureau, Sun Media

Last Updated: 29th May 2009

OTTAWA — The federal government paid out more than $20 million in pensions to retired MPs and senators last year.

According to a Treasury Board report, $20,790,863 was shelled out to 630 former parliamentarians and their survivors between April 2007 and March 2008.

“Their pension plan is more generous than any other pension plan in the rest of the country, except perhaps for CEOs of multinational corporations who make 20 million bucks a year,” said Kevin Gaudet, federal director of the Canadian Taxpayers Federation. “I think the average taxpayer has no idea how lucrative it can be to spend some time as a member of Parliament or senator.”

Eighty former members — 14 senators and 66 MPs — earned pensions worth more than $70,000.

MPs and senators who serve more than six years in office can access their pensions at age 55.

Parliamentarians contribute to the plan but the government kicks in most of it.

The average annual pension for senators was $55,012, and $48,985 for MPs.

“That doesn’t sound gold-plated to me,” said Liberal MP Marlene Jennings, adding MPs work seven days a week and put in 12-hour days.

Former Conservative MP Rahim Jaffer agrees.

“It’s not overly generous,” he said. “Compared to other pensions, people will say yes it is, but I think when you consider the work and the commitment you’re making, I think there was a reason why it was instituted that way.”

Jaffer will get his first pension cheque in 18 years.

The Conservatives are moving forward with a bill to limit Senate terms to eight years, which would add more people to the pension rolls.

“It will potentially send that number through the roof,” said the NDP’s David Christopherson.

But Cherie Godin, spokeswoman for Democratic Reform Minister Steven Fletcher, said there will be “no additional costs” associated with the reform.

Any new senators, as well as the 18 senators recently appointed by Prime Minister Stephen Harper, would be limited to one non-renewable eight-year term once the proposed legislation passes.

Christopherson said the Tory bill doesn’t make senators more accountable.

“Who are they accountable to for those eight years of pay and the lifetime of the pension?” he asked.

The government’s leader in the Senate, Sen. Marjorie LeBreton, said the reforms will inject new blood and new ideas.

But Liberal Sen. Serge Joyal, a constitutional lawyer, said the bill is unconstitutional and would strengthen the prime minister’s grip on the upper chamber.

“After eight years the prime minister would have appointed everybody,” he said.



UAW members approve
GM concessions

May 29, 2009 02:49 PM

Kimberly S. Johnson
Tom Krisher

DETROIT – The United Auto Workers union has ratified a package of concessions designed to reduce labour costs at General Motors Corp.

UAW President Ron Gettelfinger said at a news conference today that 74 per cent of GM's 54,000 U.S. production and skilled-trade workers voted in favour of the deal.

The vote comes before an expected Chapter 11 bankruptcy protection filing by GM (NYSE: GM) on Monday. Bankruptcy experts say having the labour agreement in place will help move the process through court more quickly.

The UAW says the cuts will save GM $1.2 billion to $1.3 billion a year.

"We very much appreciate the support of our employees and retirees," Diana Tremblay, GM vice-president for labour relations, said in a statement. "Their shared sacrifices will enable GM to become a stronger, more viable company that will continue to deliver world-class cars and trucks."

UAW leaders agreed to the revised contract last week that freezes wages, ends bonuses, eliminates noncompetitive work rules and ends the possibility of a strike until the next contract expires in 2015.

It also gives a union-run retiree health care trust 17.5 per cent ownership of a post-bankruptcy protection GM, with a warrant to buy another 2.5 per cent. The trust will take on the company's retiree health care costs starting next year. The stock will come in exchange for part of the company's $20 billion obligation to the trust.

The remaining 10 per cent would go to GM bondholders to wipe out $27 billion in unsecured debt.

Bondholders have until 5 p.m. EDT Saturday to accept or reject the stock-for-debt offer, under which they would get a warrant for an additional 15 per cent of the new GM's stock.

Existing GM shareholders would be left with little or nothing, and GM shares fell 32 cents, or 29 per cent, to 80 cents in afternoon trading. They fell as low as 75 cents earlier today, their lowest level since the Great Depression.

The UAW deal follows an agreement last week between the company's Canadian subsidiary and the Canadian Auto Workers union.

The CAW agreement freezes workers' pension benefits until 2015 and slashes labour costs by C$15 to C$16 an hour through cuts to benefits. The union has also agreed to negotiate a health-care trust, which it will administer to cover retirees' benefits.

Under the deal, GM Canada also agreed that it would give up its special status under Ontario law – a status that has allowed it to underfund its pension plan since the 1990s – and begin topping it up immediately.

GM has received $19.4 billion in loans from the U.S. government, which would get 72.5 per cent ownership of the new company, perhaps sharing with the Canadian government.

Federal officials said Thursday that Ottawa is budgeting about C$10 billion for its portion of bailouts at GM Canada and Chrysler Canada.

Plans are for GM to emerge from bankruptcy with lower labour costs, far less debt and with fewer factories, brands, models and dealerships.

Even workers at factories in Spring Hill, Tenn.; Pontiac, Mich.; and Orion Township, Mich., that are under discussion for possible closure approved the deal.

"I believe that our membership understands. They get it," said Ray Wood, president of a UAW local at a Toledo, Ohio, transmission factory that voted 78 per cent in favor of the deal.

On Monday, GM is to identify 14 assembly, parts stamping and engine and transmission factories that it plans to close as part of its restructuring plan, cutting 21,000 jobs.

GM announced earlier today that one of those 14 plants would be retooled to make subcompact cars starting in 2011.

Gettelfinger said four of GM's plants slated to close will remain on "standby" with the hopes that vehicle sales will rise, creating greater demand.

Fiat-Chrysler would use
Ontario plants

May 29, 2009 01:36 PM


MONTREAL–Fiat SpA chief executive Sergio Marchionne says the Italian automaker fully intends to use Chrysler's Canadian plants in southern Ontario after the Italian company buys a stake in the ailing U.S. car manufacturer.

Marchionne says there's a collective view that Chrysler's assembly lines in Canada are efficient and churn out quality products.

Fiat is on the verge of taking control of a 20 per cent share in Chrysler, pending the completion of bankruptcy court procedures in New York.

The Italian carmaker has been plotting a return to North America, where it last sold cars two decades ago.

It would gain access to Chrysler's dealer network, while the U.S. company would expand into Fiat's international markets.

Marchionne says he hopes Fiat can work with Canadian auto workers, a relationship that he acknowledges got off to a bumpy start. The CAW, however, managed a cost-cutting deal that helps save Chrysler Canada on labour costs at its plants.

The Windsor.-based automaker, with more than 9,000 employees, operates vehicle assembly plants in the southwestern Ontario border city of Windsor as well as Brampton, just northwest of Toronto, and a parts plant in Toronto.

Marchionne, a dual Canadian-Italian citizen, says that while Fiat cannot substitute Chrysler's judgment on the North American market, it can offer technical expertise on how to produce smaller, more efficient cars.

The company has been developing a new fuel-efficient, cleaner-burning engine it hopes to put into its new vehicles.


Ford pressures CAW for deal to match GM, Chrysler

By Grace Macaluso, Canwest News serviceMay 29, 2009

Ford Motor Co.'s Canadian operations are at risk unless the automaker can secure further concessions from the Canadian Auto Workers, a company spokeswoman said Wednesday.

"In order to maintain our automotive manufacturing presence in Canada we need to take action to improve our competitiveness and we can't wait until 2012 when it could be too late to close that gap," Kerri Stoakley said in an interview from the company's Oakville headquarters.

The current contract, which expires in 2012, puts CAW-Ford operations at a disadvantage with their U.S. counterparts, she said.

"Ford of Canada does not have a productivity or cost advantage over the United States," said Stoakley. "The average hours per vehicle for Ford-CAW facilities is about 26.57 versus 23.08 for Ford-UAW facilities (a 15-per-cent) disadvantage."

Ford has been seeking to re-open its collective agreement with the CAW since February when the Detroit automaker inked a cost-cutting deal with the United Auto Workers. However, the CAW has faced increasing pressure since the union renegotiated its contracts with Chrysler and General Motors, said CAW president Ken Lewenza.

"They're putting enormous pressure on us to get to the bargaining table," Lewenza said. "They want to do it immediately but we're doing a full due diligence on that matter."

Under pressure from the federal and Ontario governments to cut labour costs as a condition for releasing multi-billion-dollar loans to Chrysler and GM, the CAW recently renegotiated contracts which brought costs in line with those at Toyota's Canadian operations.

Lewenza said the union is in no rush to return to the bargaining table with Ford and any decision to do so would be based on an analysis of the CAW and UAW agreements.

"I think the first agreement they put together doesn't disadvantage Canada too much, but now we have to look at what they're going to do on the U.S. side because they're not bargaining with Ford yet, and our objective is to maintain our competitive advantage," said Lewenza.

Ford -- which, so far, has not sought government financial assistance -- should not expect a deal that mirrors concessions granted to Chrysler and Ford, he added.

"That was a different dynamic," Lewenza said, "The reality is the government forced us into bargaining."

Deals negotiated with GM and Chrysler shaved hourly labour costs by at least $19 to about $57 an hour.

Ford of Canada has approximately 8,200 employees, including 6,750 hourly employees.


Canadians may own
10% of new GM
GM Oshawa

Filings paint portrait of a once mighty auto giant majority controlled by North America's taxpayers

May 29, 2009

Tony Van Alphen and Rob Ferguson


Canadians will soon own more than 10 per cent of the "new" General Motors under a massive restructuring of the ailing auto giant.

Although government leaders won't confirm the taxpayer stake because of continuing talks, Ottawa and the province will likely commit about $10 billion in loans to keep the company alive and receive preferred and common stock in return.

The money is part of a Canadian-U.S. aid package for GM Corp. and its subsidiary here that will leave governments in both countries with almost three-quarters of the company.

In filings with securities regulators yesterday, the U.S. Treasury, which has already invested $19.4 billion (U.S.) in GM, said it will pump in another $30 billion and receive 72.5 per cent of the stock. However, it will allocate part of that stake to the federal and Ontario governments, the filings show.

Using Canada's portion of GM's North American auto production as a benchmark, that would leave taxpayers with an equity stake of between about 11 per cent and 12.5 per cent.

Washington would hold the remaining 60 to 61.5 per cent; a United Auto Workers health-care trust 17.5 per cent – and bondholders about 10 per cent, according to the filings.

The federal and Ontario governments had indicated they would contribute a proportionate amount in loans to reflect the 15 to 17 per cent of the company's production here.

GM's North American output here had hovered around 20 per cent, but the company recently closed a truck assembly plant in Oshawa and will shut a transmission factory in Windsor next year.

Last December, the federal and Ontario governments said they could become shareholders in GM and Chrysler, another reeling automaker, by receiving warrants that would give them the right to buy non-voting stock.

In GM's case, the governments would also get senior creditor status as security.

At that time, Prime Minister Stephen Harper acknowledged a planned contribution of $3 billion (Canadian) to GM of Canada and $1 billion to Chrysler Canada would likely increase as the two companies fought to recover from the worst slump in industry sales in more than a quarter of a century.

Harper and Ontario Premier Dalton McGuinty have stressed they don't want their governments to remain shareholders for a long time. However, they said the companies' deteriorating financial health left them no choice, because the fallout from a collapse of GM or Chrysler would push Canada into a much deeper recession.

Conditions worsened and GM's allocation climbed from $3 billion to a request for between $6 billion and $7 billion in February.

That amount has increased again in view of disclosures by the U.S. government about its growing aid package.

Earlier this month, the governments in Canada said they would jack up aid to Chrysler from the original allocation of $1 billion to $3.77 billion.

Chrysler gained temporary court protection from creditors in the U.S. and shut down its operations in both countries amid questions about whether it could pay suppliers.

Fiat SpA of Italy will hold a 20 per cent interest in Chrysler that could climb to 35 per cent – and would take over the company's so-called good assets.

The U.S. government will assume an 8 per cent equity stake, while Ottawa and the province will hold 2 per cent. The UAW union will own 55 per cent.

GM will also likely pursue court protection next week after it submits a restructuring plan to governments in both countries.

In addition to resolving creditor disputes, it will also allow GM to separate good assets from bad. The bad assets would be sold or closed.

"These discussions are still going on ... governments are still finalizing and working out the details," Ontario Finance Minister Dwight Duncan told reporters.

"There are too many moving parts."

Questions remain about whether GM will be able to continue production during bankruptcy protection, which could continue for 90 days.

A production stoppage would mean the layoff of tens of thousands more workers in the industry in both countries.

Visteon Corp., meanwhile, the top parts supplier and former subsidiary of Ford Motor Co., filed for bankruptcy protection in the U.S. early yesterday as it struggles with the big drop in auto demand.

Toronto Star

Sun editorial board meets
with autoworkers

The Toronto Sun took an editorial meeting to Oshawa to hear from current and retired autoworkers about the failing auto sector.


GM works to keep Canadian operations running

Automaker wants its popular model runs to continue
in Canada if parent files for Chapter 11 in U.S.

May 28, 2009 04:30 AM
Tony Van Alphen
Business Reporter

General Motors is desperately trying to keep its Canadian operations running as its parent heads towards bankruptcy court protection in the United States and possibly Canada during the next week, a top union leader says.

GM is even paying edgy suppliers in advance for parts to assure that production of popular models can continue at assembly plants during any court proceedings when payments might be in doubt, Ken Lewenza, president of the Canadian Auto Workers, said yesterday.

"They have indicated to us they are doing everything possible and in their power to avoid a Canadian shutdown," Lewenza said in an interview. "Whether they are successful remains to be seen."

Chrysler LLC immediately shut down its operations in the U.S. and Canada earlier this month when it gained temporary court protection from creditors south of the border.

Insiders said it did not matter if Chrysler assembly plants stopped production because high inventories could easily meet dealer demand for a short bankruptcy stay of 60 days or longer.

Furthermore, some parts makers had halted deliveries to Chrysler plants on both sides of the border because of payment concerns. Those moves made auto production impossible because a shortage of only a few parts can disrupt output.

The shutdowns have triggered the layoffs of thousands of Chrysler workers and their counterparts at parts makers that were already struggling to stay alive through a major downturn in North American sales in the past year.

A temporary GM shutdown would cause thousands more layoffs here and even more damage to the reeling auto sector, a key cog in Ontario's economy.

Lewenza explained GM wants to maintain output particularly at operations that build popular models, including the new Chevrolet Camaro sports car and Impala mid-size car in Oshawa and the Chevrolet Equinox sport-utility vehicle at the CAMI plant in Ingersoll.

Already, GM has scheduled overtime at the Oshawa plant for extra Camaro output and just started production of the new generation 2010 Equinox. It is also launching the GMC Terrain in August and does not want any delays for the fall selling season.

GM sees the models as important vehicles that will pull motorists into stores so they can consider other cars and trucks.

The company also runs parts plants in St. Catharines and Windsor that depend on U.S. assembly operations.

GM spokesman Stew Low would not comment on any production plans if the parent company pursues court protection in the U.S. and Canada.

"(I) can't comment on what has not happened," said Low, director of communications for GM of Canada.

But GM Corp. officials have said bankruptcy proceedings in the U.S. are probable within the next week. That appeared more likely yesterday after bondholders rejected an offer whereby they would exchange $27 billion (U.S.) in debt for 10 per cent of a reorganized GM.

Industry watcher Dennis DesRosiers added that whether plants stay open or not will depend on whether GMAC, the automaker's financing arm, can provide funds for dealers to buy vehicles from factories.

GM, the biggest industrial firm in Canada at one time, faces a June 1 deadline to resubmit a restructuring plan to governments in the U.S. and Canada to receive billions more dollars in additional public loans.

If there is no resolutions of debts with bondholders, GM would have little choice but to seek court protection where a judge would decide.

Also still in dispute is how much government aid would be used to address a huge shortfall in GM of Canada's pension plans.

This week, GM workers here accepted significant concessions to lower labour costs for the third time in a little more than a year to bolster the restructuring plan and quest for aid. GM's U.S. workers are now voting on concessions.

Analysts say Chrysler's bankruptcy protection proceedings, shutdowns and resulting negative media coverage are hurting sales. Early reports say business at Chrysler dealers in Canada plunged more than 50 per cent in the first 20 days of May, despite heavy incentives.


Trust for retired autoworkers' health benefits trades one
risk for another: CAW

By Kristine Owram

TORONTO — A new fund to cover the health benefits of more than 50,000 auto-industry retirees would provide protection if one of the big carmakers folded, but could mean reduced benefits down the road.

Canadian Auto Workers economist Jim Stanford said Tuesday that the health-care trust, being negotiated as part of the union's new agreements with Chrysler and General Motors, is trading one form of risk for another, but it will provide more protection than retirees have now.

"With an independent trust with real, up-front money, we can now be assured of covering at least a good part of retiree health benefits even if the companies were to go broke next year," Stanford said in an interview.

The trust is to be run independently, with an initial contribution by the companies invested and managed by a group of outside directors.

Stanford said the trust will be subject to the same risks as pension funds, many of which saw their assets depleted dramatically by the stock market crash. This means retirees could see their benefits shrink if a similar crisis were to hit in the future.

"In the olden days, our folks believed that the company would look after them even after they retired," Stanford said.

"Today, the bitter reality is we can't count on our employers being there, and that's why we've had to consider this type of an arrangement. But it's better than the alternative of losing our benefits altogether if the companies go under."

Stanford said it's not yet clear how much the companies will contribute.

GM Canada wouldn't comment on the trust Tuesday, but indicated in March that it would remove a "significant" liability from GM's books.

The union, GM and Chrysler are hoping to get the trust running by the start of next year.

The trust will be loosely based on the Voluntary Employee Benefit Association, or VEBA, negotiated by the U.S.-based United Auto Workers. The VEBA will be much larger than the Canadian trust due to Canada's publicly funded health-care system, but is similar in many other respects.

In the United States, General Motors Corp. (NYSE:GM) plans to give the UAW 17.5 per cent of its common stock, US$6.5 billion of preferred shares and a $2.5-billion note to fund its VEBA.

Investment income earned in the U.S. VEBA will be exempt from taxes. The Canadian government has indicated it will create a similar provision, though Stanford said tax is likely to be levied on gains that are surplus to covering retiree benefits.

Since GM Canada and Chrysler Canada don't have their own stock, the Canadian trust will be funded by a one-time monetary contribution and then a series of smaller payments over time. GM and Chrysler have asked the federal and Ontario governments for billions in emergency loans, and it's likely this funding would help support the creation of the trust.


Lower UAW stake in
GM may be catalyst

With more in kitty, `a richer offer' might induce bondholders to buy into stock-for-debt swap offer

May 27, 2009

DETROIT–A cost-cutting deal between the United Auto Workers and General Motors Corp. will give a union-run health-care trust fund a smaller stake in the automaker than expected, but it could be the catalyst that allows it to restructure outside of bankruptcy court.

GM, which has received $19.4 billion (U.S.) in government loans and faces a Monday deadline to restructure or be forced into bankruptcy protection, reached a concession deal with the UAW last week that gives the trust fund up to 20 per cent of the company's shares while freezing wages and cutting performance bonuses and cost-of-living raises.

Factory-level union leaders from across the United States unanimously endorsed the deal at a meeting yesterday in Detroit. The union's roughly 61,000 GM workers must vote on the agreement by tomorrow.

In a summary obtained by Associated Press, the union said it would get 17.5 per cent of GM's common stock, plus a warrant for an additional 2.5 per cent, as partial payment of the $20 billion GM must put into a trust that will start paying retiree health-care costs next year. The trust also will get $6.5 billion in preferred shares that pay 9 per cent interest, plus a $2.5 billion note. The other $10 billion is to come from existing GM health-care trust funds.

The trust gets a seat on GM's board but must vote at the direction of GM's other independent directors.

The UAW deal is another piece of GM's quest to restructure out of bankruptcy. The Canadian Auto Workers union approved wage reductions and other concessions Monday.

But unsecured bondholders are resisting an offer to take a 10 per cent stake in GM to wipe out $27 billion in debt. Analysts doubt that enough bondholders will approve the offer, meaning GM could still be forced to file for Chapter 11.

Under details released yesterday, the UAW trust is getting far less in stock than GM said it would earlier. Company disclosures in regulatory filings had said it was negotiating to give the government half its shares, with the union trust getting 39 per cent. The remaining 1 per cent would go to existing shareholders.

Under the planned exchange, GM would issue 62 billion new shares, then do a 1-for-100 reverse stock split. With UAW's share now at 20 per cent, not the 39 per cent of GM regulatory filings, that frees 19 per cent for Washington or the bondholders.

"It looks like the creditors will get a richer offer that hopefully will induce them to avoid a bankruptcy filing," said Harlan Platt, a corporate turnaround professor at Northeastern University in Boston. GM would not comment when asked if the offer could be sweetened. Previously the company has said the U.S. government was preventing it from offering bondholders more than 10 per cent of the restructured company.

Factory-level union leaders said that the 14 plants that GM intends to close were not identified in the agreement.

Those are part of GM's restructuring plan to be submitted to the government by the Monday deadline, said one official, who spoke on condition of anonymity because the details of the meeting have not been presented to union members.

GM plans to close 14 more factories. Two other were identified earlier.

Associated Press


Ottawa won't bail out
GM pensions: Clement

Kristine Owram

Toronto — The Canadian Press, Monday, May. 26

Although Ottawa has agreed to give billions in loans to General Motors of Canada Ltd. if the company comes up with a suitable restructuring plan by June 1, that money won't go towards the auto maker's underfunded pension plan, Industry Minister Tony Clement says.

Mr. Clement insisted Monday that any money lent from the federal government to the struggling company will not go towards topping up GM Canada's pension shortfall, which is approximately $7-billion.

He implied that the pension plan will be the responsibility of the Ontario government, which has also agreed to provide emergency funding contingent on an acceptable restructuring plan.

“The fact of the matter is, we're each taking a role and responsibility in the areas where we have those roles and responsibilities. That's what a true partnership can be about,” Mr. Clement told reporters after an infrastructure announcement in Toronto.

“I want to commend Ontario for taking the lead role in negotiating some of the aspects of the CAW agreement when it pertained to pensions. I think that was a very positive thing Ontario did — they recognized their role and responsibility and they acted it,” he added.

In a tentative labour agreement reached between GM and the Canadian Auto Workers union last week, the company agreed that it would give up its special status under Ontario law — a status that has allowed it to underfund its pension plan since the 1990s — and begin topping it up immediately.

Ontario said there won't be an agreement on who will be responsible for covering the plan's shortfall — the company, provincial taxpayers or federal taxpayers — until a final restructuring plan is presented on June 1.

Ontario Premier Dalton McGuinty said previously that the province has no plans to bail out GM pensioners. He warned in April that the province's pension guarantee fund isn't big enough to cover the auto maker's retirees if the company goes under and the best way to protect workers is to keep the company afloat.

The province's auto strategy is in flux after Economic Development Minister Michael Bryant quit Monday to head up a new Toronto business agency. Mr. McGuinty will take over the file.

One important aspect of GM's restructuring plan is the new labour agreement, which was voted on by CAW members Sunday and Monday.

Besides forcing the company to eliminate the $7-billion deficit in its pension plan, the CAW agreement freezes workers' pension benefits until 2015 and slashes labour costs by $15 to $16 an hour through cuts to benefits.

The union has also agreed to negotiate a health-care trust, which it will administer to cover retirees' benefits.

Now that GM has wrapped up negotiations — its third set in a year — with unions in both Canada and the U.S., the company will turn its attention to completing its restructuring plan to present to governments in Canada and the U.S. by next Monday.

GM Canada's parent company, General Motors Corp. (GM-N1.43----%) , has so far been unable to reach an agreement with its bondholders, and it is widely assumed the company will be forced to file for bankruptcy protection in the U.S. in order to work out a solution with the holdouts.

But Tony Faria, co-director of the automotive research centre at the University of Windsor, said he expects GM Canada will avoid that fate.

This would leave the company in the same position as rival Chrysler LLC, which filed for bankruptcy protection in the U.S. but not in Canada late last month.

This decision didn't protect Chrysler's Canadian operations, however. When the company decided to shut down its U.S. plants for 30 to 60 days while it restructured, many of its parts suppliers shut down their operations in response. This in turn forced Chrysler Canada Inc., which relies on many of the same suppliers as its U.S. counterpart, to shut down its plants a few days later.

Mr. Faria said this decision could actually hurt sales, as wary consumers respond negatively to a company that has both filed for bankruptcy protection and shut down all North American production, and GM will likely want to avoid it as a result.

“Suppliers now recognize that they don't necessarily have to worry about getting paid while GM is in bankruptcy because Chrysler is taking care of suppliers while it's in bankruptcy, so they don't have to stop shipments of parts to any of the plants,” he said.

“Besides that, GM has already announced a rotating shutdown of plants over the summer months anyhow.”

GM has said its assembly plants in southern Ontario, including a car plant in Oshawa and a joint-venture plant with Suzuki in Ingersoll, won't be affected by the nine-week rotating shutdown. However, it's likely its parts plants in St. Catharines and Windsor will be forced to close temporarily due to a lack of demand for their products.

GM has already cut its Canadian work force heavily, with the recent closing of a pickup truck plant in Oshawa eliminating 2,600 jobs. It now employs about 7,500 hourly workers in Canada, and plans a shutdown next year of a transmission plant in Windsor which employs 1,400.



CAW Members Ratify Restructuring Deal
with General Motors

May 25, 2009

Toronto CAW members working at General Motors in Oshawa, Windsor, St. Catharines and Woodstock, Ontario have voted overwhelmingly in favour of a new collective agreement, ratifying the deal by 86 per cent after a series of meetings were held over the past two days.

CAW President Ken Lewenza said this new deal should provide a much-needed sense of security to the thousands of active members and tens of thousands of retirees at General Motors in Canada.

“This has been a grueling restructuring process, and no one has felt that more than our members and retirees,” Lewenza said. “Although we were forced to make a number of important sacrifices, the support we received from our members is proof that they recognize the incredible challenges the industry is facing, but more importantly that they are prepared to stand by each other and stand with their union.”

Lewenza credited the solidarity and activism of CAW members who held demonstrations across the province in recent weeks as having played a critical role in pushing the restructuring talks forward.

The deal includes cost-saving provisions affecting cash compensation, health benefits, other non-wage benefits, work practices and productivity improvements as well as a comprehensive restructuring of the company’s pension plan.

CAW Local 222 President and CAW-GM Master Bargaining Committee Chairperson Chris Buckley said the restructuring deal will help secure the company’s financial footing in Canada and protect thousands of Canadian jobs in the face of a possible bankruptcy protection filing.

 “This deal has provided us the path on which we can move forward, to ensure not only our members but all workers impacted by the auto industry feel a bit more secure at a time of tremendous economic uncertainty,” Buckley said.

The ratification results for each location are as follows:

CAW Local 636, Woodstock
Production: 87 per cent in favour
Skilled Trades: 75 per cent in favour
Combined total: 86.5 per cent in favour

CAW Local 1973, Windsor
Production: 97.2 per cent in favour
Skilled Trades: 96.2 per cent in favour
Combined total: 97 per cent in favour

CAW Local 199, St. Catharines
Production: 86.5 per cent in favour
Skilled Trades: 87 per cent in favour
Combined total: 86.7 per cent in favour

CAW Local 222, Oshawa
Production: 85 per cent in favour
Skilled Trades: 73 per cent in favour
Combined total: 82 per cent in favour

Overall combined total: 86 per cent in favour

Tears mix with autoworker votes

Latest deal would slash GM Canada labour costs while guarding pensions

May 25, 2009
Tamara King

Anxious autoworkers and retirees, some in tears, cast ballots in three southern Ontario communities yesterday on the latest labour concession package struck between their union and General Motors of Canada.

The tentative agreement, reached last week after days of tough bargaining talks between the company and Canadian Auto Workers union, would slash labour costs by more than $8,000 per worker, while protecting wages and pension benefits.

GM workers in the southern Ontario communities of Windsor, Woodstock and St. Catharines voted on the agreement while workers in Oshawa are to cast ballots on today.

"The St. Catharines meeting was very very emotional. "There were some retirees that were actually crying," CAW president Ken Lewenza said in a telephone interview from St.Catharines following the vote.

"We certainly understand that because it's been a very, very difficult three or four months."

It's the third set of negotiations between the GM and the CAW within the past year. Ottawa and Queen's Park have insisted on further cuts to labour costs for the automaker to get billions of dollars in taxpayer aid.

The vote comes just one week before a government-imposed deadline for GM to complete a restructuring plan or be forced into bankruptcy protection.

In Windsor, Walter Smith, who has been with company for 28 years, said he hopes this is the last time the workers have to vote on a cost-cutting agreement.

"This is the third time and I think all we want to know is this going to stop, when is it going to stop?" said Smith after workers at GM's transmission plant cast their ballots.

Overall however, Lewenza said the votes are bringing workers a sense of relief.

"When we talk to our retirees and talk about their existing pension funding at 39 per cent, and recognizing that this whole restructuring is going to improve that situation ... and for active members, to think that you have a job and an opportunity to raise a family, with reasonably good income, even with the sacrifices."

The latest agreement, announced Friday, reduces hourly labour costs by between $15 and $16 per worker, on top of a $7-an-hour cut agreed to in March.

The deal also freezes pensions until 2015 and cuts benefit costs by more than $8,000 per worker – including a $3,500 payment to each worker to compensate for vacation time lost in collective bargaining a year ago.

Results of the votes at the four southern Ontario GM plants were not expected to be announced until tonight.

GM has received $15.4 billion (U.S.) in American loans.

The automaker needs holders of $27 billion of its bonds to forgive what they're owed in exchange for equity in the company, reports Friday said the company's biggest bondholders won't support the offer.

GM has already cut its Canadian workforce heavily, with the recent closure of a pickup truck plant in Oshawa eliminating 2,600 jobs. It now employs about 7,500 hourly workers in Canada, and plans a shutdown next year of a transmission plant in Windsor, which employs 1,400.

The entire auto industry has been battered by the recession, which has cut demand for cars and trucks sharply, leaving massive factory overcapacity.

The credit crunch has made it harder to finance car purchases, while changing tastes and high fuel prices have cut into demand for SUVs and pickup trucks, a major market for GM, Ford and Chrysler for years.


CAW says payments will increase dramatically under deal to keep struggling automaker alive

May 23, 2009 04:30 AM
Tony Van Alphen
Business Reporter

The federal and Ontario governments will indirectly pump billions of taxpayer dollars into addressing a huge shortfall in the General Motors pension plan as part of a historic deal to help keep the automaker alive, the company's union says.

In announcing a tentative deal on labour cost concessions, the Canadian Auto Workers revealed yesterday that GM of Canada will soon dramatically increase payments to tackle a shortfall of more than $6.5 billion in the pension plan and the two senior governments will play a significant role.

"Money will be filtered that way," said CAW president Ken Lewenza about government loans helping the pension plan.

Sym Gill, the union's director of pensions and benefits, added that GM will use the government loans to pay its bills for operations including pension obligations.

"Inevitably, some of those restructuring funds are going to be used for that (pensions)," Gill said.

Industry Minister Tony Clement said earlier this month that Ottawa was not in the business of "bailing out pension plans or legacy costs" at GM. In December, the federal government said in a statement that public funds for teetering automakers would be used for "general business purposes."

Ontario Premier Dalton McGuinty has said the government would not boost a provincial fund that guarantees pensions.

But he acknowledged recently that the province bears some responsibility for the massive shortfall because it allowed GM to make small annual contributions to its plan under a legislative loophole. That eventually led to the massive shortfall.

Senior Ontario government sources said the final amount to ease GM's pension shortfall remains under "ongoing" negotiations with Ottawa and Washington this weekend.

GM, which is currently operating with government lifelines, is seeking billions of dollars more from the U.S. and Canadian governments. The governments have told GM Corp. to submit new restructuring plans – with concessions by stakeholders including workers, bondholders, other lenders and dealers – before June to qualify for additional aid.

But opposition politicians here said it's unfair that taxpayers don't know how much they will specifically spend on GM pensions.

"We deserve to know because this is taxpayers' money," said interim Progressive Conservative Leader Bob Runciman. "We're not talking about small change here."

As part of resolving the issue, Lewenza also noted GM made a commitment to soon start funding the plan on a solvency basis, including a significant "upfront" payment. Its funding status will reach the level of Ford and Chrysler in about a year, he added.

GM paid $240.9 million into the plan in fiscal 2007 and should have contributed another $254.5 million last year, according to its actuaries. However, the annual contribution necessary to keep the plan solvent would be several hundred million dollars more.

Union officials said that under GM's commitment to the plan, it would be fully funded in about 10 years if economic conditions remain stable.

GM spokesman Stew Low would not comment on any pension funding issues, including government and company commitments, until after some 7,500 workers vote on the concessions package during the next few days. The concessions will only apply if GM gets the aid.

The pension problem dominated negotiations for concessions between the CAW, GM and the two governments for 11 days at a downtown hotel before a deal late Thursday night.

The federal and Ontario governments pressed GM and the union to ease the plan's burden so it wouldn't cripple the company's future prospects.

In an indication of what obligations lie ahead, GM will have four retirees for every active worker in a few years.

At the same time, the two governments and union knew they couldn't afford to let GM fail because it would trigger the loss of hundreds of thousands of other jobs in the auto industry.

Lewenza also said that if GM collapsed, retirees from what was once the biggest company in the country would lose more than 60 per cent of their pensions because the plan is currently funded at 39 per cent on a wind-up basis.

"It's a catastrophe in every way," he said about the possibility.

The federal and Ontario governments have never indicated how much they will be offering GM in total public loans. GM has already accepted $500 million.

Some reports indicated the aid would reach $7 billion but the actual figure might change because GM of Canada's production – as a part of the parent company's North American production – appears to be declining. Last year, the company had about 19 per cent, but that could now shrink to as low as 15 per cent.

The two governments had made retaining production here at 18 to 20 per cent of GM's overall North America output a major condition for how much aid the company would get.

The tentative terms of the worker concessions at GM are similar to cuts in a three-year deal their counterparts accepted recently at Chrysler Canada, another reeling automaker.

Over the three years, it would reduce labour costs for active workers by about $15 an hour on top of $6 an hour in cuts accepted in March.

The GM contract calls for a freeze on worker wages and cost-of-living allowance until 2012. Workers currently earn about $33 an hour.

But GM retirees would face more adverse terms than Chrysler pensioners.

They wouldn't get any further cost-of-living protection and improvements in benefits until 2015. At Chrysler, the freeze for retirees is until 2012.

Under the deal's terms, GM workers, like their Chrysler counterparts, would also lose one week of annual vacation, a $1,700 Christmas bonus, $3,500 in one-time holiday pay, school tuition assistance for children and semi-private hospital coverage. They would pay more for drugs and face limits on dental coverage and long-term care.

Lewenza noted GM would use some of the savings to help the pension plan. Newly hired workers would also contribute $1 an hour to the pension plan.



Company starts increasing funding to workers' pension plan to eliminate $6 billion to $7 billion shortfall over next decade.

Federal and provincial governments to give about $7 billion in loans to GM, which will use some of it to help reduce shortfall.

Workers' wages and cost of living allowance (COLA) will be frozen until 2012. Retirees won't get new COLA increases over the same period. Their benefits will also be frozen.

Workers will lose one week of vacation, $1,700 Christmas bonus, $3,500 in other holiday pay, tuition and hospital coverage. They'll face limits on dental coverage and long-term care.

Workers will pay a new health-care fee of $30 a month. Retirees will contribute $15 monthly.

New workers will contribute $1 an hour to pension plan.

GM to maintain 15 to 17 per cent of its North American production, down from about 20 per cent earlier.

Source: Canadian Auto Workers


GM, CAW reach tentative deal

Alisa Priddle / The Detroit News
Friday, May 22, 2009

General Motors Corp. and the Canadian Auto Workers union have reached a tentative agreement in negotiations to reduce labor costs as mandated by the Canadian and Ontario governments as a condition of securing government loans.

CAW President Ken Lewenza said the agreement between the United Auto Workers and GM a day earlier put pressure on the Canadian talks, as well as the need for GM to be able to put a comprehensive restructured business plan on President Barack Obama's desk within three days.

A tentative agreement was reached late Thursday night and received the initial approval of representatives of the Canada and Ontario governments.
The union will meet with its leadership Saturday with ratification meetings and votes to be completed Sunday.

The deal staves off threats that failure to reach an agreement would result in the liquidation of GM operations in Canada and maintain the same level of production in the country in return for Canadian government loans.

Lewenza said the union was promised the new contract would be honored by GM in bankruptcy. The automaker is expected to file for protection in both the U.S. and Canada by month's end.

Core wages and benefits were preserved, but the union gave concessions that will see workers and retirees pay for more aspects of health care and lose some benefits similar to the terms already agreed to by unionized Chrysler workers in Canada.

The cuts, combined with high productivity at GM's Canadian plants, bring labor costs to the same level as those at Toyota Motor Corp. facilities in Canada, Lewenza said. It represents a cut of about $20 an hour when all is factored in.

Key to the settlement was restructuring of the pension plan. GM's plan in Canada is underfunded by about $6 billion.

A pension benefit freeze will be in effect until 2015 and new hires will pay $1 an hour to the pension fund.

The union agreed to give up a $3,500 bonus and contribute that amount to a new trust fund established to manage retiree health care.

Lewenza said GM has made a commitment to return its plan to solvency and no longer take advantage of a Canadian loophole that designated the automaker as too big to fail and thus allowed it to contribute proportionately less than smaller automakers such as Chrysler LLC and Ford Motor Co.

GM is working with the Ontario government to resolve the amounts and payment schedule to restore the fund to adequate levels. Once GM receives government funding, some of that will be used to bolster the fund.

With the recent closing of the Oshawa, Ontario, truck plant and other Canadian plants still to close including a transmission plant in Windsor, about 3,000 retirees will join the roughly 25,000 GM retirees or a ratio of four retirees for each active employee.

"GM Canada extends its sincere appreciation to the CAW leadership for its forthright commitment and determination in reaching today's tentative agreement which was required to meet competitive cost benchmarks and the expectations of the Ontario and Federal governments for significant further reductions in the company's longer term liabilities," the company said in a statement.

GM slated for bankruptcy

Obama administration plan would give the U.S. automaker at least $30B more in public financing as it reorganizes

May 22, 2009

David Cho
Peter Whoriskey
Kendra Marr
Washington Post

WASHINGTON–The Obama administration is preparing to send General Motors into bankruptcy next week under a plan that would give the automaker tens of billions of dollars more in public financing as the company seeks to shrink and re-emerge as a global competitor, sources familiar with the discussions said.

The move comes as the administration prepares to lift the other faltering U.S. car company, Chrysler, from bankruptcy as soon as next week, industry sources said.

The legal tactic is viewed by some as the best means of reviving the companies. But the speed of the government-led transformation has triggered complaints that the rights of investors and dealers are being trampled. Meanwhile, fears that a bankruptcy could lead to cascading business failures are spreading throughout GM's vast chain of suppliers.

Under the draft bankruptcy plan, the company would receive just short of $30 billion (U.S.) in additional federal loans, a source said. The figure is a starting point in negotiations between the government and the company, the source said, and could change before filing. A cash injection that large would boost the U.S. investment in GM to nearly $45 billion.

Pressure is increasing on GM and union negotiators to reach a deal on concessions for Canadian autoworkers after their U.S. counterparts signed a tentative agreement on cuts in labour costs yesterday, the Star's Tony Van Alphen reports.

"There is a little more pressure to get it done now," Ken Lewenza, president of the Canadian Auto Workers, said last night. "And we will get it done as soon as GM and the governments agree to take some offensive things off the table."

Lewenza revealed that company and government officials want to eliminate long-standing provisions whereby workers automatically retire after 30 years of service.

"We're obviously against anything like that," he said.

"At a time when our younger members are feeling insecure, this would be horrible."

The UAW and parent GM Corp. reached a deal earlier in the day, including some provisions that the company and governments in both countries want to impose on more than 7,500 employees here in exchange for public aid.

The CAW has rejected a "cookie-cutter" approach to bargaining because of different cost structures in each country and the advantage of lower health-care costs here.

The UAW did not release details of the U.S. deal, but it calls on the union to take a significant shareholder stake in GM in exchange for accepting future financial responsibility for a retiree health-care trust. GM also plans to cut 16 plants south of the border.



UAW reaches deal with
GM, government

DETROIT–The United Auto Workers union has reached a tentative deal with the U.S. government and General Motors Corp. that offers to cut labour costs and fund a union-run trust that will take over retiree health-care costs next year.

The union announced the deal in a short statement issued today that gave no details, which were withheld pending meetings with members to explain the terms.

The move is a key step toward GM's efforts to restructure outside of bankruptcy court.

The company, which has received US$15.4 billion in federal loans, faces a June 1 government-imposed deadline to restructure or be forced into bankruptcy protection.

The statement says union members still have to vote on the deal.

It makes no mention of factory closures or production of vehicles outside the U.S., items that the union has protested in Detroit and Washington as the deadline approaches.

GM plans to close 16 more U.S. factories, costing 21,000 hourly workers their jobs, as it tries to cut labour costs and shrink its manufacturing footprint to match lower demand for its products.

The Treasury Department, which has been overseeing GM's restructuring efforts, had no immediate comment.

GM has about 61,000 hourly workers in the U.S., but plans to take that number down to 40,000 by 2010.

Talks for worker concessions with the CAW and General Motors of Canada dragged on yesterday with some minor progress but no tentative deal.

Ken Lewenza, president of the Canadian Auto Workers, said last night that although there were some signs of movement, there would be no deal on big cuts in labour costs at the teetering automaker until at least today.

"We're still moving in quicksand," said Lewenza at a downtown hotel.

The union says the federal and Ontario governments and Washington, which are considering billions of dollars in public aid to GM, are trying to impose on workers here concessions similar to those of their U.S. counterparts.

The CAW, which represents more than 7,500 GM workers, has rejected "the cookie-cutter" approach. It is also resisting proposals that would make active employees pay into a pension plan for the first time and make retirees accept significant reductions in benefits to address the fund's huge deficit.

The two sides and governments have been negotiating since May 11.



245 GM Canada dealers get the axe

Auto maker sends out letters telling them their fate;
thousands of jobs stand to be lost

May 20, 2009

TORONTO — General Motors of Canada Ltd. has confirmed it is informing almost two-fifths of its dealers that their sales-and-service relationships with the auto maker will end.

A spokesman said letters were being sent Wednesday to about 245 of GM Canada's 709 dealerships, and further consolidation is expected to increase the number of shuttered locations beyond that number by the end of 2010.

Spokesman Stew Low added that the auto maker will not publicly release a list of dealers facing the axe.

GM said that the “rationalization” is focused on key urban markets, and it aims to accomplish the reduction “in an orderly, cost-effective and customer-friendly way.”

The result, it says, “will be a more competitive dealer network with higher volumes, while continuing to maintain the strongest and broadest dealer network in the country.”

While GM Canada has cut its direct work force to 12,000 people, the dealer chain is estimated to employ 33,000 people.

“The economic implications, of course are huge,” said Michael Hatch, chief economist at the Canadian Automobile Dealers Association.

“People look at the auto sector, sometimes, and they think it's just Detroit and Oshawa and Windsor, but dealerships are the retail presence ... and everybody knows that they're located in virtually every community in the country.”

While dealers normally see their sales shrink in economic downturns, they now face closings and thousands of job losses.

Marc Comeau, GM Canada's vice-president of sales and marketing, last week said the company plans to pay all the money it owes dealerships.

One dealer pointed out, however, that if he is forced to shut down and let his 60 employees go, legacy costs will be between $700,000 and $800,000.

“Who is going to pay that?” the dealer asked at the time.

GM Canada spokesman Stew Low last week said the auto maker has recently spoken with all its Canadian dealers.

“Our objective in the next few weeks is to achieve solutions that will best serve our current and future customers while also recognizing some of the unique aspects of our Canadian dealer network,” Mr. Low said.

U.S. dealers who sell less than 35 cars a year were among those notified in the first round of cuts.

Wednesday's GM announcement — following last week's termination notifications to about 1,100 U.S. dealers — came as the auto maker continued talks to extract further concessions from its Canadian unionized work force.

The Canadian Auto Workers told members Tuesday that the “incredibly intense” talks “are approaching a moment of truth.”

A May 15 deadline set by the federal and provincial governments has passed, and the governments “continue to interfere in the process, making new demands all the time,” the union said.

Federal Industry Minister Tony Clement said Wednesday that his officials have told him progress has been made.

“As long as we're moving in the right direction, not the wrong direction, I'm willing to be patient on this,” Clement told reporters in Washington.

With files from Globe and Mail reporters Greg Keenan and Karen Howlett



Being 'blackmailed,' CAW says


Globe and Mail Update

May 20, 2009 at 7:30 AM EDT


The Canadian Auto Workers lashed out at Ottawa and Ontario yesterday, saying the union is being "blackmailed" by those two governments and employers as they try to strip workers of fair pensions.

The union issued a bulletin in the midst of negotiations with General Motors of Canada Ltd., accusing the governments of interfering in the talks at the direction of Washington, which is overseeing the restructuring of General Motors Corp. GM-N "Because the Canadian and U.S. governments are planning a joint effort to support GM's restructuring, we now face a dangerous attempt to enforce a 'cookie-cutter' approach on our bargaining," the CAW's master bargaining committee in the GM talks said in the bulletin.

"This philosophy is absolutely offensive to us as Canadians and it is leading the governments to demand things that are neither economically necessary nor tolerable."

The union's broadside came on the fourth day after the expiration of the government's May 15 deadline to reach a deal that dramatically reduces hourly labour costs at the auto maker's Ontario operations in Oshawa, St. Catharines and Windsor.

The deadline was extended on the weekend because GM Canada and the CAW were making progress, but union president Ken Lewenza said the negotiations were similar to "walking in quicksand."

The union and the company were instructed by the governments to cut hourly labour costs to match those of Toyota Motor Manufacturing Canada Inc., with pension costs included. That's a key battleground because GM Canada has massive pension costs while those of Toyota Canada are negligible.

On an hourly labour cost basis, the union would have to make about $12 in cuts on top of about $7 an hour in reductions workers agreed to in March - cost cuts that GM chief executive officer Fritz Henderson said were sufficient for the company to maintain a competitive position in Canada.

But that was before the union agreed to $19 an hour worth of cuts at Chrysler Canada Inc.

Now, Mr. Lewenza said, the governments and GM Canada are seeking deeper cuts than what the union agreed to give Chrysler.

If the governments were not involved, an agreement could have been reached by yesterday, union sources said.

But the CAW said the governments are aggressively intervening in the bargaining.

"Perhaps they would welcome the excuse to wash their hands of the problem and let the company fail - all the while blaming the CAW for the collapse," the union's bulletin said. "If GM collapses, it will not be because of the CAW."



The end of the untouchable pension


Globe and Mail Update

May 20, 20092

In his final days as Canadian Auto Workers president last August, Buzz Hargrove reassured worried members that pensions were untouchable.

The prospect of trimming pension benefits was “so remote,” Mr. Hargrove said, “that it's not worth speculating on.”

Who could blame the retired CAW chief for such a view? Until recently, Canadian pensioners have been shielded by the most protective legal regime on the continent. Historically treated as sacrosanct trusts by the courts and no-go zones in corporate restructurings, Canadian pensions have mostly been impervious to the corporate stresses and courtroom manoeuvres that vaporized scores of U.S. retirement plans in broken industries such as the steel sector.

Now, Canadian pension champions such as Mr. Hargrove are eating their words. A severe recession, global competition for cheap labour, and life-threatening cash shortages at the country's largest airline, auto, forestry and technology companies has put pension benefits in the crosshairs.

Under siege are hundreds of defined benefit pensions crafted a generation ago to offer guaranteed incomes to retirees. The fixed legacy pension incomes are much more lucrative than modern plans, which call for companies to contribute only set payments to pensions.

Many distressed companies are already billions of dollars short of the funds they are required to set aside for defined pension plans. Executives of the worst basket cases are raising the spectre of corporate liquidations in a bid to pressure workers, governments and the courts for a pension do-over.

Against this backdrop, lawyers are girding for waves of pension litigation and collective bargaining battles. Pensions have always been fertile ground for legal fights, but the ground is shifting. For decades, most legal challenges involved pension surpluses. Companies wanted the right to tap surplus funds and workers fought back, arguing that surpluses should be kept for rainy days.

Well, the rainy days are here and troubled companies saddled with pension shortfalls are fighting again, this time to trim defined pension benefits they say they can no longer afford.

“History has led us to the point where employers have shirked their obligations to properly fund their pensions,” said Susan Philpott, a pension expert with Koskie Minsky LLP representing a group of Nortel retirees. “I expect to see some hard, hard fought changes to these pension plans. It is not going to be easy.”

Ms. Philpott's corporate world opponents are also bracing for conflicts. “We are going to see a dramatic increase in pension litigation,” said Brett Ledger, a pension litigation specialist with Osler Hoskin & Harcourt LLP who represents several Canadian companies.

In the face of so much economic turmoil, he said companies will push the courts to revisit pension plans. Historically, Canadian courts have been reluctant to tamper with pensions because they were developed here under our trust laws, making it very difficult to impose changes detrimental to the interests of pensioners.

In a few recent cases, the courts have shown a greater willingness to tamper with pensions with an eye to the broader interest of preserving a company and its ability to support pensioners in some fashion over the long term.

“It has been very hard to mess with or change pensions. But the question now is: Are the courts going to make an accommodation with these traditional trust principles to achieve a reasonable commercial result?” Mr. Ledger said.

The answer appears to be yes if the company is forest products business AbitibiBowater Inc. Earlier this month, Quebec Superior Court Justice Danièle Mayrand stunned AbitibiBowater's unions by allowing the company's request to suspend $13-million in monthly payments it owed to replenish a pension shortfall of $1.4-billion that is required by federal and provincial laws.

The company has sought court protection from its creditors under the Companies' Creditors Arrangement Act in Canada and Chapter 11 in the United States. Legal experts said Judge Mayrand's decision is part of a developing body of law that has seen judges allow the pragmatic, corporate problem-solving spirit of CCAA to trump federal and provincial pension funding laws.

The Communications, Energy and Paperworkers Union at AbitibiBowater is reviewing legal options since the decision.

Another pension battle appears to be brewing at Nortel, the fallen telecommunications giant that is also operating under CCAA to restructure its debts. It is actively seeking buyers for most of its assets, a strategy that could ultimately leave Nortel with limited resources to finance its pensions.

By law, companies are legally bound only to honour pension agreements as long as they are in business. If a company is insolvent and liquidated, federal and most provincial laws allow it to wind up pension plans. If Nortel were allowed to wind up its pensions, retirees could face an income cut because the company is operating with a $1.8-billion pension shortfall.

When companies are wound up with underfinanced pensions, the remaining pension fund is distributed as a kind of retirement annuity and divided on a pro-rata basis to each eligible employee and retiree.

“My clients are very concerned,” said Christopher Rootham, a lawyer with Nelligan O'Brien Payne LLP who represents a number of current Nortel employees. “They have been long-serving employees and they are worried that the retirement savings that they bargained for over the years is going to disappear or be significantly reduced.”

Similar fears can by found at Air Canada, whose directors and new chief executive officer Calin Rovinescu have placed a priority on shaving the airline's defined pension costs.

Mr. Hargrove's brave assertion of immutable auto pensions seems like the cry of a bygone generation. Chrysler Canada's parent is fighting for survival in bankruptcy court and General Motors Corp. is likely days away from a similar fate. Mr. Hargrove's successor, Ken Lewenza, has been locked in bargaining with GM officials who are seeking, among other things, steep pension cuts.

He emerged from negotiations over the weekend to express frustration with GM's demands, which, he warned, were pushing the union near “the point of despair.”



CAW and GM given final deadline

May 19, 2009 01:31 PM


Federal Industry Minister Tony Clement has indicated the government is flexible about when General Motors Canada and its unionized workers reach a new labour agreement, so long as it's part of a finished restructuring plan delivered by the end of May.

The Canadian Auto Workers union has said the federal and Ontario governments set last Friday as the deadline for GM to reach a labour agreement with the CAW.

But the two sides are still mired in negotiations this afternoon.

Clement had planned to travel to Washington, D.C., today to discuss the new deal with U.S. officials, but a spokeswoman in his office said his trip had been delayed until later this week.

Clement says May 31 is the hard and fast deadline for GM to present its restructuring plans to governments in the U.S. and Canada and the government wants a labour agreement to be reached and ratified before then.

GM has asked the Ontario and federal governments for $6 billion in emergency loans to get the automaker through a severe slump in sales.



CAW seeking limit on imports

As talks drag, union calls on Ottawa to protect jobs, public investment

May 19, 2009
Tony Van Alphen

The Canadian Auto Workers union says Ottawa must make sure General Motors of Canada doesn't import any more vehicles from offshore countries if the government wants to protect jobs here and assure protection of public investment in the teetering automaker.

As talks for worker concessions continue in Canada, Detroit-based parent GM Corp. – which is seeking billions of dollars in public loans – has revealed to the U.S. Congress it plans to start importing small cars from China within two years. Union officials in both countries say the move will kill jobs in North America.

"Obviously the federal and Ontario governments should maximize their return from GM and Chrysler and possibly Ford by limiting imports which have been costing us jobs for years," CAW president Ken Lewenza said in an interview yesterday.

He said the union has pressed Ottawa for years to stop a flood of auto imports here because offshore countries don't offer the same access to Canadian-made vehicles.

GM is already importing South Korean-made small cars to Canada despite union efforts to limit them since Canadian automakers face trade barriers in that Asian country.

"In China, it's the same thing – a one-way flow of trade out," Lewenza said. "Here, we leave it wide open. If this keeps up, the only question for government is when are we (the domestic auto industry) going to die."

Chris Buckley, chairman of the union's bargaining committee, said he finds it "absolutely mind-boggling" that GM is trying to increase imports into North America at a time when it is shutting down North American plants.

In negotiations for worker concessions with General Motors and struggling Chrysler, the union and the federal and Ontario governments have insisted that the companies maintain current levels of output as a percentage of their North American production. If output slid in the U.S., it could drop here too and still hold the production threshold.

The union has repeatedly told Ottawa to fix the trade problem and limit imports, but Buckley would not comment on whether the federal and Ontario governments should refuse GM's current requests for loans if the company plans to increase imports here.

In the U.S., the United Auto Workers union has complained to the government about GM's plan to close 16 plants while "dramatically" increasing auto imports from Mexico, South Korea, Japan and China.

The UAW said GM wants to nearly double the number of imports from those countries, which would cost 21,000 unionized jobs south of the border.

GM acknowledged it plans to start importing small cars from China starting in 2011 and gradually bump up the number to 51,000 by 2014. But the company says the percentage of cars made and sold in the U.S. will remain stable, with fewer imports likely from Canada.

Some industry watchers say GM needs to import small cars from countries with lower labour costs to remain competitive.

GM shut down its truck assembly plant in Oshawa last week and plans to close a transmission operation in Windsor next year. At one time in the 1990s, GM had six assembly plants in Canada but now operates only two, one in Oshawa and one in Ingersoll. The Ingersoll plant is a joint venture with Suzuki.

The issue over imports has overshadowed continuing negotiations for worker concessions, particularly in the U.S. GM must reach deals for concessions from workers, debtholders and other stakeholders by June 1 to qualify for billions of dollars in additional aid from governments in both countries. GM has already received $15.4 billion (U.S.) in loans from the American government and another $500 million (Canadian) from Ottawa and the provincial government.

Meanwhile, negotiations for concessions by workers here dragged through the weekend at a downtown hotel without resolution on how to reduce GM's huge underfunded pension plan. The governments had set a "deadline" of last Friday night for a deal.

Sources close to the talks said GM now wants thousands of active workers to start paying into the fund, which had a shortfall of more than $4 billion in 2007. GM has not yet released 2008 figures but experts say the shortfall could now be higher than $7 billion.

GM and Lewenza would not comment on demands, but the union leader said there are "multiple proposals for active workers which are much different" than what Chrysler employees recently accepted so that company could qualify for aid.

"We are close to the end of our ability to give," Lewenza said last night. "Sooner or later, GM and the federal and provincial governments will realize that."

Both sides agree that GM's pension plan is in far worse shape than Chrysler's fund after years of making minimal contributions under a special provision in provincial legislation.

Chrysler workers ratified a deal that froze wages, cut benefits, eliminated bonuses and some vacation time. They also agreed for the first time that new employees would contribute $1 an hour, or about $1,700 annually, to the company's defined pension plan.


Crowd at table hurts talks,
CAW says

Union and GM bargaining expected to continue as consensus called elusive in multi-party format

May 18, 2009 04:30 AM

Labour concession talks between General Motors of Canada and the Canadian Auto Workers are progressing slowly largely because there are so many parties involved, says the union president, who predicts talks may continue several more days.

"What we consider close and what all the parties consider close is what separates us," CAW president Ken Lewenza said. "This isn't two-sided bargaining."

Both the Ontario and federal governments, along with the U.S. Treasury Board and U.S. Auto Task Force, are additional players as the union aims to negotiate a cost-saving deal that will unlock $6 billion in financial assistance for the automaker. A midnight-Friday deadline imposed by the governments passed without a deal being reached. Officials have since told Lewenza they will allow discussions to continue "at least a couple more days" as long as there is no sign of either side leaving the table.

Lewenza said he believes the union has already made greater concessions than were asked of Chrysler when they worked out a similar deal to access bailout funds last month.

Pensions, health-care costs and benefits are the main stumbling blocks, he said.

Chrysler reached a deal with union members last month that cut the company's labour costs by $19 an hour.

The CAW in a statement late Saturday cited some headway in the last-ditch talks, though key issues remained.

Without a stringent deal, the worst-case scenario for GM would see the company's Canadian assets liquidated.

GM has until the end of May to provide governments in Canada and the United States with a restructuring plan that could include filing for bankruptcy protection.

GM Canada currently employs 7,500 hourly workers at a car plant in Oshawa, a transmission plant in Windsor and an engine plant in St. Catharines. It also operates the GM-Suzuki joint-venture CAMI plant in Ingersoll, also in southern Ontario.

A truck plant in Oshawa closed Thursday and the Windsor transmission factory will be shut next year.

From the Star's wire services


GM, CAW adjourn
talks until Monday

Weekend negotiations fail to produce labour concessions deal

Last Updated: Sunday, May 17, 2009 | 7:47 PM ET

CBC News

Talks between General Motors and the Canadian Auto Workers union will continue on Monday in an effort to reach a new agreement on cost concessions.

The two sides negotiated through the weekend at a downtown Toronto hotel after a government-imposed deadline of midnight Friday passed without a deal being struck.

CAW president Ken Lewenza said the federal and Ontario governments told them that talks could continue for a couple more days, providing they make progress.

Lewenza earlier described the mood at the bargaining table as near despair.

The two levels of government are demanding that GM drastically cut costs to be eligible for billions of dollars in aid. In February, GM asked for $6 billion in loans from the two governments.

A June 1 deadline looms over the company to present its restructuring plans to government.

Lewenza said the union has already agreed to concessions greater than those it gave Chrysler Canada.

Chrysler and the CAW agreed last month on a deal that cut the company's labour costs by $19 an hour per worker. GM is in an even worse financial position, in part due to a ballooning pension deficit.

In March, GM and the union worked out a new labour deal that cut labour costs by about $7 an hour per worker.

However, government later rejected it as being insufficient.

Both Prime Minister Stephen Harper and Ontario Premier Dalton McGuinty have insisted that labour, management, bondholders and financial institutions must all make concessions that are significant enough to ensure the company's long-term viability.

Otherwise, they say, there will be no more government financial support.


GM, CAW still working on deal

Two sides are making progress despite missing
government-imposed cut-off of midnight Friday

May 17, 2009 04:30 AM
Tamsyn Burgmann

General Motors of Canada and the Canadian Auto Workers union were still trying to negotiate a labour concession agreement yesterday as the union president expressed frustration at the company's unwillingness to compromise.

"It's not a matter of the CAW with overzealous proposals. It's a matter of General Motors at this particular time being overzealous," CAW president Ken Lewenza said in a phone interview yesterday evening. "But we keep talking."

The two sides failed to reach an agreement by a government-imposed deadline of midnight Friday and continued talking through the night.

Lewenza said the federal and Ontario governments told the two sides yesterday they could wait a few more days as long as there was progress at the bargaining table.

"The minute we quit talking, then the whole process is in jeopardy and I'm not prepared to jeopardize ... that," he said.

A deal has not yet been reached because the union believes the sacrifices being asked of GM membership are "much more significant" than those asked of Chrysler employees, he said.

"We've already made some productivity improvements that are over and above what we did at Chrysler," he said. "There's no question General Motors is getting more at this particular time than what we provided Chrysler."

Government officials were also working behind the scenes to help broker a deal, Lewenza said.

Both GM and Chrysler must present restructuring plans to the government if they want to receive billions in bailout money.

Chrysler reached a deal with union members last month that cut labour costs by $19 an hour through concessions.

But GM is in a worse financial position than Chrysler, due in part to a ballooning pension deficit.

At one point in the talks with GM yesterday evening, Lewenza said he thought a deal was within reach, but it slipped away and he couldn't predict how much more bargaining was ahead.

Without a more stringent deal, Ottawa and the province have said they won't give GM Canada the $6 billion in aid it has requested.

GM Canada currently employs 7,500 hourly workers in southern Ontario.


GM wants more concessions

Labour-cost cuts Chrysler autoworkers
accepted aren't enough for rival company

May 16, 2009
Tony Van Alphen
Business Reporter

General Motors wants more concessions from workers than those Chrysler employees recently accepted in the effort to stay alive, a top union leader says.

Ken Lewenza, president of the Canadian Auto Workers, said late yesterday GM and union negotiators remain far apart on an agreement and bargaining would continue past a midnight government "deadline" last night.

"GM is telling us the labour-cost savings by Chrysler workers are now not enough," Lewenza said in an interview. "They are being overzealous in every area."

Lewenza stressed that the union bargaining committee would not accept lower wages, benefits and pensions than Chrysler workers.

The federal and Ontario governments had set a midnight deadline for the two sides to reach a tentative deal on concessions that would form part of a GM restructuring plan required to qualify for several billions of dollars in public loans.

A spokesperson for GM, which closed its truck plant in Oshawa on Thursday, could not be reached for comment on the talks.

GM must submit the plans by the end of the month to governments in Canada and the United States. The parent company and the United Auto Workers are also negotiating concessions in the U.S.

Lewenza said the union didn't negotiate a deal at Chrysler until two days after deadline last month and negotiations at GM are at least a few days behind that pace.

The union's bargaining committee distributed a leaflet in GM plants earlier this week that said "we are fighting for our lives" and called the government demands in negotiations "outrageous."

GM had said a concessions deal in March with the union made the company competitive with rivals in the U.S. But the governments here instructed the two sides to resume bargaining for more labour-cost cuts so they would be competitive with Toyota in Canada.

The governments also want GM and the union to address a huge long-term pension deficit and retiree health-care costs.

Negotiators for the union and Chrysler agreed on reducing pension expenses by halting cost-of-living payments and accepting contributions by new workers to the company plan for the first time. They also agreed on introduction of a health-care trust that will eventually shift financial responsibility for retiree health-care costs to the union from the company.

But the pension issue poses a much more difficult problem at GM because of huge funding shortfall.

In the three-year Chrysler deal, workers, who currently earn an average of about $35 an hour, also accepted freezes in wages and cost-of-living allowance; higher health-care and drug payments; loss of some vacation time and bonuses; a reduction in child-care benefits and the elimination of a tuition refund program. The union said it would save Chrysler about $240 million annually.


GM Talks will continue past
midnight deadline

May 15, 2009



General Motors wants more concessions from workers than what Chrysler employees accepted recently in efforts to stay alive, a top union leader says.

Ken Lewenza, president of the Canadian Auto Workers, said late today GM and union negotiators remain far apart on an agreement and bargaining would continue past a government midnight deadline tonight.

"GM is telling us the labour cost savings by Chrysler workers are now not enough," Lewenza said in an interview. "They are being overzealous in every area."

Lewenza stressed that the union bargaining committee would not accept lower wages, benefits and pensions than Chrysler workers.

The federal and Ontario governments had set a midnight deadline for the two sides to reach a tentative deal on concessions that would form part of a GM restructuring plan so it can qualify for several billions of dollars in public loans.

A spokesperson for GM, which closed its truck plant in Oshawa earlier this week, could not be reached for comment on the talks.

GM and its Detroit parent must submit the plans by the end of the month to governments in Canada and the U.S. The parent company and the United Auto Workers are also negotiating concessions in the U.S.

Lewenza said the union didn't negotiate a deal at Chrysler until two days after a government deadline last month and negotiations at GM are at least a few days behind that pace.

The union's bargaining committee distributed a leaflet in GM plants earlier this week that said "we are fighting for our lives" and called the government's demands in negotiations "outrageous."

GM had said a concessions deal in March with the union made the company competitive with rivals in the U.S. But the governments here instructed the two sides to resume bargaining for more labour cost cuts so they would be competitive with Toyota in Canada.

The governments also want GM and the union to address a huge long-term pension deficit and retiree health care costs.

Negotiators for the union and Chrysler agreed on reducing pension expenses through a stoppage in cost of living payments and contributions by new workers to the company plan for the first time. They also agreed on introduction of a health care trust that will eventually shift financial responsibility for retiree health care costs to the union from the company.

But the pension issue poses a much more difficult problem at GM because of huge funding shortfall.

In the three-year Chrysler deal, workers, who currently earn an average of about $35 an hour, also accepted freezes in wages and cost of living allowance; higher health care and drug payments; loss of some vacation time and bonuses; a reduction in child care benefits and the elimination of a tuition refund program. The union said it would save Chrysler about $240 million annually.


'Not even close' to deal with GM, CAW president says
Work boots hang from the fence as the last Canadian GM truck came off of the line at the General Motors truck assembly plant in Oshawa May 14, 2009. The trucks will now be made in Indiana, Michigan and Mexico.

May 15, 2009 04:01 PM
Kristine Owram

The Canadian Auto Workers union was "not even close" to reaching a new labour agreement with General Motors Canada, union president Ken Lewenza said Friday afternoon.

Lewenza gave the brief update with just hours to go before a midnight deadline set by the federal and Ontario governments with negotiations expected to go right to the deadline.

A GM Canada spokesman wouldn't comment on the details of the negotiations, but said there was "lots of hard work going on."

Although CAW members ratified a deal with GM back in March, less than a year after the two sides had reached a three-year contract, the two governments almost immediately said it didn't do enough to cut costs.

Without a deal, the governments have said they won't give GM Canada the $6 billion in financial assistance it has requested, meaning that in a worst-case scenario the company's Canadian assets could be liquidated.

GM has until the end of May to provide governments in Canada and the United States with a restructuring plan that could include filing for bankruptcy protection.

Prime Minister Stephen Harper said he realizes the government is asking a lot of GM workers, but it's the only way the company will survive.

"I understand for many people, particularly the people on the line, these are very difficult decisions with very real impacts on their lives," Harper said Friday in Toronto.

"But at the same time, the taxpayers of Canada cannot be expected to support the restructuring unless the restructuring will be successful, and that is going to require difficult decisions on the part of everyone."

Ontario Premier Dalton McGuinty echoed Harper, emphasizing the need for "extraordinary decisions" and an "extraordinary new arrangement."

"There's much at risk here and I think our response given how much is at risk has to be proportional in nature, which means we're all going to have to dig deep if we're going to make a go of this," McGuinty said.

Federal Industry Minister Tony Clement plans to head to Washington, D.C., on Tuesday to present details of the agreement to U.S. officials.

At particular issue is GM Canada's ballooning pension deficit, which was about $4.9 billion as of November 2007. Reports say it jumped to about $7 billion after financial markets crashed in late 2008.

Lewenza has said the issue of pensions cannot be resolved at the bargaining table.

The CAW has blamed the Ontario government for giving GM Canada a holiday on contributions to its own pension fund in the 1990s, back when it was widely considered "too big to fail."

Ontario Economic Development Minister Michael Bryant has said retired workers' pensions won't be touched.

Instead, it's likely the CAW will be asked to give GM similar concessions to those it gave Chrysler Canada in a deal reached last month that cut that company's labour costs by about $19 an hour.

Among many other concessions, that agreement will help Chrysler reduce its legacy costs by giving it 10 years instead of five top up its pension fund and, for the first time ever, workers will contribute $1 per hour toward their pensions.

GM Canada currently employs about 7,500 hourly workers in southern Ontario at a car plant Oshawa, a transmission plant in Windsor and an engine plant in St. Catharines. It also operates the GM-Suzuki joint-venture CAMI plant in Ingersoll.

A truck plant in Oshawa closed Thursday and the Windsor transmission plant will close next year.

GM plans to cut 1,100
dealers in U.S.

May 15, 2009
The associated Press

DETROIT–A day after Chrysler LLC told a quarter of its dealers that it won't renew their contracts, owners of General Motors Corp. dealerships are awaiting word on whether they will be next.

GM said it will notify 1,100 U.S. dealers on Friday that their franchise agreements will not be renewed. Dealers expect to hear either by telephone or FedEx letters that will begin arriving Friday morning.

GM spokeswoman Susan Garontakos said the company will not make public a list of dealers to be cut, leaving the decision to release information to individual business owners.

The company has scheduled a conference call for noon Friday to explain its dealer reduction strategy.

The cuts will come just a day after crosstown rival Chrysler announced it was dropping 789 of its roughly 3,200 dealerships by around June 9. Both companies have too many dealerships for too few sales are slashing costs as they race to restructure.

GM's dealer cuts are part of the company's plan announced last month to cut more than 2,600 dealers by 2010. The remaining cuts will come from closed Saturn and Hummer dealers, along with 400 dealers that the company expects will close voluntarily. Another 500 would be consolidated into other dealerships.

The GM dealer cuts are likely to have a much greater impact than Chrysler's. While many Chrysler dealers also sell other brands and will stay open after losing their franchises, a large number of GM dealers sell only GM vehicles. So if their franchises are revoked, they run a greater risk of closing for good.

In both cases, the cuts will cost thousands of jobs, create holes in local tax bases, eliminate community pillars and create economic ripple effects across the country.

Chrysler is operating under bankruptcy protection, so it is likely to have an easier time tearing up its franchise agreements with its dealers than GM. A hearing is scheduled for June 3 in U.S. Bankruptcy Court in New York for the judge to determine whether to approve Chrysler's motion to fire its dealers.

Chrysler executives said Thursday the company is trying to preserve its best-performing dealers and eliminate ones with the weakest sales. More than half of the dealerships being eliminated sell less than 100 vehicles per year, they said, and account for 14 percent of U.S. sales.

Chrysler has received $4 billion in government aid, while GM has received $15.4 billion. GM is continuing to restructure out of court and faces a government-imposed deadline of May 31 for doing so. Several difficult hurdles remain, and many experts say that it is all but inevitable that it will follow Chrysler into Chapter 11 bankruptcy.

To remake itself outside of court, GM must persuade its bondholders to swap $27 billion in debt for 10 per cent of its risky stock. In addition, it must work out deals with its union, announce factory closures, cut or sell brands and shutter dealers.

Swapping its bond debt for equity may be its most difficult task. The company is trying to get 90 percent of its bondholders on board for the so-called debt-for-equity swap. A committee representing the bondholders has rejected the swap, saying it unfairly favors the government and the United Auto Workers union. They have counteroffered seeking a 58 percent ownership stake, which the automaker in turn rejected.

On Thursday, GM said that bankruptcy is possible if it doesn't get enough takers on the exchange. If that happens, it likely would sell most of its assets to a new company and liquidate the rest, the automaker disclosed in a regulatory filing.

The automaker also says it could seek court approval of its reorganization plan even if creditors vote against it.

Shares of GM closed Thursday at $1.15.


Pension issue threatens GM Canada's survival

* CAW says not much progress in GM talks
* Ottawa warns GM Canada not viable without more cuts
* Union says pensions cannot be dealt with in bargaining

By John McCrank and Randall Palmer

TORONTO/OTTAWA, May 13 (Reuters) - Pension issues are stymieing efforts to reach a new concession deal between the Canadian Auto Workers union and General Motors Corp that is needed to keep the automaker's Canadian operations from liquidation, the head of the union said on Wednesday.

The two sides have until Friday to strike a new cost-cutting deal or the automaker could miss out on billions of dollars in government loans needed to keep GM Canada afloat.

"We're not making much progress at all," CAW President Ken Lewenza told Reuters during a break in the negotiations, which have been ongoing since Sunday.

"We're talking to each other, but we've got some major issues," he said."
A GM spokesman was not immediately available for comment.
The biggest hurdle involves the cost of pensions for GM's retired workers, Lewenza said.

GM Canada has been making vehicles for around a century and has about five retirees for every active worker.

Complicating matters is a pension fund shortfall at GM Canada estimated to be as high as C$7 billion ($6 billion).

GM and the CAW signed a cost-saving contract agreement in March that the company said would cut nearly C$1 billion related to retirees from its books, on top of big savings on the active worker side.

Industry Minister Tony Clement said on Wednesday the concessions from March did not go far enough.

Ottawa recently sent the two sides back to the bargaining table with a deadline of May 15 and a goal of bringing costs at GM Canada into line with those at the nonunionized Toyota and Honda plants in Canada.

"The general determination is, given the deterioration of the market, even since that moment (March), there is no question that for GM to be viable there has to be more on the table," Clement told Reuters.

"We're at a very critical juncture. Over the next 48 to 72 hours there's a lot that has to fall into place and then we'll make a determination on where we stand," he said.

Jim Stanford, the CAW's economist, said on Wednesday that Ottawa had given little in the way of guidelines about what it expects to see in the final deal.

"We don't have an agreement on a particular target, other than the broad, nonspecific direction from government to be comparable to Toyota Canada," he said.

Labor costs for automakers include the costs of both active and retired workers, among a host of other items.

Toyota Canada has a similar pension plan to GM Canada's, but it has only been producing autos in the country for just over 20 years, and has nowhere near as many retirees as GM.

"It's not apples to apples," Lewenza said. "We can't handle the pensions. That can't be dealt with at the bargaining table."

The CAW and GM are also involved in ongoing committee discussions with the governments of Canada and the province of Ontario on how to deal with pension and healthcare issues, Stanford said.

GM Canada currently employs about 10,300 hourly workers, but has said that number will fall substantially as planned plant closures take effect.

The company's Oshawa, Ontario, truck plant will be shuttered on Thursday, putting about 2,600 people out of work.


End of an era in Oshawa


Globe and Mail Update

May 13, 2009

TORONTO, OTTAWA — Some time this morning, Bob Nesbitt, 67, will drive a black GMC Sierra crew cab off the assembly line at the General Motors of Canada Ltd.'s Oshawa truck plant. The final pickup truck rolling out of the plant will mark not only the end of an era in the city where GM Canada was born, but also the end of GM's decades-long run as the largest auto manufacturer in the country.

The Oshawa plant's closing is a key factor in the drop of GM Canada's vehicle production, taking it to considerably less than 17- to 20-per-cent level of overall General Motors production in North America – the threshold that Ottawa and Ontario have insisted GM Canada must meet in return for loans of $6-billion (U.S.) or more.

The plant closing also means the elimination of 2,600 jobs, which when added to next year's shutdown of a transmission plant that employs 1,500 people in Windsor will push the company's head count well below 16,000.

“I've seen this before but that was always model change,” said Mr. Nesbitt, who has worked at GM in Oshawa since 1964 and in the truck plant since 1971. “But that truck I take off [today], there won't be another one behind it.” He has one of the plum jobs of the operation. For 20 years, he has been driving finished vehicles off the assembly line and to a holding area where they wait for delivery.

“It's a busy job and it's a good job, but it goes with seniority,” he said, adding that he drives about 90 trucks off the line during a typical shift.

Today is his last day on the job as well.

Barney Kerr, a 53-year-old millwright, worked in the truck plant from 1986 until last October when he transferred to the neighbouring Oshawa car plant. One of the biggest changes, he said yesterday, is in the corporate culture.

“The boss was the boss back then,” Mr. Kerr said of his early days, when it was his job to rebuild the paint guns that robots used to spray paint the GMC Sierra and Chevrolet Silverado models that rolled through the plant.

In more recent years, GM has made an effort to get employees more involved in decision making and quality. “GM knows they have to compete with the Japanese,” Mr. Kerr said.

The change in the market has not escaped his notice either: “We worked 20 years with almost unlimited overtime.” But overtime began drying up a few years ago and the sudden announcement last year that the truck plant was closing stunned workers. They were told an announcement was pending and thought it was the addition of a new product, perhaps another hybrid truck. Instead, it was the announcement of a permanent closing.

From 2004 through 2007, GM Canada cranked out more than 20 per cent of all the vehicles the auto maker produced in North America. In 2008, that fell to 17 per cent and is forecast to drop again this year to 14 per cent, says an analysis done by consulting firm AutomotiveCompass LLC.

“We see no way Canada can get to 20 per cent,” said AutomotiveCompass president Bill Pochiluk. “We don't see them even reaching 15 per cent.”

The forecast calls into question the federal and Ontario governments' commitment to lend GM Canada up to 20 per cent of the amount the U.S. government provides to its parent company. The most recent GM request is for about $30-billion in loans from Washington.

The federal and Ontario governments have argued since the restructuring talks first began that Canada must retain its share of GM's North American auto production in return for any loans. They have used the 20-per-cent threshold, saying Canada's share of the bailout would be proportional to GM's production here, and have little appetite for lending money that exceeds that level.

“Obviously, that's where we started from,” Ontario Economic Development Minister Michael Bryant said yesterday.

“That's the goal we want to achieve. We're only going to provide a contribution that's proportional to the footprint that's here in Ontario.”

Federal Industry Minister Tony Clement has said Canada will provide assistance proportional to the production and investment that GM commits to keeping here.

Federal officials have not seen any indication from General Motors that it won't be able to meet the 17- to 20-per-cent Canadian production levels that were contained in the restructuring plan that the company put forward in March.

In fact, since then, GM has committed to closing more plants in the U.S. but has not announced further closures in Canada, one official said.

“We know what they plan to do in Canada, and what they will be doing in the States, and we expect that would keep us in the 17- to 20-per-cent ballpark,” the official said. “We have not heard any other number.”

Both the federal and Ontario governments have insisted that the loans will come with strings attached. But GM Canada has slashed jobs and closed plants in the past after receiving government funding. In return for $435-million (Canadian) in federal and provincial funding in 2005, GM Canada committed to maintain an average of 16,000 employees in Ontario over the following nine years.

In 2002, GM Canada closed its plant in Ste-Thérèse, Que., after receiving $220-million in interest-free loans from Ottawa and Quebec in 1987. David Paterson, GM Canada's vice-president of corporate affairs, refused to comment on current discussions with the governments.

The AutomotiveCompass forecast shows production at GM Canada and its joint venture Cami Automotive Inc. plant in Ingersoll, Ont., falling to a low of 12 per cent next year and rising to 14.5 per cent by 2015.

As of the end of the first quarter, GM Canada had fallen to fourth spot among auto producers in Canada, behind Chrysler Canada Inc., Honda of Canada Mfg. and Toyota Motor Manufacturing Canada Inc.

GM Canada production is forecast to double by 2015, but output in Mexico will almost triple over the same period, taking that country to 24 per cent of GM's North American volume.

The Detroit News reported last week that in a presentation to members of the U.S. Congress, GM said its Canadian operations will produce just 331,000 vehicles in 2014, down from 621,807 in 2012.

At their peak earlier this decade, GM Canada and Cami produced more than 1 million cars a year on three separate occasions.

Output fell last year to 577,00 and AutomotiveCompass forecasts it will tumble by more than 50 per cent this year to 275,000. Closing the Oshawa truck plant, which opened in 1965, eliminates production capacity of 237,000 vehicles, although workers built just 104,000 last year amid the meltdown in the pickup truck market in the first half of 2008 then the crash of the entire North American market later in the year.



Pension deficit threatens
GM's viability

$7-billion shortfall a roadblock to restructuring


From Wednesday's Globe and Mail

May 13, 2009

OTTAWA, TORONTO — General Motors of Canada Ltd. faces a pension shortfall of more than $7-billion, a gap that poses a major obstacle to a cost-cutting deal with the Canadian Auto Workers union, and a political challenge for Ottawa and Ontario.

The federal government says the province has jurisdiction for settling the pension issue, and must also contribute one-third of the overall loan package that Canada could provide in collaboration with the U.S. government. However, Ontario officials say the pension deficit is part of GM Canada's overall financial problems, and needs to be solved as part of the overall restructuring package.

Premier Dalton McGuinty acknowledged yesterday that the cost of saving GM's Canadian operations may be higher than he had anticipated, as he learned from Ontario's participation in $3.8-billion assistance provided to Chrysler LLC last month. Everyone involved in the GM restructuring should apply the lessons they learned by going through a similar exercise with Chrysler, he said.

“When we come together at the table, and when we're really honest with each other, then I think we can accept that we're going to have to do some things that we didn't want to do,” Mr. McGuinty said. “We came to the table with more money than we initially anticipated we'd have to come with for Chrysler.”

Mindful of a potential political backlash if Ottawa is seen to be bailing out lucrative auto worker pensions, Industry Minister Tony Clement has insisted federal taxpayers will not be on the hook for GM Canada's pension shortfalls, which are regulated and guaranteed by the province.

The Ontario government's position is that the shortfall in the pension plans is a significant component of the GM situation and cannot be isolated from the overall negotiations, said an Ontario government source who asked not to be named.

“All of the parties – the unions, GM, U.S. Treasury and the Canadian and Ontario governments – are working together to try to keep GM viable now and sustainable in the long term,” the source said.

The Canadian and Ontario governments will decide how much money they are prepared to lend GM once the company and the CAW present their plans for restructuring the company's operations and cutting overall labour costs.

Still, provincial Finance Minister Dwight Duncan warned that Ontario's Pension Benefits Guarantee Fund is not in a position to bail out the GM plan. He said it would be unfair to ask taxpayers to bail out any pension plans that are under water, including GM's, because about two-thirds of Ontarians don't even have a pension.

GM Canada's plan had a deficit of $4.5-billion in its most recent public information released in November, 2007, but sources said the amount ballooned to more than $7-billion at the end of 2008 on declines in the stock market last year.

Since then, the Toronto Stock Exchange's leading index has regained about 12 per cent of its value, paring the pension shortfall somewhat. As well, the CAW says it already gave GM Canada $500-million worth of pension savings in March when the union agreed to freeze basic benefits and eliminate cost-of-living adjustments for retirees. Those changes won't come into effect, however, unless GM signs a final loan agreement with the federal and Ontario governments.

GM Canada spokesman Stew Low said the latest public figures are still those from November, 2007.

With government officials acting as mediators, the union and company are huddled in talks this week aimed at wringing out further cost savings after governments said a March agreement did not provide enough to make the company competitive and viable over the longer term.

The Detroit-based parent, General Motors Corp., is negotiating with its United Auto Workers union to reach the level of concessions demanded by President Barack Obama in return for a U.S.-led bailout that would provide more than $30-billion (U.S.) in loans to the company.

Even with deals with unions and governments, GM is likely to file for bankruptcy protection in the United States – and its subsidiary may seek similar protection in Canada – to dramatically reduce its debt load.

A settlement of GM Canada's pension problem is likely to involve financial contributions from GM Canada and the Ontario government, plus a reduction in future benefits for unionized employees at GM Canada who are still working and will retire in future years.

The fund will face a big hit in payouts over the next few years as the auto maker reduces its hourly work force to about 4,400 by 2014, from more than 10,000 now. Based on the November, 2007, shortfall of $4.5-billion in the funds, the deficit would amount to more than $1-million for every active GM worker by 2014.



CAW union says pressing
for new GM Canada deal

* Pushing to meet May 15 government deadline
* Costs related to GM retirees seen as key hurdle
* Oshawa truck plant set to cease operations Thurs

By John McCrank

TORONTO, May 12 (Reuters) - The Canadian Auto Workers union said on Tuesday it is working hard to reach a new contract agreement with General Motors of Canada ahead of a government imposed deadline of May 15, but cautioned there are no guarantees a cost-saving deal will be reached.

The union said at the end of last week that Ottawa had warned that without new cost concessions with the struggling automaker, GM would likely be forced to liquidate its Canadian operations.

"This is extremely painful and that we're doing everything within our power to protect the interests of our active and retired members," said Chris Buckley, chairman of the CAW-GM bargaining committee and president of CAW Local 222 in Oshawa, Ontario.

"The alternative is the company going into liquidation (in Canada) and we're trying to avoid that because then nobody wins."

The CAW and GM began bargaining on Sunday and Buckley said the two sides were pushing hard to meet the government's deadline, "but there are no guarantees."
A spokesman for GM Canada was not immediately available for comment.

GM's CEO said on Monday that it was probable the company would have to seek bankruptcy protection to help it restructure.

The union reopened its three-year collective agreements with GM and Chrysler, reached last May, to help the companies survive the brutal downturn in the auto sector and qualify for government aid.

The CAW and GM reached a new agreement in March that the company said would made its Canadian plants cost competitive with its U.S. operations.
However, the federal government said that deal did not go far enough for them to justify supporting GM with taxpayer-funded loans.

The union later struck an agreement with Chrysler that would put its labor costs on par with nonunionized automakers operating in Canada, such as Toyota and Honda -- a move that Ottawa supported.

"Unfortunately, General Motors is a totally different situation," said Buckley, noting that costs related to retirees at GM are much higher than at Chrysler.
Labor costs include the costs of active workers, retirees, payroll taxes, and benefits, among a host of other items.

General Motors, whose origins in Canada date back more than a century, has about five retirees for every active worker. Chrysler has about 1.5 retirees for every active worker, while Toyota, which is not unionized, has very few retirees in Canada, where it first set up shop in 1987.

Separately, GM Canada is set to shutter its Oshawa truck plant on Thursday, putting about 2,600 people out of work.

GM Canada currently employs about 10,300 hourly workers but has said that number will fall substantially as planned plant closures take effect.


Tuesday, May 12, 2009

GM may consider
move from RenCen

Robert Snell and David Shepardson / The Detroit News

GM pays $6M a year in property taxes for RenCen. (David Guralnick / The Detroit News)Detroit -- GM President and CEO Fritz Henderson acknowledged Monday that the automaker is open to moving out of its world headquarters along the Detroit River, which could save the company millions in taxes. But he emphasized that General Motors Corp., surviving on $15.4 billion in federal loans, has no plans to leave.

Detroit risks a devastating blow to its tax base and identity if GM leaves the Renaissance Center for the suburbs.

The automaker is under pressure to cut costs by June 1 or face bankruptcy. It is being courted by Warren Mayor James Fouts, who is touting his city's lack of an income tax as one reason to relocate GM's headquarters to the company's Technical Center in the Macomb County community. Fouts plans to make a formal proposal to GM this week.

A move would rob Detroit of about $6 million in annual property taxes when the city is facing an estimated $250 million budget deficit and would further erode the city's tax base if RenCen retailers and nearby businesses falter or flee. A move also would leave the Motor City without a Big Three automaker, with Ford Motor Co. based in Dearborn and Chrysler LLC in Auburn Hills.

Mayor Dave Bing, who was sworn in Monday, called a possible GM move "absolutely horrendous" and said one of his first phone calls would be to Henderson, whom he described as a friend.

Sen. Carl Levin, D-Detroit, told reporters Monday that he had been assured privately by GM that it had no plans to move.

"They told me the door ain't open a crack," Levin said, adding he opposes any relocation.

GM would not respond to Levin's comments.

Detroit Councilwoman Alberta Tinsley-Talabi said it would be "heartbreaking" if GM left the city. "I hope we pull out every stop necessary to make sure that does not occur."

Left midtown for downtown

It was just 13 years ago that GM paid $75 million for the iconic RenCen -- a set of seven interconnected towers that includes a movie theatre, several restaurants and a hotel. The automaker later borrowed $500 million for a major remodelling.

GM's move from its midtown Detroit complex helped fuel a downtown rejuvenation, sparking young professionals to buy lofts and condominiums in renovated warehouses and office buildings and retailers and restaurants to open in and near the RenCen.

The automaker has until June 1 to reach money-saving concessions with the United Auto Workers and bondholders or face a possible Chapter 11 bankruptcy filing. Henderson said again Monday that a bankruptcy filing is probable, but not preferred.
Warren's Fouts raised the relocation issue at a meeting Friday with Ed Montgomery, the White House's point man on autos; Gov. Jennifer Granholm and GM officials. Fouts reminded them that Warren has no city income tax, and suggested that GM could consolidate its operations at its Warren Tech Center.

Wayne County Executive Robert Ficano on Monday said Fouts' proposal to have GM move to Warren is counterproductive. "Now is the not the time to play regional politics," Ficano said. "We need to help the auto industry and our region. It is not time to be divisive."

Henderson told reporters on a conference call Monday there were no plans to move -- but he pointedly did not rule it out.

"We don't have any such plan, but if we did it would be motivated by business rationale, which would be cost, efficiency and speed," he said. "We're looking at frankly everything within our business, but it is not like we have that queued up at the top of our list."

GM was founded in 1908 in Flint, but in 1923 moved into a 15-story, 1.2 million-square-foot midtown Detroit complex designed by Albert Kahn. Nearly 75 years later, GM moved into the RenCen, a complex championed by Henry Ford II and hailed as a symbol of the city's renaissance.

GM had been leasing the RenCen until May 2008, when it paid $626 million to take full ownership of the building. Last fall, it tried to sell the building and lease back office space to raise funds, but a city pension fund balked at a loan request, and other funding was not available.

The White House, which would have the authority to block a move under the terms of GM's federal loans, said it wouldn't intercede.
"That's a decision that is going to be made by whoever the future CEO of GM is, and I think that's where that decision appropriately rests," said White House spokesman Robert Gibbs.

Also Monday, a filing revealed six GM executives disposed of about 203,000 shares of GM stock on Friday and Monday for between $1.45 and $1.61 a share: Vice Chairman Bob Lutz, 81,000 shares; and vice presidents Troy Clarke, 21,400; Gary Cowger, 35,000; Ralph Szygenda, 40,000; Thomas Stephens, 21,000; and Carl Peter-Forster, 5,000 shares.

GM's departure from Detroit would be major blow to the city. Detroit collects more than $5 million in property taxes on the RenCen, plus $1 million in personal property tax.

Detroit Councilwoman Sheila Cockrel called GM part of the fabric of the region and said its departure would be devastating. Cockrel added that in addition to the taxes it receives from GM, the automaker has spent about $45 million to remove the berms that once dominated the Jefferson Avenue side of the RenCen and another $50 million to develop the Detroit RiverWalk.

The specter of a relocated GM headquarters also brings into question the long-term viability of the dozens of businesses occupying the public spaces of the RenCen and adjoining Millender Center. Dwindling numbers of office workers in recent years -- the result of staffing cuts by both GM and other RenCen tenants -- have squeezed the small customer base.

Recent victims of the RenCen's anemic retail environment include high-end men's clothier Brooks Brothers and bookstore Borders Express, which closed last year, citing low sales with little prospect for improvement.

Ed Nakfoor, a retail consultant based in Birmingham, said the RenCen's most recent retail incarnation -- dubbed The Shops at the RenCen -- hasn't solved the building's most basic trouble in supporting retailers and restaurateurs: its isolated location along the riverfront and a mostly daytime base of customers.

"All that's left, with few exceptions, is service businesses and food," Nakfoor said. "Take away the workers, and there won't be anyone left for even those businesses."


As time grows short, GM bankruptcy 'more probable'


With files from The Canadian Press

May 12, 2009

The clock is ticking louder for General Motors Corp. GM-N as the largest U.S. auto maker tries to avert the highest-profile bankruptcy protection yet by coming up with a massive restructuring plan demanded by U.S. and Canadian governments by June 1.

"I certainly think today it's more probable that we would need to resort to a bankruptcy process," Fritz Henderson, GM's chief executive officer, said yesterday.

Multiple tasks need to be completed by the governments' June 1 deadline, Mr. Henderson said during a conference call with reporters, adding that staying out of bankruptcy protection is still a possibility and a filing in the United States would not necessarily mean similar moves in other countries.

His comments came as the auto maker opened talks with the Canadian Auto Workers (CAW) yesterday to reduce hourly labour costs - just two months after the union agreed to concessions such as extending a pay freeze, eliminating one week of paid time off and halting cost-of-living adjustments for retirees.

Also yesterday, federal Industry Minister Tony Clement pointed to Mr. Henderson's statements about not making a debt payment owed by June 1 as a sign bankruptcy protection may be unavoidable.

One option is for GM and its Canadian subsidiary to go into a "surgical" bankruptcy process, under which the company would, in theory, emerge quickly, Mr. Clement said.

Mr. Henderson said yesterday that bankruptcy filings are being evaluated "country by country. It's not a foregone conclusion that a U.S. filing would result in filings in other locations."

Among the tasks GM needs to complete are reaching agreements with the CAW and the United Auto Workers; convincing thousands of unsecured debt holders to swap that debt for equity in a restructured GM; and announcing the closings of several more U.S. plants.

The federal and Ontario governments set a deadline of May 15 for the company to reach a deal with the CAW.

Since the union agreed in March to concessions at GM Canada amounting to about $7 an hour, the CAW conceded even more - cuts worth $240-million annually or about $19 an hour - at Chrysler Canada Inc., as workers faced the prospect of that company's Canadian operations being liquidated in its parent company's Chapter 11 filing in the United States.

The two governments warned the CAW last week that the same threat hangs over General Motors of Canada Ltd. facilities in Oshawa and St. Catharines, Ont.

Mr. Henderson also said two investors are interested in the Hummer brand and several are kicking the tires at its Saturn Corp. unit. Multiple bidders also are vying for German division Adam Opel AG.




Fixing up Ford

If business were politics, Detroit would be the Middle East. So how is an outsider like Alan Mulally finding solutions? And why does he seem to be enjoying himself?

By Alex Taylor III, senior editor
May 11, 2009
mulally.03.jpgFortune Magazine -- Alan Mulally (pictured) is in my face - again. In fact, he has barely left it for the past two hours. He has taken me through the thick loose-leaf binder he assembled for my interview and shown me another five binders filled with interviews he did upon taking the CEO job at Ford, along with research material and personal notes.

He has given me his opinion on all the stories I've written about Ford since he took over and, for good measure, the stories I wrote about Boeing back when he worked there. The man is relentless and demands all my attention. He won't let up until he has turned all my "nos" and "maybes" into "yeses."

Call it the Mulally method: this good-natured but relentless insistence on following what he has determined to be the correct course of action. My immersion is taking place around a conference table in his office on the 12th floor of Ford Motor Co.'s world headquarters in Dearborn, Mich.

Mulally is sitting so close, he could be in my lap. The office decoration is sparse, but Mulally likes the 180-degree view; Ford's historic River Rouge complex is visible on the horizon, and he says he can keep an eye on General Motors and Chrysler from here too. Not that Mulally has much time for window gazing. He's on a crusade to save Ford Motor.

Now he's showing me the corporate mission statement he wrote and had printed on plastic cards and distributed to employees. And here is the hand-drawn diagram he's created just for me (with my name in a cloudburst!) to explain what it all means. In case I hadn't noticed, Mulally says, "I went to a lot of work for this." Trust me, Alan, I noticed.

All this attention is wearing me out - but not Mulally. In the midst of history's second-worst auto depression, Mulally seems to be ... enjoying himself? This is a man who lives less than three miles from his office, arrives there each morning at 5:15 a.m. for a 12-hour workday, and does so with smile. At 63, he still gets enthusiastic about tackling big jobs. "I've always wanted to do something important, and it had to be in a big organization," says Mulally.

You would think once in a lifetime would be enough for the aeronautical engineer in charge of developing the 777 airliner at Boeing. But here he is, doing it all over again: "What gets me really excited is a big thing where a lot of talented, smart people are involved," he says. Mulally once asked his mother, now 90, "Why am I this way?" She replied, "You've always been this way."

Mulally's being "this way" has, at least for now, kept Ford ahead of GM and Chrysler in the fight for survival. Unlike its traditional rivals, Mulally's Ford insists it has enough cash to ride out the economic downturn and does not want the government loans that the other two companies have accepted.

Ford's financial independence is largely due to a new operational discipline that Mulally has installed, as well as some timely strategic moves he initiated. So while GM suffered the ignominy of seeing the Treasury Department's auto task force depose chairman and CEO Rick Wagoner, and Chrysler has declared bankruptcy, Ford stands alone as an independent company and, potentially, a Detroit survivor. "Alan was the right choice [to be CEO], and it gets more right every day," says executive chairman Bill Ford, the man who hired him.

Ford Motor is still losing money, like nearly every other automaker, but it shows signs of recovery. In the U.S. its market share of retail sales to individuals (as opposed to wholesale sales to fleet customers) has gone up in six of the past seven months. It has negotiated four new agreements with the United Auto Workers, bringing its hourly labor cost down from $76 an hour to $55 an hour and, Ford says, promising to make it competitive with Toyota. While GM and Chrysler are hoarding cash, Ford actually laid out $2.4 billion in March to pay down $10.1 billion in long-term debt. Its share price has increased nearly fivefold since hitting a low in November.

'Pretty relentless'

Mulally, who was hired as CEO in September 2006, hasn't engineered, designed, or built any cars. But he has devised a plan that identifies specific goals for the company, created a process that moves it toward those goals, and installed a system to make sure it gets there. Mulally watches all this with intensity - and demands weekly, sometimes daily, updates. "Alan's style is pretty relentless," says chief financial officer Lewis Booth, a 31-year Ford veteran. "He says, 'If this is the reality, what are we going to do about it?' not 'We're going to work our way through it.'"

The Mulally method has pointed Ford to some smart strategic moves. Sensing a recession in 2006, Mulally decided to borrow $23.6 billion against Ford's assets. Piling on more debt wasn't an easy call, but the extra cash meant that Ford could say no to government loans when sales fell apart last year. Mulally is moving to integrate the company globally, despite several failed attempts in the past. In 2010, Ford will be selling small cars in the U.S. that were developed in Europe. Mulally persuaded Bill Ford to dispose of Jaguar and Land Rover and focus its resources on the Ford brand, and by moving quickly he managed to sell them to India's Tata in 2007 when there was still a market for makers of luxury vehicles. He took longer to untangle Volvo from the rest of the company, but he has now put that up for sale too.

Those moves have helped Ford separate from GM and Chrysler, and Mulally is pumped. "As we come through this, we're going to be a turbo machine on the other side," he says. He has promised that Ford's core North American operations, as well as the entire company, will turn profitable by 2011. It had better, because it can't keep losing money indefinitely. Ford recorded a loss of $14.7 billion last year and another $1.4 billion in 2009's first quarter. If the U.S. and the rest of the global economy continue to slump, Ford's survival could be endangered. "The test of Ford's liquidity will be how low vehicle sales go this year, when they recover, and what levels they recover to in 2010 and 2011," writes analyst Shelly Lombard of Gimme Credit.

Besides, Ford hasn't always handled prosperity well. It boomed in the mid-1980s on the strength of the Taurus, pickup trucks, and Lincolns, only to be laid low by the recession of 1990-91. Then it squeezed record profits out of Expeditions, Lincoln Navigators, and pickups - all built on the same platform - in the middle to late 1990s. But a binge of overseas acquisitions, combined with laxity in operations, brought it limping into the 21st century. When Mulally arrived in September 2006, Ford was known mainly for its pickup trucks and the Mustang, and the company was on the verge of collapse. It lost $12.6 billion in 2006 and another $2.7 billion in 2007.

Now, if the economy recovers on schedule, Ford is in a position to thrive. To meet stricter government fuel-economy standards, it is introducing a line of more efficient, smaller-displacement engines with turbocharging, and it will start rolling out electric vehicles in 2010. A healthier Ford will be able to scoop up business from GM and Chrysler as those companies shed brands and models. Goldman Sachs's Patrick Archambault sees Ford picking up 25% of the sales the two companies lose, equivalent to 1.35 points of market share.

So how does an industry outsider like Mulally come into a company as large as Ford - with its 205,000 employees, multiple product lines, and international operations - and straighten it out?

To people like me who follow the industry and find its inner workings infinitely complex, the success of a non-auto person is surprising and, frankly, a little discomfiting. Mulally, after all, was so removed from Detroit ways when Ford hired him that his personal car was a Lexus.

Although there are similarities between building airplanes and making cars - heavy R&D, complex manufacturing, supplier relations, a unionized workforce - there are crucial differences too. Mulally had no experience in mass marketing or dealer relations. Although he has weighed in on model names, brand streamlining (he is allowing Mercury to wither away), and product complexity (he was flabbergasted to hear that engineers had created 132 different center consoles for the Navigator), he leaves product decisions to the professionals.

The story of how Mulally revived Ford's best-known sedan is a quintessential demonstration of the Mulally method - analyzing a situation using accepted facts and then winning over support through persistence.

Here's the story, told by Mulally:

"I arrive here, and the first day I say, 'Let's go look at the product lineup.' And they lay it out, and I said, 'Where's the Taurus?' They said, 'Well, we killed it.' I said, 'What do you mean, you killed it?' 'Well, we made a couple that looked like a football. They didn't sell very well, so we stopped it.' 'You stopped the Taurus?' I said. 'How many billions of dollars does it cost to build brand loyalty around a name?' 'Well, we thought it was so damaged that we named it the Five Hundred.' I said, 'Well, you've got until tomorrow to find a vehicle to put the Taurus name on because that's why I'm here. Then you have two years to make the coolest vehicle that you can possibly make.'?" The 2010 Taurus is arriving on the market this spring, and while it is not as startling as the original 1986 Taurus, it is still pretty cool.

A new corporate culture

It's difficult to imagine the reaction of hard-bitten Ford executives to Mulally's arrival. Sharp elbows, fierce loyalties, and frequent turf battles were hallmarks of Ford's management culture: The tough guys won. Despite nearly 40 years in the commercial airplane business - one of the most international of industries - Mulally looks as if he had just left his home state of Kansas. He dresses like a Boy Scout leader - blue blazer, button-down shirt, kiltie loafers - and his open-mouth smile makes him appear bemused or even a bit puzzled by what goes on around him. That corn-fed sincerity, however, masks confidence, discipline, and a fierce desire to win.

"Communicate, communicate, communicate," Mulally explained in one of his notes to me. "Everyone has to know the plan, its status, and areas that need special attention." For instance, Mulally is determined that Ford reduce its dependence on light trucks as gas becomes more expensive, and he has let the entire organization know it in the bluntest possible language. "Everybody says you can't make money off small cars," he says. "Well, you'd better damn well figure out how to make money, because that's where the world is going."

Mulally's openness seems to have won him support throughout the organization. Says manufacturing boss Joe Hinrichs: "Alan brings infectious energy. This is a person people want to follow." Sometimes Mulally verges on guilelessness. In preparation for our interview, he provided me with a one-page summary of his managerial abilities. Titled "Alan's Leadership," it includes some boilerplate - "proven successful leader ... business acumen and judgment ... steady ... true North" - but leavens it with less quantifiable traits: "expects the very best of himself and others, seeks to understand rather than to be understood." I can't imagine another CEO making such a list public. Bill Ford sums Mulally up this way: "Alan is not a very complicated person. He is very driven."

Arriving at Ford, Mulally boned up on the company like a student cramming for an exam, interviewing dozens of employees, analysts, and consultants, and filling those five binders with his typed notes. The research allowed him to develop a point of view about the auto business that now frames all his decisions. Its pillars draw heavily from his experience at Boeing: Focus on the Ford brand ("nobody buys a house of brands"); compete in every market segment with carefully defined products (small, medium, and large; cars, utilities, and trucks); market fewer nameplates (40 worldwide by 2013, down from 97 worldwide in 2006); and become best in class in quality, fuel efficiency, safety, and value.

Are corporate mission statements so 1990s? Not to Mulally. To let everyone know what he had in mind, Mulally created those plastic cards with four goals on one side ("Expected Behaviours") and a revised definition of the company ("One Ford") on the other. To Mulally, it is like sacred text: "This is me. I wrote it. It's what I believe in. You can't make this shit up."

"I am here to save an American and global icon," Mulally declares. He drives performance the way he did at Boeing, with the Business Plan Review, a meeting with his direct reports, held early every Thursday. "I live for Thursday morning at 8 a.m.," he says. First up are Ford's four profit centers: the Americas, Europe, Asia Pacific, and Ford Credit. Then come presentations from 12 functional areas (from product development and manufacturing to human resources and government relations).

"When I arrived there were six or seven people reporting to Bill Ford, and the IT person wasn't there, the human resources person wasn't there," says Mulally. "So I moved up and included every functional discipline on my team because everybody in this place had to be involved and had to know everything."

The Thursday meetings are held in what's known as the Thunderbird Room, one floor below Mulally's office, around a circular dark-wood table fitted with three pairs of video screens in the center. Eight clocks, one for each Ford time zone, are mounted on the wall. There are seats for 18 executives around the table, with additional ones on the perimeter ("Here's where I sit," says Mulally, indicating a chair: "Pilot's seat").

There are no pre-meetings or briefing books. "They don't bring their big books anymore because I'm not going to grind them with as many questions as I can to humiliate them," Mulally says. "We'll see them next week. We don't take action - I'm going to see you next week." No BlackBerrys are allowed, and no side conversations either - Mulally is insistent about that. "If somebody starts to talk or they don't respect each other, the meeting just stops. They know I've removed vice presidents because they couldn't stop talking because they thought they were so damn important."

Mulally instituted color coding for reports: green for good, yellow for caution, red for problems. Managers coded their operations green at the first couple of meetings to show how well they were doing, but Mulally called them on it. "You guys, you know we lost a few billion dollars last year," he told the group. "Is there anything that's not going well?" After that the process loosened up. Americas boss Mark Fields went first. He admitted that the Ford Edge, due to arrive at dealers, had some technical problems with the rear lift gate and wasn't ready for the start of production. "The whole place was deathly silent," says Mulally. "Then I clapped, and I said, 'Mark, I really appreciate that clear visibility.' And the next week the entire set of charts were all rainbows."

"If something is off-track, we are much better at identifying it and resolving it," says CFO Booth. "Not everything turns to green. If it doesn't, we have to modify the plan."

To monitor operations during the week, Mulally can visit two adjacent rooms whose walls are lined with 280 performance charts, arranged by area of responsibility, with a big picture of the executive in charge in case there are any doubts. Everyone at the Thursday meeting gets wall space. Mulally spends 30 minutes explaining the charts to me, making sure I stand 20 feet away so that I can't see any of the data. The message, though, comes through clearly: Mulally has his finger on every piece of this large and complex company. So does his board of directors; they see a subset of the same data. There are no secrets at Ford anymore. "This is a huge enterprise, and the magic is, everybody knows the plan," says Mulally.

And everyone seems to be onboard. Chief financial officer Don Leclair became a company hero for arranging the $23.6 billion loan in 2006. But other executives found him hard to work with, and Leclair decided to retire. Mulally doesn't want to have to settle arguments between executives, either. "They can either work together or they can come see me," he says. He demonstrates how infrequently that happens by springing up from his chair, dashing into his outer office, and then racing back and sitting down. He reports that nobody is waiting to see him. "They're not here. There's nobody here. There's nobody outside. So they must be working together." I am speechless, but I get the point.

Will it work?

So far, Mulally has been mostly managing the hand dealt him when he arrived. The first new model to bear his fingerprints will be the restyled 2010 Taurus that goes on sale in June. His plan for "One Ford" won't get a real test until next year when two small, fuel-efficient cars, the Fiesta and the Focus, make their way from Europe to the U.S. It remains an open question whether Americans will be willing to pay more for the smaller, higher-content vehicles. They will have to if Mulally is to succeed in reducing Ford's dependence on pickup truck profits.

The biggest unanswered questions about Mulally are how long he will stay at Ford and who will succeed him. Bill Ford has been saying that he hopes Mulally never leaves, but having spent nearly four decades in Seattle, he isn't likely to settle in Dearborn, and in fact, the company spent $344,109 in 2008 flying Mulally and his family between the two cities and elsewhere. Now that Ford is running more smoothly, there shouldn't be a need to look outside again for his successor. If Mulally leaves when he turns 65, the betting is that he will be succeeded by Booth, who is 60. If Mulally stays longer, then 48-year-old Fields would likely be the choice.

Mulally talks as if he has found a home and is doing the work he was always intended to do. "Something about just being mature, being almost 64, is that I've been there. I've been through a lot of cycles. I'm not up and down. I'm rock-solid, no matter where the bad news comes from. I'm steady. And everybody knows why I'm here. It's not a career move. I'm not trying to get ahead. I am not looking for more awards."

At one of his early meetings with employees upon joining Ford in 2006, Mulally was asked whether Ford would be able to remain in business: "Was Ford going to make it?" "I don't know," Mulally replied. "But we have a plan, and the plan says we are going to make it." It was a moment Mulally's mother would have appreciated.

Ford to sell 300 million
common shares

DETROIT, May 11 (Reuters) - Ford Motor Co said on Monday that it would sell 300 million common shares and use part of the proceeds to pay off its healthcare obligations to the United Auto Workers under the terms of a recently concluded deal with the union.

Ford also said it expects to grant to the underwriters -- Citigroup, Goldman Sachs, JPMorgan and Morgan Stanley -- a 30-day option to buy up to 45 million shares of common stock.

Ford shares fell 4.6 percent to $5.80 in after-market trade following the stock offering. At that price, the new shares would raise about $1.7 billion for Ford.
Ford is the only U.S. automaker that has not sought government aid.

Ford's stock offering comes on the heels of a successful debt exchange. Ford shares have had a four-fold rise in price since hitting a low of $1.50 on Feb. 20.
Ford said net proceeds from the stock offering would also be used for general corporate purposes.

"Today's equity offering is another example of the fast, decisive action we are taking as we build momentum on our plan, including further progress on improving our balance sheet," Ford Chief Executive Alan Mulally said in a statement.

Ford is trying to raise capital to fund the Voluntary Employee Beneficiary Association (VEBA), a union-run fund set up for retiree healthcare expenses.
Ford restructured payments into the VEBA, including the option to contribute about half in company stock, to conserve cash. But the plan to make payments in stock requires shareholder approval at Ford's annual meeting this week.

Ford, which posted a net loss of $1.43 billion in the first quarter, has said it believes it has adequate liquidity to operate through the economic downturn without seeking emergency U.S. government loans.


New urgency for survival

Globe & Mail editorial

From Monday's Globe and Mail

May 11, 2009

The federal and Ontario governments are right to have sent General Motors of Canada Ltd. and the Canadian Auto Workers back to the bargaining table, setting Friday as a deadline – two weeks before the restructuring-plan deadline faced by General Motors Corp. in the United States.

The cost-cutting measures that General Motors agreed to in March are not yet equivalent to those arrived at for Ford Motor Co. of Canada Ltd. and Chrysler Canada Inc., in turn with a view to the cost structures of Toyota Motor Manufacturing Inc. and other East-Asian-owned competitors.

The two Canadian governments have cause to be particularly concerned with the pension liabilities of General Motors Canada to current employees, as well as those who have already retired – matters that may well become burdens on the public purse, if the company and the union do not contain and reduce the expectations of current employees forthwith.

The $6-billion (U.S.) loss that General Motors reported last week was not surprising in itself, and the cash outflow, though accelerating, was actually less than the company's own projections, thanks to new cost controls. But the accumulating headlines about losses and bankruptcy-protection prospects all diminish consumer demand for General Motors vehicles, contributing to a viciously downward spiral.

Although, as between the two U.S. parents, General Motors Corp. may well have a stronger basis for survival in underlying value than Chrysler LLC, the short-term course of Chrysler's restructuring is much clearer than with General Motors. The GM bondholders are still far from agreement with the plan favoured by the U.S. government; moreover, it is unknown which, if any, of the stakeholders will exercise the effective control that future success will require.

Chrysler now has the shelter of bankruptcy protection in the U.S., and its subsidiary can forgo the Canadian equivalent, but the labour-cost issue may indeed result in General Motors entering insolvency protection in both countries.

The strenuousness of the Canadian and Ontario governments' position is underlined by the fact that Ken Lewenza, the president of the CAW, who is no pushover, described it on Thursday as an ultimatum, according to which, if the company and the union do not agree to new cost-cutting, there will no more government help and “GM Canada will be liquidated.”

The Harper and McGuinty governments both deserve praise for a decisiveness that is likely to instill a sense of urgency in the company and the union alike.


Letter from Alan Mulally

From: Alan Mulally
To: The Ford Team
Sent: Thu Apr 30 13:07:11 2009

Subject: Changing Competitive Landscape

Today’s announcement that Chrysler is filing for Chapter 11 bankruptcy is an important development during this unprecedented period for the auto industry and the global economy. 

Our teams are monitoring the situation and have been working hard for months to ensure that the external environment and industry restructuring do not slow progress on our Ford transformation plan, which remains solid and unchanged:

  • Aggressively restructure to operate profitably at the current demand and changing model mix
  • Accelerate the development of new products that customers want and value
  • Finance the plan and improve the balance sheet
  • Work together effectively as one team, leveraging Ford’s global assets

Importantly, we share President Obama’s hope that Chrysler’s bankruptcy will be controlled and quick, while we continue planning for all contingencies as a prudent business measure.  Our industry is highly interdependent, and the health of the supply base and dealer network is critical for all automakers.  Ford appreciates that the U.S. Automotive Task Force is focused on the stability of the supply chain and is committed to ensuring that a healthy U.S. auto industry emerges from this difficult economic period

At this time, we do not expect any disruptions to our operations as a result of today’s news.

With the continued industry restructuring in the weeks and months ahead, the most important point for the Ford team is to remain absolutely focused on our plan.  I am more convinced than ever that we have the right plan, the right products and the right ONE Ford team to allow us to operate through the downturn and emerge as a lean, globally integrated automaker poised for profitable growth when the economy rebounds.

As you have seen, people everywhere have noticed that Ford is different, and the real difference is in our plan and our great products – particularly our leadership in quality, fuel efficiency, safety, smart technologies and value.

It is important that each of us understands and communicates the actions we are taking, as well as developments in the external environment.  Please visit www.at.ford.com for up-to-the-minute information, as well as answers to key questions. 

One Team.  One Plan.  One Goal.  One Ford.

Thank you!



Level Playing Field Institute
presentation to Ford US Retirees

(Click Above)

A long road to restructuring
the auto industry

Government must wrestle with a host of competing interests in hopes of emerging with a 'Fitter Group of Three'


Globe and Mail

May 10, 2009

New York-based investment manager, formerly of Goldman Sachs. Each week Mr. Stirton examines a facet of the current economic situation.

It's not just the banks being stress-tested these days. Today's debates in the car sector are as politically heated as they come, and the President's Auto Task Force has its work cut out as it seeks solutions to intractable issues. However the government drives toward a balancing of interests, the U.S. auto industry will be dramatically altered.

The issues can be categorized on two primary planes, each with its own kind of logic: one of urgency, the other of structure.

Because of the urgency surrounding near-term viability, the current debates centre on whether and how Chrysler and General Motors should continue to be saved by the government, and the U.S. bankruptcy court system.

Should Chapter 11 reorganization of the U.S. Bankruptcy Code be sought, or avoided?

How much taxpayer money and public ownership? How many concessions from labour?

What undertakings from management?

Should secured creditors and unsecured creditors share the same burdens?

Beneath these kinds of urgent questions lie some deeper structural issues about the industry that can't sensibly be ignored; indeed they should be straightened out first in policy-makers' minds. These include how many North American players should survive independently and whether we need to be thinking about car makers the way we seem to think about the big banks; that they are worthy of massive taxpayer support because, without them, we are all somehow economically doomed.


Many leading hedge fund investors, representing numerous pensions and endowments, have been short-selling the shares of U.S. auto makers for at least six years, betting against their sustainability. They were instead investing in Toyota, Honda, Hyundai, etc.

The reasons are straightforward and well documented. Over the past 20 years a toxic mix of high costs, lagging quality and dwindling market share dragged the Big Three down.

This would normally lead to elimination of the weaker parties, and this is precisely where we have arrived - companies naturally heading to their respective ends, absent government intervention.

Highly regarded U.S. automotive analyst, Michael Geoghegan, now of Ounavarra Capital LLC, had this way of describing the underlying structural situation, in an interview this week:

"The first and most important issue, by far, is the industry's overcapacity, and U.S. manufacturers' high fixed costs - in significant part due to the United Auto Workers, which is only now starting to come down into a slightly more reasonable zone.

Additionally, you have an unhealthy pricing mechanism between OEMs (original equipment manufacturer) and suppliers; one that deprives suppliers of reasonable profits when volumes are either declining or have been planned by the Big Three at unrealistically high levels. This stifles innovation and keeps suppliers in a constantly distressed state of survival. We are seeing this now, as suppliers are in extreme pain.

Beyond these factors, the U.S. suffers from a dealership infrastructure that has been left over from very different - larger - U.S. market share circumstances. Finally, the industry lives according to a long, three- to four-year product design cycle that makes predicting consumer preferences difficult to achieve with any consistency. It is easy to spend big, and miss big, especially when a financial crisis comes along."

Without government support, Mr. Geoghegan says, the outlook is bleak indeed.

"True bankruptcy of one OEM would have triggered a domino effect of bankruptcy down the line through suppliers, and even the shutdown of the North American plants of foreign OEMs."

As it is, even with the aggressive Washington response, Mr. Geoghegan has this to say about the landscape three or four years hence:

"We would likely have a global industry with four or five major OEMs which would include at least one non-Japanese Asian-based company (either Indian, Chinese, or Korean), one Europe-based company, with the remaining two or three domiciled in the United States and Japan. This implies one, but probably two, of the existing Detroit companies go by the wayside. No major manufacturer would have more than 20 per cent market share.

If the UAW existed in its current form, you would look for the U.S.-based player(s) to have significant government involvement, similar to how the French industry works.

The dealer base would be much smaller. And the supplier base would be much healthier and far less dependent on just one or two U.S. car makers."

So the government has entered the fray, and is seeking to force the industry to get leaner, while simultaneously putting pressure on those who have lent Chrysler and GM money to restructure those debts.

In return for some sacrifices and taxpayer monies, Washington wants unions to own the majority of both, with the government coming in for minority stakes.


To get to this sort of policy outcome, the task force has to wrestle a lot of parties together, whose interests do not always align: taxpayers, auto workers, managements, creditors secured and not, shareholders, dealerships, foreign auto makers, suppliers, and, implicitly, customers.

Thus far, Ford Motor Co. is insisting that it can keep moving forward without a government lifeline. Not so GM and Chrysler. The U.S. and Canadian governments have stepped in with more than $20-billion in actual and committed special loans and assistance, and the total is likely to increase. Despite the money, the process to date shows how difficult it is to find an equation that works for all.

With Chrysler, government pushed hard for a realistic management plan to lower costs and restructure dealers, and brought creditors together to try keep the company out of bankruptcy proceedings.

Significant cost-reduction commitments were made by the company, and by the UAW.

But the approach did not quite work and Chrysler has therefore moved into Chapter 11 proceedings.

For the much larger publicly traded GM, the company and its creditor groups have been given until June 1 to agree on a restructuring plan.

GM has proposed a plan that would give Treasury a majority ownership in the company, workers would have half their health-care benefit obligations erased, and they would own 39 per cent of the company.

But GM bondholders disagree again, and have made a very different counterproposal, one that would give them a majority ownership stake, workers a large minority stake, and the government no equity, but lots of ongoing debt.

A key financial adviser to the GM bondholder committee said last week: "We do not believe that nationalizing one of America's largest and most important companies is the right policy decision for our country."

So a serious rift has been formed. And if the two sides cannot agree, as seems very likely, GM too will head into Chapter 11 in a matter of weeks. But what exactly goes on "there"?


Chapter 11 is a section of the U.S. Bankruptcy Code, which permits "reorganization," in which equity owners of the company are typically wiped out and a court-appointed trustee takes over the debtor company, with the interest of creditors governing the ship. The idea is to get the company reorganized, so it will re-emerge and keep operating. It can take months or years for a court-confirmed plan of reorganization to be executed.

There are serious doubts about how fast the Chrysler restructuring can occur notwithstanding the task force's expressed wish for 30 to 60 days.

And any GM plan will be longer given the much larger scale of the issues.

But in the end, the assumption seems to be that government wants a "Fitter Group of Three" to emerge, under the public's guiding hand. Washington wants to avoid a mass-destruction scenario, so it is operating at the centre of the action, with chequebooks and persuasion.

Like it or not, we are apt to be here for a long period: with restructuring car makers, working through the court system, propped up by taxpayers' earnings.

Government is now an integral owner of the U.S. car industry, just as it is of the U.S. banking sector.

Cars and credit, Wall Street and Main Street, have been taking meaningful steps closer together the past few months. We'll see how long that lasts.


Restructured GM to build
more cars overseas

When plan completed, number of new cars built abroad will roughly double

May 8, 2009

By Peter Whoriskey

WASHINGTON - The U.S. government is pouring billions into General Motors in hopes of reviving the domestic economy, but when the automaker completes its restructuring plan, many of the company's new jobs will be filled by workers overseas.

According to an outline the company has been sharing privately with Washington legislators, the number of cars that GM sells in the United States and builds in Mexico, China and South Korea will roughly double.

The proportion of GM cars sold domestically and manufactured in those low-wage countries will rise from 15 percent to 23 percent over the next five years, according to the figures contained in a 12-page presentation offered to lawmakers in response to their questions about overseas production.

As a result, the long-simmering argument over U.S. manufacturers expanding production overseas -- normally arising between unions and private companies -- is about to engage the Obama administration.

Essentially in control of the company, the president's autos task force faces an awkward choice: It can either require General Motors to keep more jobs at home, potentially raising labor costs at a company already beset with financial woes, or it can risk political fury by allowing the automaker to expand operations at lower-cost manufacturing locations.

"It's an almost impossible dilemma," said former labor secretary Robert B. Reich, now a professor at the University of California-Berkeley. "GM is a global company -- so for that matter is AIG and the biggest Wall Street banks. That means that bailing them out doesn't necessarily redound to the benefit of the U.S. or American workers.

"More significantly, it raises fundamental questions about the purpose of bailing out these big companies. If GM is going to do more of its production overseas, then why exactly are we saving GM?"

The administration has aroused similar complaints by shepherding a merger between Chrysler and Italian automaker Fiat. But it has extracted a promise from Fiat that it will build small cars in the United States.

The complaints about GM's operations portend a potentially larger argument, a political dispute led in part by the United Auto Workers.

"The bottom line is GM would rather pay $2 an hour -- and it's a slippery slope downward," said Alan Reuther, the UAW's legislative director. "If GM is going to be getting government assistance, they ought to be maintaining their manufacturing footprint in the U.S. rather than going off to China, Mexico and South Korea."

Labor costs in those countries are far lower. While paying a U.S. autoworker with benefits costs about $54 an hour, a South Korean worker earns about $22 an hour, a Mexican worker earns less than $10 an hour and some Chinese workers can earn as little as $3 an hour, industry sources said.

On Tuesday and Wednesday, GM chief executive Fritz Henderson met with legislators and sought to ease their concerns over the overseas operations.

He emphasized that the company, which is shuttering factories at home, is also canceling projects in Mexico, Russia and India.

He also assured legislators that none of the figures are final, and that negotiations with the union are ongoing.

"We continue to work closely with GM, UAW, and all the stakeholders to further refine and develop GM's plan," a Treasury spokesman said.

The U.S. government has loaned GM $15.4 billion. But billions more are expected to be invested, and under the current plan, it will be the majority owner of the company.

The company forecasts that between 2010 and 2014, as the recession recedes, its U.S. sales will rise from 2.4 million to 3.1 million.

Most of that growth -- about two-thirds of it -- will occur in the United States. But about one-third of that growth will come from other countries, mostly Mexico and South Korea.

Those proportions roughly reflect how GM builds the cars it sells in the United States today -- about two-thirds come from the United States and one-third from other countries.

According to the figures shared with lawmakers, the percentage of GM's U.S. sales of cars built in the United States dips from 67 percent in 2009 to 61 percent in 2012. Yet the company projects that by 2014 the percentage will rebound to 66 percent.

Under the viability plan, "the U.S. percentage stays roughly the same," Henderson said in an interview last week.

But the union and some legislators object that the company's U.S.-funded revival should not help pay for expanding foreign operations. Moreover, they believe that planned cuts in Canadian production -- down 23 percent -- will have direct effects on U.S. jobs because the U.S. and Canadian auto industries are so intertwined.

"If you are shutting down plants in this country, U.S. tax dollars should not go for building plants in other countries," said Sen. Sherrod Brown (D-Ohio), who was among those who met with Henderson.

But company officials and industry analysts have long argued that, even putting aside the issue of labor costs, it makes logistical sense to build some cars in other countries, even if they are destined for sale in the United States.

Take, for example, the Chevrolet Spark, a tiny car that GM sells in South Korea and elsewhere in Asia. In the next few years, the company plans to send some of those cars -- which are built in Changwon -- to the United States for sale.

But since only about 5 percent of the car's market will be in the United States, the manufacturing will remain in South Korea.

Analysts who study the auto companies and their global operation warn against allowing political passions to obstruct GM's efficiency.

"If we start making political decisions with the auto industry, we're going to be in tremendous trouble," said Michael Robinet, vice president of global vehicle forecasts at CSM Worldwide.

Chrysler's first week rough

Bankrupt carmaker moves from plans to shut plants to deadline effort to review bids

David Shepardson / Detroit News Washington Bureau

New York -- The first week of Chrysler LLC's stay in bankruptcy was messier, costlier and more disruptive than the company or the Obama administration disclosed in the run-up to last Thursday's filing.

Now, it faces a sprint to review bids, win approval of its sale at a May 27 hearing and then complete the deal by early July.

That won't be easy, if the first week is any indication.

Chrysler revealed its plans to close six plants -- including three in Michigan -- by the end of next year. It will keep all of its plants shuttered for up to nine weeks during its stay in bankruptcy and furlough all salaried workers for two weeks.

The Auburn Hills automaker also admitted it is unlikely to repay $7 billion in U.S. government loans, while some retirees said some checks were cancelled.

The bankruptcy also threw into serious question the fate of the Chrysler Financial lending arm, which has 3,500 employees, including 650 at its Farmington Hills headquarters. The Treasury Department announced it would pump money into GMAC to assume lending to dealers and customers for Chrysler Financial.

But Chrysler scored two big legal victories in the opening days of its bankruptcy stay that sharply boosted its chances of emerging by late June. First, federal bankruptcy judge Arthur Gonzalez approved its plan to sell itself to the highest bidder -- almost certainly the U.S. Treasury Department.

It also convinced Gonzalez to require the creditors that won't take the deal offered them by Chrysler to make their identities public -- a move that scared away many would-be objectors, leaving dissident creditors holding just $295 million -- or 4 percent of Chrysler's first lien-debt. Those objections are the main obstacle to a quick exit and tie-up with Italian automaker Fiat SpA.

The bidding process Gonzalez approved throws hurdles in the path of other potential bidders: They must decide by May 20 and put up a cash deposit of 10 percent of the bid -- at least $200 million.

In bankruptcy court documents and testimony this week, some of the aches and pains of a Chrysler bankruptcy emerged.

• While Chrysler said it would honour its pension obligations, about 1,200 retirees who receive large pensions under the company's Supplemental Employee Retirement Program saw those supplemental checks cut off. They now are unsecured creditors -- like more than 100,000 other creditors -- and it is unclear how much, if anything, they will receive.

• Several plants closed the day the company filed for bankruptcy because parts suppliers stopped shipments.

• Chrysler didn't disclose until after the deal was ratified that it planned to close six more U.S. auto plants, including the Sterling Heights Assembly Plant, by the end of next year.

Costs to taxpayers also appear to be growing. Last week, President Obama defended the decision to force Chrysler into bankruptcy, emphasizing that taxpayers would be repaid, and noting the government would be "making additional loans that are consistent with what I outlined last month."

"As part of their agreement, every dime of new taxpayer money will be repaid before Fiat can take a majority ownership stake in Chrysler," Obama said.

That's technically accurate -- to a point. While Fiat must repay the $6 billion in "exit financing" loans that the U.S. and Canadian governments will give if the company emerges from court oversight, that does not include $4.5 billion in debtor-in-possession financing Gonzalez approved Monday. Chrysler disclosed this week it is "highly unlikely" to repay any of the $4.5 billion loan.

On Thursday, the administration reduced the amount of debtor-in-possession financing it would make to Chrysler by $300 million, from $3.34 billion to $3.04 billion, saying Chrysler had larger cash reserves than previously indicated.

The president also didn't disclose that the first $4 billion that Chrysler received from the Bush administration would not be repaid -- so U.S. taxpayers could be out $7.04 billion.

Lynn LoPucki, a bankruptcy expert at UCLA Law school, said the administration has been increasingly moving away from demanding full repayment of Chrysler loans. He said he is confident the sale will be approved quickly.

"They don't think Chrysler has the money," LoPucki said.

Among developments yet to come in the Chrysler drama:

• A decision by the Obama auto task force on how much more it plans to loan GMAC to take over lending to dealers and customers from Chrysler Financial. It already has gotten $6 billion.

• An airing of precisely what "bad" assets Chrysler will leave behind in bankruptcy court, to be liquidated.

• The number and names of terminated Chrysler dealerships.


Ottawa to GM: Cut
costs or be cut off

Federal, provincial governments push union for concessions, setting up fierce battle over pensions



From Friday's Globe and Mail

May 8, 2009

The federal and Ontario governments have ordered the Canadian Auto Workers to make further cuts in labour costs at General Motors of Canada Ltd. – including addressing the deficit in the company's pension funds – or they will cut off financial support, leaving few options but liquidation.

The government ultimatum was made at a meeting with the company and the union on Wednesday and sets up what will be a fierce battle over how to repair a pension mess that the CAW insisted yesterday cannot be fixed at the bargaining table.

GM Canada's pension plans had a shortfall of $4.5-billion as of the most recent public information in November, 2007, but that has almost certainly ballooned to $6-billion or more based on declines in stock markets last year.

“If we don't get a deal, the governments will provide no financial support and GM Canada will be liquidated,” CAW president Ken Lewenza told reporters yesterday. “This is an unbelievable situation.”

The governments set a deadline of May 15 for a labour agreement.

Government officials asked GM Canada during the meeting to redo its restructuring plan, based on what was achieved in the Chrysler LLC agreement with the CAW, said an Ontario government source familiar with the talks. GM has been asked to achieve the Toyota Motor Corp. benchmark of $49 an hour for all-in labour costs, he said.

Mr. Lewenza spoke on a day when General Motors Corp. reported a first-quarter loss of $6-billion (U.S.), three weeks before a June 1 deadline set by Washington, Ottawa and Ontario for the company and its Canadian unit to come up with acceptable restructuring plans.

“Everyone seems to believe this will involve a Chapter 11 restructuring in the United States and probably a [Companies' Creditors Arrangement Act] filing in Canada,” he said. “We don't know for sure, but it seems likely.”

In the United States, GM must also reach a cost-cutting agreement with the United Auto Workers union and scores of debt holders to avoid bankruptcy protection.

However, sources say the company could secure U.S. government assistance to remain in operation, even through bankruptcy protection, but be forced to shutter its Canadian facilities if it can't reach an acceptable deal here.

The pension issue will be turned over to a committee of representatives from the union, the company and the two governments, though Ottawa has insisted that the Ontario government is responsible for GM Canada's pension issue.

The solution will likely involve concessions by existing CAW workers at GM, who will be forced to accept pension payments lower than those received by current retirees. In addition, a solution to the shortfall would also likely require financial contributions by government and the company itself.

Pension benefits for the company's 25,000 retirees are sacred, Mr. Lewenza said.

“Over our dead body will the CAW throw 25,000 retirees overboard,” he vowed.

The union and GM had reached an agreement just two months ago that both parties claimed made the Canadian operations competitive with Japanese-owned rivals.

But federal Industry Minister Tony Clement said that deal did not provide enough savings to make GM viable in the long run and ordered the two sides back to the table.

Ontario Premier Dalton McGuinty said yesterday that the governments want auto workers to agree to make concessions with GM Canada that are similar to those they made with Chrysler Canada. “I would ask folks to keep in mind what happened in the case of Chrysler,” he told reporters.

But the two auto makers are in dramatically different situations, CAW officials said, pointing to the gaping pension hole at GM and its higher ratio of retirees to active workers. The ratio is about five retirees per active worker at GM, compared with about 1.5 to one at Chrysler Canada.

The pension deficit at Chrysler Canada was settled by the union agreeing to give the company 10 years to make up its pension shortfall, compared with the current requirement of five years.

That can't be done at GM Canada because it is still operating under Ontario legislation passed in the early 1990s that allowed it to contribute to the province's pension benefits guarantee fund instead of making annual payments to keep GM's plans solvent.

Mr. McGuinty warned, however, that his government “cannot come to the table on behalf of Canadian taxpayers unless there are significant contributions made by everybody else.”

The Canadian governments could be asked to take equity in General Motors, even though they did not enter the bailout talks looking to become shareholders of an auto company, Mr. McGuinty said.

GM Canada has not said publicly how much financial help it is seeking from the two governments, which lent it $500-million (Canadian) this week.

The latest GM request to the U.S. government is for as much as $30-billion (U.S.). A Canadian contribution would be $6-billion based on the commitment made by Mr. McGuinty and Prime Minister Stephen Harper in December that Canada would provide 20 per cent of the money the beleaguered auto makers need in return for a commitment that the companies maintain 20 per cent of production here.


GM bankruptcy likely: CAW

Ottawa, Queen's Park order union to slash costs or
aid will be denied and GM will face liquidation

May 08, 2009 04:30 AM
Tony Van Alphen
Business Reporter

General Motors will probably seek bankruptcy court protection in Canada and the U.S. in its fight for survival, a top union leader warns.

Ken Lewenza, president of the Canadian Auto Workers union, said yesterday the company's worsening financial condition is increasing the likelihood of court protection from creditors in both countries.

"It is very clear General Motors is in serious trouble," he said.

His remarks came after parent GM Corp. reported it lost $6 billion (U.S.), the equivalent of $7 billion Canadian, in the first quarter, as revenues tumbled 47 per cent due to consumers' fears that the company could collapse and stop honouring warranties. GM, which doesn't break out the financial performance of its Canadian arm, has lost $82 billion since 2004.

Lewenza said the federal and Ontario governments have issued an ultimatum to the union that if it doesn't agree to significant concessions within the next week, they won't provide billions of dollars in crucial public aid and the company will face liquidation.

"If we don't get a deal, the governments will provide no financing and GM Canada will be liquidated," he said. "Plants will close, jobs will be gone, retiree benefits are gone and the pensions are sacrificed. This is an unbelievable situation."

GM must submit new restructuring plans to Ottawa and the province by June 1 to qualify for more than $8 billion (Canadian). It has already received $500 million.

That sets up the prospect of more than 9,000 GM workers voting on concessions for the third time in a year to help offset the company's plummeting fortunes.

Lewenza noted that if GM moves to bankruptcy court proceedings, the union will gain assurances that workers won't face additional concessions beyond the cuts from bargaining during the next week.

The latest negotiations at GM follow a recent concession deal at Chrysler that saw workers vote overwhelmingly to accept about $240 million in labour cost savings annually to save plants and jobs.

That hasn't led to much stability at Chrysler, which filed for bankruptcy court protection in the U.S., despite deals with workers and most stakeholders.

That triggered a halt in production at almost all of the company's North American operations, including two assembly plants in Canada.

Meanwhile, CAW leaders expressed frustration at government demands for both sides to deal with a massive deficit of more than $4 billion in GM's pension plan and the formation of a retiree health-care trust during the negotiations. Talks will start Sunday or Monday.

"It's absolutely impossible that we can do this at the bargaining table," Lewenza said.

CAW officials repeated that the Ontario government needs to accept responsibility for allowing GM to not properly fund the pension plan and said Ottawa must make tax changes so a health-care trust can work.

They also said it is difficult to compete on labour costs with Toyota Canada when the governments include pension expenses. Toyota has few pensioners; Chrysler has a ratio of 1.5 retirees for every active worker, while GM will have a five-to-one ratio within the next year.

"We can become fully competitive if we threw 25,000 (GM) retirees overboard," union economist Jim Stanford said. "Is that what the government wants when it tells us to equalize our costs?"

Lewenza added he finds it incredible that the governments want more concessions at GM when the company has already indicated it is satisfied with cuts that will make it competitive with rivals in the U.S.

But Michael Bryant, Ontario's minister of economic development and trade, eased retirees' concerns by saying the cost cuts won't affect retiree pensions, even in bankruptcy court proceedings.

"No Canadian judge has ever touched a retiree's pension in the history of CCAA (the Companies' Creditors Arrangement Act)," he said.

In Ottawa, NDP MP Malcolm Allen (Welland) accused Industry Minister Tony Clement of asking auto workers to sacrifice more than other stakeholders.

Clement replied in the House of Commons that everyone must co-operate in the restructuring.

"What will not work is if the union heads do not want to be part of the solution," Clement added. "Then the choice of the workers is to have a job that is cost-competitive or to have no job at all."

With files from Les Whittington and Madhavi Acharya-Tom Yew




Globe and Mail Update

May 7, 2009

The leader of GM Canada's largest union says a filing by the car maker for court protection from creditors is likely.

The federal and Ontario governments have ordered the Canadian Auto Workers and General Motors of Canada Ltd. [GM-N] to slash hourly labour costs by May 15.

CAW president Ken Lewenza says the company faces liquidation if a cost-saving agreement is not reached.

“This is an unbelievable situation,” says Mr. Lewenza, who believes the car maker may have to file for Chapter 11 and CCAA creditor protection.

The union and the auto maker will head back to the table just two months after signing a new labour agreement that GM chief executive officer Fritz Henderson said made the auto maker's Canadian operations competitive with offshore-based car companies in North America.

Since the CAW-GM deal that was approved in March, the union reached a new agreement with Chrysler Canada Inc. that trims labour costs by about $12 an hour more than the GM agreement.

The CAW-Chrysler deal cut costs for the auto maker by $240-million annually.

GM Canada never revealed how much its hourly labour costs were reduced by the March deal, but said the agreement narrowed the competitive gap with offshore-based companies and reduced legacy costs.

Ontario Premier Dalton McGuinty said the Canadian governments want auto workers to agree to make concessions with GM Canada that are similar to those they made with Chrysler Canada.

“I would ask folks to keep in mind what happened in the case of Chrysler,” Mr. McGuinty told reporters.

Based on his conversations with Mr. Lewenza in recent days and with an executive in GM's global operations on Wednesday, Mr. McGuinty said he expects “a bit of pushing to and fro” between both sides, but he said there is plenty of goodwill.

“We cannot come to the table on behalf of Canadian taxpayers unless there are significant contributions made by everybody else,” he said. “I'm convinced that can be done.”

The Canadian governments could be asked to take equity in General Motors, even though they did not enter into the bailout talks looking to become shareholders of an auto company, Mr. McGuinty said.

But as part of the negotiations, the governments may have to take equity in GM, as they did in Chrysler, he said.

“Obviously, we're going to take a serious look at that.”

Ontario Finance Minister Dwight Duncan said federal and provincial government officials met with GM Canada and the CAW on Wednesday to set down conditions in return for providing loans.

“People raised eyebrows at the thought that Chrysler may not pay back loans,” Mr. Duncan told reporters on Thursday. “This is a very serious amount of money that's involved here. The government of the United States has called for a full viability plan.”



UAW, General Motors
headed for a showdown

Thursday, May 7, 2009

Daniel Howes

This is about to turn real ugly.

The bankruptcy of Chrysler LLC -- promised to be "speedy" -- is shaping up to be anything but. The umpteenth restructuring of General Motors Corp. is giving new meaning to the word "draconian," mostly because the time for negotiation and cajoling is being replaced with the hammer -- take the deal or we'll see you in court.

Which is why a United Auto Workers vice president used an upbeat event at a rival plant Wednesday to send a clear message to the General, one day before last-ditch bargaining is scheduled to go into high gear: Avoiding bankruptcy may be preferable, but not if it means complicity in using taxpayer dollars to benefit foreign autoworkers and gut the union.

"There are some today that don't understand what the Ford leadership understands," UAW Vice President Bob King, head of the union's Ford Department, told an audience that included Ford Chairman Bill Ford Jr., CEO Alan Mulally and Gov. Jennifer Granholm. "There are some companies who want to sell products here that they're not going to build here.

"There are some restructuring plans that are saying they want to take the jobs out of America. And they want to build ... in Mexico rather than build in the United States of America." Then, his voice rising in expectation of a unanimous response from gathered members of UAW Local 900, King asked:

"If you're going to take American tax dollars -- our tax dollars -- where do you build?"

In these times, especially, the politically correct question answers itself: "America." This in front of the building-Ford-Fusions-in-Mexico execs, now that King clearly has established the Blue Oval as the standard by which the rest of Detroit Auto would be judged.

Yes, this is about to get real ugly, an archly political confrontation of organized labor and the depressing reality of GM's business prospects that will, before it's over, force the likes of Granholm, members of Michigan's congressional delegation and lots more to choose sides.

The problem here is that King, a likely favourite to succeed UAW President Ron Gettelfinger, implies the antiquated belief that all three of Detroit's automakers are equal, as if "pattern bargaining" and an alleged market parity between GM, Ford and Chrysler exist in the real world.

They don't, haven't for a long time and few know that better than the UAW's leadership. If parity existed, Chrysler wouldn't be bankrupt, GM wouldn't be on the way out and Ford wouldn't be sitting on the cash pile (and an intensely focused business plan) that is keeping it from joining the other two.

"The General Motors plan is not acceptable to the American public," King continued, assuming that who builds what where is as important in Los Angeles or Atlanta as it is in Detroit. "I don't think the American public will support their tax dollars being used to close more plants -- and then to openly say we're going to bring product in from China, Korea and Mexico."

Building cars in foreign markets to sell in foreign markets is acceptable, he said, conveniently downplaying the Mexican parentage of the Fusion and its siblings from Lincoln and Mercury. Or the fact that its GM counterpart, the Chevy Malibu, issues from UAW plants.

What we're witnessing here isn't so much a paroxysm of nationalistic fervour, because driving that line in the North American auto business means little if the automakers end up in liquidation. No, these are the opening salvoes in a political battle to win hearts and minds of competing constituencies.

First, to show union members that their leaders are fighting the good fight against punishing odds, a horrific economy, a sceptical Congress and a critical public. And, second, to show GM insiders that the union knows it has five days, starting today, to influence the "manufacturing footprint" (i.e., plant closing) plan scheduled to be presented to GM's North American Strategy Board on May 12.

Not much time. For years, UAW-Big Three negotiations have been the three equal parts of economics, politics and theatre. Now, there's a fourth component -- survival. It's fuelled by theatre and shaped by politics, but it will be decided by the numbers, one way or another.


GM reports $6B Q1 loss
General Motors Corp. headquarters in Detroit

May 07, 2009 07:26 AM

Reuters News Agency

DETROIT – General Motors Corp said it burned through $10.2 billion (dollar figures U.S.) in the first quarter, operating under a federal bailout, as auto sales fell across the globe and it scrambled to cut costs.

The automaker on Thursday posted a quarterly net loss of $6 billion, compared with a loss of $3.3 billion a year earlier.

Revenue dropped by almost half to $22.4 billion as sales plunged in North America and fell in Europe, Asia and Latin America.

Excluding $73 million of one-time net charges, GM posted a loss of $9.66 per share. That was within the wide range of analysts' expectations but narrower than the average forecast of a loss per share of $11.05 as tracked by Reuters Estimates.

GM is facing a government-imposed June 1 deadline to reach agreements to overhaul its operations and cut more than $40 billion in debt. The company has taken $15.4 billion in emergency loans from the U.S. Treasury to date.

The first quarter was also marked by GM's failure to win new federal backing for a turnaround plan that the U.S. autos task force concluded was too slow-moving and too cautious to succeed.

The Obama administration ousted Rick Wagoner as GM chief executive at the end of the first quarter.

Creditors have been looking beyond GM's results, focusing instead on whether it succeeds in winning debt concessions from its bondholders and the United Auto Workers union, analysts said.

The automaker said Thursday that it had not yet reached the deal it needs with the UAW. It also said the Treasury had not yet agreed to convert half of the loans it has extended to GM into stock in a restructured company.


Ford plans to build Focus
small-car line

(Canada not in the Picture)

May 6 (Reuters) - Ford Motor Co plans to build a Ford Focus small-car line that will be produced in its Michigan Truck plant, as well as in Asia and Europe, CEO Alan Mulally told the Wall Street Journal.

With reduced labor costs from new union work rules and global production, the Focus in the U.S. will be "profitable from initial production" starting next year, Mulally told the paper.

Ford will spend $550 million to convert the Michigan plant to produce smaller cars and will reap $160 million in local and state tax incentives. The new model could also be built at Ford's Louisville, Kentucky plant.

Ford did not disclose where in Europe or Asia the new Focus will be built, the paper said.


Ford truck plant to
make electric cars

The Associated Press

May 6, 2009 at 9:04 AM EDT

WAYNE, MICH. — Ford Motor Co. says it will spend $550-million (U.S.) to convert its old Michigan Truck Plant into a facility that will build small compact modern cars.

The retooled facility, which once built sport utility vehicles like the Lincoln Navigator, will now build Ford's next-generation Focus, expected to roll off the line next year.

The plant will also build a new battery-electric version of the Focus for the North American market. That vehicle is expected to debut in 2011.

The struggling auto maker says roughly 3,200 jobs will be created in Michigan because of the plant conversion.

The majority of Ford's investment will be spent on manufacturing at the site and the remainder on engineering and launch costs.

Ford says it will also consolidate operations at its Wayne Assembly plant and transform two other truck and SUV plants — the Cuautitlan Assembly in Mexico and the Louisville Assembly in Kentucky — as part of the retooling.

“We're changing from a company focused mainly on trucks and SUVs to a company with a balanced product lineup that includes even more high-quality, fuel-efficient small cars, hybrids and all-electric vehicles,” said Mark Fields, Ford's president of the Americas, in a statement.

The Dearborn, Mich.-based auto maker will also build the same Focus it is offering its North American customers in Europe and Asia.

In addition to Ford's zero-emission Focus battery-electric car, the company is working on several other product plans. The company is working with Smith Electric to sell a battery electric commercial vehicle for North America in 2010. It also plans to introduce in 2012 a next-generation hybrid vehicle and a plug-in hybrid vehicle.

Michigan, Wayne county, and the city of Wayne have contributed more than $160-million in tax credits and grants to support Ford's expansion.



We face small pensions unless
savings boosted, economist says


Globe and Mail

May 6, 2009 at 3:24 AM EDT

OTTAWA — Canadians should be forced to save more for retirement because their RRSPs and private-sector pension plans are in tatters, a leading economist said yesterday.

Many Canadians are unaware of how little their retirement investments will yield, so the Harper government should consider a new mandatory savings plan that goes beyond the modest payouts of the Canada Pension Plan, Toronto Dominion chief economist Don Drummond said.

"We're going to have a lot of Canadians with shattered dreams when they come to their retirement. They're going to suffer an unexpected drop in their income," he warned.

The impeccably well-connected Mr. Drummond is a former senior official in the federal Finance Department who's often consulted by governments and political parties. When he speaks, politicians tend to listen.

"We have to have a big think in Canada: Do we need a larger state presence in the pension business?"

The problem for Canadians is that lucrative private-sector pension plans are dwindling, and many investors have failed to sock away sufficient funds in registered retirement savings.

The Canada Pension Plan, to which many workers contribute, does not offer much. It's designed to provide only 25 per cent of the pre-retirement income on which contributions were based.

"People have no idea what stock of savings they need in order to sustain a certain income flow in retirement," Mr. Drummond said. Reform options could include enriching incentives for private-sector savings or increasing contributions to CPP so that it yields more for retirees. The latter could be a mandatory measure.

Mr. Drummond acknowledged that hiking CPP premiums could be politically controversial because voters might consider it a tax hike rather than a mandatory contribution. "It isn't obvious this is a winner politically because somebody's got to pay for it."

The traditional defined benefit pension plan - where employees are guaranteed a certain payout upon retirement - is dwindling in the private sector as companies cut costs. "They're going to be very soon restricted to civil servants and relatively few others," Mr. Drummond said.

Even defined contribution plans - where companies contribute but returns depend on the success of investments - are on the wane, he said.

"If you look at the growth rate for jobs that have benefits and those that don't ... there's about triple the growth rate for jobs without benefits over the last 10 years."

He said the investment outlook suggests far more modest returns in the years ahead. "It's going to take a long time to make up for the losses of the last two years."

Canadian Auto Workers union economist Jim Stanford said he'd like to see contributions to CPP increased so the plan can provide more retirement income for seniors.

"We need a whole national debate about how we pay for a decent standard of living for our retirees and that is going to have to involve less reliance on the stock market," Mr. Stanford said.

"It's the big deficits in big defined benefit plans that get the headlines, but there's a hidden crisis ... that's just as bad, or worse, in the RRSP system."

Big stock-market declines in 2008 and early 2009 have slashed the value of registered retirement savings plans.

But Mr. Drummond noted that many Canadians had saved relatively little in RRSPs even before the markets plunged, saying this reflects a failure of the RRSP system to get middle- and upper middle-income Canadians to put away sufficient cash.

"After 50 years of promoting RRSPs, we have to conclude they haven't turned out as envisioned. I don't know why we don't just recognize this and make the needed adjustments to the retirement income system," he said.

Liberal finance critic John McCallum said the lack of retirement savings for middle-income earners in the private sector is a "major issue." But he said an improved system doesn't necessarily require mandatory contribution hikes to CPP. An alternative could be a voluntary system where Canadians who want higher payouts can contribute more.

Mayor Orders Lawmakers
to Buy American

Here’s another fine example of a true leader holding the position of Mayor and isn’t shameful that others holding elected office such as him can’t do the same. This attitude and fortitude of this political leader is trying to do his part in saving the auto industry. It'd be nice to see some of our Canadian Polticians take a stand like this.


Buy-American rules shutting
out Canadians

Growing protectionism in U.S. spells disaster, manufacturers fear

May 06, 2009
Les Whittington

OTTAWA – A Toronto company that has been exporting pipe to the United States market for 60 years recently landed a contract to supply plastic piping for a new health-care centre at the Camp Pendleton Marine base in California.

But the piping is now being ripped out of the ground. Why? Because the pipes are branded with the words Made in Canada.

It's just an early example of what some Canadians fear will be a plague of protectionist measures in the U.S. that could result in the loss of billions of dollars in sales and thousands of manufacturing jobs in Ontario and other provinces.

Despite reassurances by President Barack Obama, Buy America provisions that require the use of U.S.-made products are spreading and threatening to keep Canada's suppliers from participating in the massive rebuilding project now under way south of the border, according to business experts.

"Camp Pendleton is a perfect example of how an excellent product, a brand new product, is going to be pulled out of the ground and be replaced by an American-made product," said Veso Sobot, spokesperson for IPEX Inc., the Don Mills-based company that sold the pipe to the California Marine installation.

"We've never seen such a wave of protectionism as at this moment," he said, adding that he's also being pressed by project organizers in other states to certify that his pipes are all made in the U.S. – which they aren't.

"Many Canadians believe the issue" of U.S. protectionism "was settled when (Obama) came into Canada back in February and made assurances that all is well. But it's not," Sobot said at a news conference organized by Canadian Manufacturers & Exporters (CME).

"This will lead to lost Canadian jobs if it's not dealt with quickly."

John Hayward, who runs an industrial equipment firm in Halton Hills, said his sales of pumps and other equipment in the U.S. market are in jeopardy for the first time in more than 30 years.

"Literally overnight, I'm being required to certify that we make them in the U.S.," he said, adding that his company may be forced to shift some of its production to New York state.

Meanwhile, Hayward said, he's bidding on a contract in Burlington and his main competitor is a company from Utah that has no restrictions at all when it comes to landing sales in Canada.

"What's really frustrating is that Canada and the U.S. are such large trading partners – we're the largest export market by far for the Americans – and for them to all of a sudden be putting these kind of bid restrictions on us should be a huge concern to all Canadian industry," said Hayward, adding the outlook is "very disturbing."

The stakes for Canada's economy are huge. More than $90 billion (U.S.) has been earmarked for spending on roads, bridges and other infrastructure in the United States as part of Obama's $787 billion stimulus package.

After an international outcry over the stipulation that these projects must contain only U.S.-made steel and other manufactured goods, the president emphasized to Canadians and to other countries that the stimulus spending must comply with NAFTA rules, which ban protectionist practices such as Buy America provisions.

But the problem is that much of the $90 billion is being spent at the city and state level where NAFTA provisions do not override the Buy America clause attached to the appropriation. Canadian firms, which might normally land between $5 billion and $10 billion worth of those contracts, may now find it very difficult to bid successfully, says CME president Jayson Myers.

What's more, Canadians could end up facing the same discriminatory restrictions on many of the multi-billion dollar environmental, public works, health-care and energy projects envisioned by Obama, Myers said.

The CME has compiled a list of bills before Congress with protectionist clauses. "We anticipate that that list will grow longer," CME's Washington-based adviser Birgit Matthiesen said. "We hope it doesn't. We anticipate that it does."


Chrysler Canada assembly
plants will remain idle

Sites that employ 7,500 shuttered while parent completes bankruptcy proceeding in the U.S.

May 05, 2009 04:30 AM
Tony Van Alphen
Business Reporter

Chrysler Canada Inc.'s two assembly plants probably won't resume production for four to six weeks while the company's parent completes a restructuring plan under bankruptcy court protection in the United States, industry officials say.

They said yesterday many parts makers will find it difficult to operate efficiently by supplying only two assembly operations here while all of the company's manufacturing operations remain down in the U.S.

Chrysler announced last week that it would suspend operations in the United State beginning yesterday for up to two months while it completed a restructuring plan under court protection that includes resolution of disputes with a group of debtholders.

Late yesterday, Chrysler LLC won interim court approval yesterday to access a $4.5 billion (U.S.) bankruptcy loan from governments in the U.S. and Canada, pushing it further along toward its planned sale to Italy's Fiat SpA .

The judge approved Chrysler's request to access the funds, known as debtor-in-possession financing, as well as requests for the company to pay essential suppliers, dealers and its taxes.

One executive with a major Canadian supplier who requested anonymity said nevertheless "it would be better for Chrysler suppliers to just stay down.

"The economies of scale wouldn't be very good. They wouldn't be able to make any money and a lot of them are already in difficulty. It wouldn't make any sense."

Some Chrysler assembly plants south of the border closed prematurely on Friday after a few parts suppliers stopped deliveries because of fears that the automaker wouldn't pay them.

A shortage of only a small number of parts can quickly shut down an auto assembly plant.

Parts shortages disrupted production of minivans and cars at plants in Windsor and Brampton on Friday, even though the company's Canadian subsidiary did not apply for court protection here.

That left open the possibility that the two assembly plants would continue operating in Canada, regardless of the length of the court proceedings in the U.S.

Chrysler said yesterday that the Canadian assembly plants, which employ about 7,500 workers, will remain idle "until further notice" and would not comment on whether they would reopen before the completion of the proceedings in the United States.

Jerry Dias, a senior Canadian Auto Workers union official, said a resumption of operations here will be extremely challenging while plants remain down in the U.S. because of the difficulties it creates for suppliers in both countries.

"It would be hard for them to run profitably by just supplying the Canadian operations while still paying the same overhead and other costs for a lot more normal production."

Dias said it would only take one or two suppliers to stop output in order to disrupt an assembly operation.

The auto parts executive, who requested anonymity, said more suppliers will die during the stoppage of Chrysler's operations.

"The parts industry right now is imploding," he said. "This will be it for some of the smaller ones who have been struggling for a long time."

Automakers including General Motors are curbing output for the remainder of the second and third quarters.


Fiat in talks to buy
GM's European arm

May 04, 2009

Associated Press

ROME–Fiat Group SpA confirmed Sunday that it is in talks to buy General Motors' European operations, in a move that, combined with its planned takeover of Chrysler LLC, would form one of the world's biggest car and truck makers.

The new auto manufacturer would have $105 billion (U.S.) in annual revenue, Fiat said in a statement.

Fiat said it is evaluating the possible spinoff of its auto business to form the core of the new company. Fiat Group Automobiles includes the Fiat, Alfa Romeo and Ferrari brands.

The statement was issued on the eve of a meeting in Berlin between Fiat Group CEO Sergio Marchionne and the German economy and foreign ministers to discuss Fiat's offer for GM's German unit, Opel.

GM Europe also includes the British company Vauxhall and the Swedish carmaker Saab.

GM has been trying to find investors for its noncore and unprofitable assets as part of a restructuring in which it has sought billions of dollars in aid from the U.S. government to avert collapse.

Opel has said it needs $4.3 billion to get through the economic crisis. The German government has said it doesn't foresee giving direct state aid. Chancellor Angela Merkel has suggested the government could help an Opel investor with loan guarantees.

Fiat said that over the next few weeks, Marchionne will be looking "to assess the viability of a merger of the activities of Fiat Group Automobiles (including the interest in Chrysler) and General Motors Europe into a new company.''

"As part of this process, the group would evaluate several corporate structures, including the potential spinoff of Fiat Group Automobiles and the subsequent listing of a new company which combines those activities with the activities of General Motors Europe."

In an interview Sunday with Corriere della Sera, Fiat Chairman Luca Cordero di Montezemolo called GM's Opel an "ideal partner'' and a possible takeover by Fiat an "extraordinary opportunity."

Fiat is not the only suitor for Opel, however. Last week, Canadian car parts maker Magna International Inc. presented German Economy Minister Karl-Theodor zu Guttenberg with what the minister called a "rough concept for a commitment with Opel."

Guttenberg has said the German government would wait to determine its role in any full or partial Opel sale until after the U.S. government had weighed in.

Fiat, meanwhile, has pressed ahead with a takeover of Chrysler. Chrysler filed a motion Saturday to sell substantially all of its assets to Italian automaker Fiat, but the ailing automaker must still deal with creditors who refused to come to a deal to erase the company's debt.

In addition to Fiat Group Automobiles, the Fiat Group also includes its agricultural vehicles branch CNH and its Iveco trucking unit, as well as a media arm.


Chrysler reaches deal with CAW

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

CAW Chrysler Bargaining Brochure
Click here


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