Canada Forcing CAW To Reach Agreement With GM

Canadian Auto Workers said federal and Ontario governments pressing union and GM to reach cost-cutting labor agreement or risk losing government assistance and liquidation.

TORONTO (AP) -- The head of the Canadian Auto Workers said Thursday that the federal and Ontario governments are pressing the union to come up with a new cost-cutting labor agreement with General Motors Canada or risk losing government assistance and liquidation.

Ken Lewenza said the governments have set a deadline of May 15 for the two sides to agree on a deal to replace the pact that was negotiated in March. The government has asked the union to give GM Canada the same concessions that it recently gave Chrysler Canada. It is the third time the union and GM have been asked to head back to the bargaining table this year.

"The government gave us an ultimatum. We've been instructed to go back into bargaining and if we don't get a deal, the governments will provide no financial support and GM Canada will be liquidated," Lewenza said at a news conference Thursday.

"Who would ever think that General Motors could possibly be in a position where they could potentially liquidate and potentially have no existence here in Canada? It's quite frightening," he added.

The CAW and GM agreement ratified in March provided the company with about 7 Canadian dollars ($5.76) an hour in labor cost savings. That followed an agreement last summer that froze wages and gave other concessions.

GM chief executive Fritz Henderson, who replaced Rick Wagoner at the end of March, has said the agreement made CAW workers competitive with their counterparts in the United States.

But the federal and Ontario governments have said the company must aim to be competitive with non-unionized Toyota plants in Canada.

"We are telling them that they have to be viable and competitive and otherwise, as I understand it, they won't get a viability agreement in the United States and therefore government loans won't flow," Ontario Finance Minister Dwight Duncan said Thursday.

The governments hope the new agreement would mimic a deal reached with Chrysler late last month that provided that company with about CA$19 ($15) an hour in savings. The CAW-Chrysler deal cut costs for the auto maker by CA$240 million ($204 million) annually.

The governments have offered between CA$9 billion and CA$10 billion in loans to GM Canada and Chrysler Canada if the governments approve of the restructuring and cost-saving measures laid out by the struggling automakers.

The CAW said the governments' main issue with the previously ratified agreement is that it fails to adequately reduce GM Canada's legacy costs -- primarily its pension obligations.

But CAW economist Jim Stanford said it's nearly impossible to make GM's legacy costs competitive with those at Toyota's Canadian plants because GM has far more retirees.

As part of the negotiation process, the governments may have to take an equity stake in GM, as they did in Chrysler, Ontario Premier Dalton McGuinty said in a news conference Thursday.

"Obviously, we're going to take a serious look at that," he said.

However, unlike the Auto Workers union in the U.S., which took a 55 percent stake in Chrysler LLC, Lewenza said the CAW has no interest in owning a share of GM.

"We're philosophically opposed to taking an equity share, we're not here to manage companies," he said.

The CAW's announcement came on the same day fears mounted about General Motors Corp. filing for bankruptcy protection if it is not able to cut its debt and win new labor agreements by the end of the month.

General Motors Canada's parent company reported Thursday that it lost $6 billion in the first quarter and its revenue was cut nearly in half as car buyers feared the wounded auto giant would enter bankruptcy and no longer honor its warranties.

"Everyone seems to believe the next steps for GM will involve Chapter 11 filling. We don't know for sure, but it seems likely," said Lewenza, adding that if that happens, GM Canada will likely be forced into CCAA proceedings, the Canadian equivalent of a Chapter 11 liquidation filing.

Lewenza said the governments would provide debtor-in-possession financing for GM Canada in the event that seeks bankruptcy protection.

GM Canada currently employs 10,300 hourly workers in Canada, mainly in southern Ontario. The GM truck plant in Oshawa, Ontario, is slated to close this spring while the Windsor, Ontario, transmission plant will close next year.

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