Analyst: Canada Won't Be Immune From GM Fallout

As the industry waits for restructuring plans from GM and Chrysler, one analyst says it's likely GM will seek bankruptcy protection and Canada 'won't be able to hide.'

TORONTO (CP) -- As the auto industry holds its breath and waits to see what General Motors and Chrysler will propose in the restructuring plans they are set to deliver to the U.S. government Tuesday, one analyst says it's likely GM will seek bankruptcy protection and Canada "won't be able to hide" from the fallout.

'Everybody wants somebody else to blink first, and that's fundamentally the problem of this particular process," said Bill Pochiluk, president of industry adviser AutomotiveCompass.

One of the people briefed on GM's plan said some parts, such as bondholder and labour agreements, probably won't be complete by the time the plan is submitted to the U.S. Treasury Department late Tuesday.

GM has been in 11th-hour negotiations with the United Auto Workers union, but has yet to reach an agreement.

Pochiluk said this may force the automaker to seek bankruptcy protection from its creditors, which could throw the auto supply chain and therefore the entire North American industry into havoc.

He added that the many auto parts companies based in southern Ontario that feed GM, Ford and Chrysler plants are at particular risk.

'Money basically is their food of life, they're being starved, and right now without access to cash to keep their business operations, some of them will have no choice but to conserve their cash by going into early bankruptcy," Pochiluk said.

'When that happens, then this will affect the ability of the automotive industry to make parts and therefore make vehicles ... it will take us longer to climb out, the collateral damage on the front end will be materially worse, and it'll affect a lot of major corporations."

It's not yet clear how much GM will cut its workforce or its manufacturing capabilities, but Pochiluk said he believes its operations in Oshawa, Ont., are at particular risk. GM is already planning to shut down its truck plant in the industrial city east of Toronto this spring, costing 2,600 jobs, and has temporarily laid off the third shift at its car plant in the southern Ontario town, affecting about 700 workers.

A GM transmission plant which employs about 1,400 people in Windsor is slated for closure next year.

Other potential casualties of the restructuring are Chrysler's plant in Brampton, Ont., near Toronto, and the joint-venture GM-Suzuki CAMI plant in Ingersoll, Ont., Pochiluk said.

He added that while Chrysler is in worse shape than General Motors, GM plays a much more important role in the "North American psyche."

'I think that the situation for Chrysler is more dire, but the situation of GM will have bigger scope, just because of the psychological damage of having an institution like GM basically go bankrupt," he said.

While the two automakers are getting access to government aid in the United States, their Canadian subsidiaries can also tap into C$4 billion in financial aid offered by the federal and Ontario governments. That amounts to about 20 per cent of the U.S. aid package, representing Canada's share of North American auto production by the companies.

In Toronto, Canadian Prime Minister Stephen Harper said he's confident that General Motors will not pull out of Canada, where it employs about 19,000 people, mainly in southern Ontario.

The restructuring will be complex, Harper said, but added he's not worried about GM shutting down operations in Canada if the company seeks bankruptcy protection from creditors in the United States.

'I'm confident with ... Ontario coming to the table, with our share of funding, that we will maintain a strong industry in this country," Harper said following a transit infrastructure announcement in Toronto.

But Harper wouldn't rule out more job losses at the Canadian auto subsidiaries, which have already cut thousands of jobs in Ontario as the industry streamlines to deal with a collapse in sales.

Last week, the Ontario government said GM was no longer seeking an emergency $3 billion loan from the province but is still seeking longer-term aid.

The automakers' Canadian subsidiaries are set to deliver their restructuring plans to the federal and Ontario governments on Friday.

Ontario Premier Dalton McGuinty refused to speculate on a possible GM bankruptcy filing., but agreed with Harper that more job cuts will be coming to the Canadian industry on top of the thousands of jobs already lost.

"We'll just have to wait and see," he said. "I'm not going to speculate on what's going to happen in Washington."

"Just as taxpayers are prepared to come to the table, we expect that all the players in the auto sector to come to the table as well, understanding what's at stake -- the future of the sector. There will be more restructuring and I wouldn't be surprised if there were more job losses."

Economic Development Minister Michael Bryant acknowledged bankruptcy protection was an option for GM, although he said he believes it's unlikely.

'It's not something that anybody has ruled out as a possibility, but it is something that in fact there's a consensus that it is the last-case scenario . . . because of the volatility that would come with it," Bryant said.

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