Create a free account to continue

Chrysler's Canadian Assets May Have Advantage

Whether or not Chrysler files for bankruptcy protection, the company's Canadian assets are well-positioned to emerge relatively unscathed, says one analyst.

TORONTO -- Whether or not Chrysler files for bankruptcy protection, the company's Canadian assets are well-positioned to emerge relatively unscathed, says one analyst.

"Overall, Canada should do much better than the U.S.," Bill Pochiluk, president of industry adviser AutomotiveCompass, said Friday as the automaker and its Canadian union huddled in contract talks.

"I think what's emerging here is an industry that can be competitive again, and certainly Canada, as long as it's doing what it's doing, should not be disadvantaged relatively."

The clock is winding down on Chrysler's last chance for survival outside bankruptcy court. The struggling automaker is working to wring concessions from its workers, lenders and other stakeholders in order to cement an alliance with Fiat and present governments in Canada and the U.S. with an acceptable restructuring plan by next Thursday.

The company is still in negotiations with the Canadian Auto Workers, but union and government officials say the two sides are very close to reaching a deal and an announcement was expected Friday afternoon.

This indicates CAW president Ken Lewenza bent from his earlier refusal to give Chrysler anything more than the union gave General Motors in an earlier agreement.

Chrysler said it needed to cut its labour costs by $19 an hour to stay competitive, while the GM agreement only cut that company's labour costs by about $7 an hour.

The idea of pattern bargaining -- or the concept that an agreement with one company was good enough for all three of the Detroit-based automakers -- seems to have been cast aside as Chrysler and GM struggle to stay afloat amid the weakest car sales in years, Pochiluk said.

"Pattern bargaining doesn't work in these very troubled circumstances, because the needs and capabilities of General Motors and the needs and capabilities of Chrysler were so different," he said, adding that he expects GM to ask for further concessions once the Chrysler deal is announced.

But that doesn't mean pattern bargaining is dead.

"In this case, this is all about how things look at this stage. I think the optics required everybody to really share in the pain," Pochiluk said. "But I'm sure they'll bring it back."

Ontario Premier Dalton McGuinty said Friday Chrysler and its union are getting closer to an agreement that the Ontario government can support.

"I think it's getting closer to what we can justify on behalf of taxpayers," McGuinty said.

The premier wouldn't say what the next step would be if a deal is reached Friday, but said there is still much work to be done before governments in Canada and the U.S. can provide Chrysler with the long-term aid it has requested.

He said it's important the CAW and the U.S.-based United Auto Workers reach similar agreements with Chrysler.

"We're into a position here where, broadly speaking, if we can't match what they're delivering down there, then we become less competitive, and there's much less incentive to keep our 20 per cent of the production up here."

The federal and Ontario governments have so far provided Chrysler with $750 million of $1 billion promised, and have said they will proportionally match whatever the U.S. government provides to the struggling company to maintain Canada's share of production.

Published reports Thursday said the struggling company was preparing a bankruptcy filing which would protect the pensions and retiree health-care benefits of UAW members -- and presumably CAW members as well.

McGuinty said governments would be willing to help Chrysler even if it finds itself in bankruptcy court.

"What I do want to provide by way of reassurance is that whether there is a restructuring that takes place outside of court, or under court supervision, we intend to play our part," he said.

Both the federal and Ontario governments have said they will provide financial aid to Chrysler so it can continue its operations if it ends up restructuring under bankruptcy protection, although they would not specify how much this could cost.

Chrysler has said it needs to slash its labour costs by $19 an hour, but the CAW said it would stick to the pattern established in a recent agreement with General Motors, which cut that company's labour costs by about $7 an hour.

However, it appears that the CAW has given significant ground in recent days.

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

More in Operations