CAW, GM Reach Labor Deal

Canadian Auto Workers and GM have been working towards agreement on wages and other costs critical for the automaker to receive Canadian and U.S. government aid.

TORONTO (AP) -- After two weeks of round-the-clock negotiations, the Canadian Auto Workers union has agreed to another cost-cutting deal with General Motors Canada in its bid to qualify for government loans to stave off liquidation, the head of the union said Friday.

Union leader Ken Lewenza said the deal allows GM to meet the cost benchmarks set by the Canadian and American governments and stipulates that GM's car assembly and parts plants in the southern Ontario communities of Oshawa, St. Catharines and Woodstock will stay open.

"We have preserved our wages. We have preserved and secured our pension benefits. We have protected most of our core benefits. Those are important victories and they wouldn't happen without solidarity," Lewenza told a news conference.

Specific details of the deal were not immediately available, but Lewenza said it delivers reductions of 15 to 16 Canadian dollars ($13 to $14) in the average per-hour wage of GM's Canadian workers on top of a previously negotiated CA$7 cut ($6).

CAW members had ratified a deal with GM in March, less than a year after settling a three-year wage-freeze contract, but Canada's federal and the Ontario provincial governments said two weeks ago that it did not do enough to cut costs.

The union and the automaker have been working toward an agreement on wages and other costs the governments say is needed before they provide more aid to GM.

The governments have offered between CA$9 billion and CA$10 billion ($7.7 billion to $8.5 billion) in loans to GM Canada and Chrysler Canada if they approve of the restructuring and cost-saving measures laid out by the struggling automakers.

The deal comes a day after workers in the United States agreed to a tentative deal with the U.S. government and General Motors Canada's parent company, GM Corp.

Workers on both sides of the border will have to vote to ratify the deals. Lewenza said the voting process will begin on Sunday.

The moves are key to GM's efforts to restructure. The company, which has received $15.4 billion in federal loans, faces a June 1 government-imposed deadline to restructure or be forced into bankruptcy protection.

But GM also needs bondholders who hold $27 billion in unsecured debt to forgive what they're owed for an equity stake in the company. Analysts have said it is nearly impossible that the required 90 percent of bondholders will agree to the offer, making a bankruptcy protection filing likely.

"From all of the discussions, it's very likely they'll go into Chapter 11 filing," said Lewenza. "We had same discussions on this side of the border. GM is trying to avoid bankruptcy protection, but if they don't, the deal we negotiated last night is protected."

GM has already cut deeply into its Canadian work force, recently closing a pickup truck plant in Oshawa, with the loss of 2,600 jobs. In addition, the company plans to shut down a transmission plant in 2010 in Windsor, Ontario, which employs 1,400 people.

The entire North American auto industry has been battered by the recession, which has cut demand for cars and trucks sharply, leaving the companies with assembly plant overcapacity that needs to be shut down.

In addition, the credit crunch has made it difficult for consumers to finance car purchases, squeezing demand further. At the same time, changing consumer tastes and high fuel prices have hurt demand for SUVs, pickup trucks and other big vehicles, the mainstay market of the Detroit Three -- GM, Chrysler and Ford Motor Co.

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