TORONTO – As General Motors and Chrysler scrambled late Tuesday to finalize U.S. restructuring plans that involve thousands of new job cuts, Prime Minister Stephen Harper and other senior Canadian politicians warned that more streamlining also awaits the battered Canadian auto sector.
Harper said he’s confident that General Motors (NYSE:GM) will not pull out of Canada, a possibility raised by a Canadian Auto Workers union leader earlier this month.
But he said that doesn’t mean industry watchers should expect the status quo going forward.
“We have to be frank here – not to say there will not be job losses because we know there are some very tough decisions to be made,” Harper said following a transit infrastructure announcement in Toronto.
“But I’m confident with our participation in the restructuring that we will maintain our share of this industry in North America.”
In its proposal, Chrysler LLC said it needs another US$5 billion to survive, and it will cut 3,000 jobs and three vehicle models as part of the restructuring plan submitted to the U.S. government.
Chrysler chairman and CEO Bob Nardelli said the cuts won’t impact the automaker’s Canadian operations directly, but he implied that he expects proportionate cuts north of the border.
“This plan . . . doesn’t impact the Canadian operations, but obviously we need to have the same kind of constituent concessions to make this plan viable,” Nardelli said in a conference call.
Chrysler vice-chairman Tom LaSorda said discussions are ongoing with both the Canadian Auto Workers and the United Auto Workers, and he expects “very similar” agreements with both unions.
“We’ll get into much more detail with the CAW starting next week,” he added.
General Motors was also expected to present a plan that will radically alter its operations, shrink its vehicle lines and cut output, plants and the size of its workforce.
GM and Chrysler’s 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 in the hopes that the Canadian industry will be able to maintain its 20 per cent share of the companies’ North American production.
Last week, the Ontario government said GM was no longer seeking an emergency $3 billion loan but is still seeking longer-term aid, while Chrysler is still looking for $1 billion in help from the two governments.
Ford is not part of any bailout talks in Canada or the United States.
The Canadian automakers are set to deliver their own restructuring plans to the federal and Ontario governments on Friday.
There’s little doubt the restructuring plans in both countries will include widespread job cuts, said Ontario Premier Dalton McGuinty.
“There will be more restructuring and I wouldn’t be surprised if there were more job losses,” McGuinty said.
Chrysler Canada, Ford Canada and GM Canada have been cutting plants and jobs for the last two years or so across southern Ontario where they operate as they cope with the recession and a credit crunch that has eroded car sales across North America.
McGuinty’s economic development minister, Michael Bryant, agreed “there’s no question” that the industry has already shrunk by thousands of jobs “and there will be more contractions.”
It’s not yet clear by how much the two automakers will cut their workforces or their manufacturing capabilities, but GM’s operations in Oshawa, Ont., are at particular risk, according to Bill Pochiluk, president of industry adviser AutomotiveCompass.
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, affecting about 700 workers.
A GM transmission plant which employs about 1,400 people in Windsor, Ont., is also slated for closure next year.
Other potential casualties of the restructuring are Chrysler’s sedan plant in Brampton, Ont., near Toronto, and the joint-venture GM-Suzuki CAMI plant in Ingersoll, Ont., Pochiluk said.
He added that if GM were to seek bankruptcy protection from its creditors – one of many possibilities for the beleaguered carmaker – this could throw the auto supply chain and therefore the entire North American industry into havoc.
Pochiluk said the many auto parts companies based in southern Ontario that feed GM, Ford and Chrysler plants are at particular risk if this happens.
“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.”
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.
GM employs about 19,000 people in Canada, mainly in southern Ontario. Chrysler employs about 10,000 workers at assembly and parts plants in Windsor and in the Toronto area, where a streamlining announced last year will pare the workforce to about 8,400.
The Canadian auto industry lost approximately 13,000 jobs in 2008, and analysts predict it could lose between 15,000 and 20,000 additional jobs in 2009 as auto sales in the U.S. continue to slump and the major companies work to cut costs.
The Canadian Auto Workers union says it agreed to a three-year wage freeze in 2008, saving the industry about $900 million in wage costs. However, most industry watchers expect further concession demands from the carmakers.
