TORONTO — General Motors Canada will take $10.5 billion in aid from the federal and Ontario governments and pump some of that money back into operations, boosting research and development and launching five new vehicles, including a new hybrid gasoline-electric car.
The financial aid is part of the parent company’s bankruptcy restructuring filing Monday and will be used to maintain 16 per cent of GM’s North American manufacturing output in Canada into the future.
In addition, the Oshawa-based subsidiary will invest $3.2 billion in operations and new assembly programs.
However, by the time GM’s restructuring is complete, the 101-year-old Canadian business will be a shadow of its former self and will shed more jobs from plants in southern Ontario.
No new cuts to GM Canada’s operations were announced Monday as General Motors Corp. (NYSE:GM) filed for bankruptcy protection in a New York court, outlining plans to close nine more U.S. factories and idle three others, displacing 18,000 to 20,000 employees.
Instead, the federal and Ontario governments were able to secure several promises from the company that they said make one of the largest Canadian corporate bailouts in history worthwhile.
“In recent months there’s been a lot of anxiety around the kitchen tables of families working in the auto sector, whether those moms and dads work in assembly plants, parts manufacturing, dealerships or any of the over 400,000 jobs dependent on the making of cars and trucks in Ontario,” Premier Dalton McGuinty told a news conference in Toronto.
“We’re here today to put GM on a sound footing, to build a base for growth and prosperity in Canada and to give all those families reason to be hopeful.”
McGuinty said GM would have quickly moved its production out of Canada if the Canadian governments had not agreed to participate in the bailout. This in turn would have affected hundreds of Canadian parts suppliers and the other auto manufacturers that rely on them.
As one of the conditions of the Canadian loans, GM has promised to maintain the Canadian proportion of its North American manufacturing capacity at 16 per cent. According to an analysis by AutomotiveCompass LLC, that’s down from 22 per cent in 2007.
The overall GM restructuring hinges on the former global auto giant gaining new customers for its lineup of new fuel-efficient vehicles planned over the next several years, including the Volt electric car that will be built in the United States.
In Canada, GM closed its truck plant in Oshawa earlier this month and said last year it would close its Windsor transmission factory in 2010. Over the next five years, GM Canada expects its workforce to shrink to 4,400, excluding the CAMI facility which it runs jointly with Japanese carmaker Suzuki.
Including CAMI, the Canadian Auto Workers estimates GM Canada will employ about 7,500 people.
The company, which employed 20,000 people in 2005, also previously announced the closure of about 250 dealerships and further reductions to its white-collar workforce.
PM doesn’t expect to get money back from GM
By The Canadian Press
TORONTO — Ottawa doesn’t expect to get back the billions in taxpayers’ dollars it’s investing in General Motors but Canada risked losing its entire auto industry if it didn’t take a role in Washington’s restructuring of the troubled sector, Prime Minister Stephen Harper said Monday.
It’s regrettable that public money is funding the $10.5-billion bailout of GM but the move is a necessary one amid a global recession, said Harper.
“We don’t intend to run automobile companies.
“In fact, we are seeking to exit our equity position in a reasonably short period of time,” he said.
“Clearly taxpayers will get some money back when the day comes that we begin to sell our equity share but, to be frank, we are not counting on that.”
Under the deal with Ottawa and Ontario, GM will not file for bankruptcy protection in Canada — protection it sought from its creditors in the U.S. on Monday.
Canadian taxpayers will own 12 per cent of a restructured General Motors in return for providing the troubled automaker with $10.5 billion. Ontario will be responsible for $3.5 billion of that amount.
The two levels of government plan to fully divest their stakes by 2018 at the latest.