March 10, 2009 / 6:14 PM / 9 years ago

Canada says GM-CAW deal a piece of rescue puzzle

<p>Canadian Auto Workers President Ken Lewenza speaks during a news conference on Parliament Hill in Ottawa February 10, 2009. REUTERS/Chris Wattie</p>

TORONTO (Reuters) - A cost-cutting agreement between General Motors Canada and the Canadian Auto Workers union is just one piece of the puzzle that has to be solved before government rescue money can flow to the carmaker, Industry Minister Tony Clement said on Tuesday.

Union members in Ontario are voting on the tentative deal that would result in savings of several dollars an hour in costs for active workers and “substantial cost reductions” for retirees, the union said. CAW leaders have fully endorsed the agreement.

The results of the vote are expected late Wednesday.

GM is seeking emergency loans of up to C$7 billion ($5.4 billion) from the governments of Canada and the province of Ontario to help it survive the steep plunge in North American auto sales.

Ottawa has said that in order to qualify for the loans that all of GM’s stakeholders - from labor to bondholders, to management -- will have to come to the table to help make the company more viable.

Clement reiterated that sentiment after a speech in Toronto.

“Part of the picture is labor cost, part of the picture is how management costs things out in their overhead costs. The other part of the picture is what is your plan to get where we are right now to where we have to be to have a viable auto sector,” he told reporters.

“That is to say that this is a piece of the puzzle, but it’s not the entire Rubik’s Cube.”

Some industry analysts have said the union fell short with its concessions, which includes freezing wages, taking on more health-care costs, cutting paid time off, and suspending or eliminating cost-of-living adjustments.

CAW President Ken Lewenza said the union cannot cut any deeper and that the deal would give GM Canada plants a cost advantage over GM plants in the United States.

The union said it would now move on to cost-savings negotiations with Chrysler, which is seeking up to C$3 billion in Canadian aid, and Ford Canada, which has said it likely has enough liquidity to survive the industry crisis.

In press conference on Tuesday, Clement refused to pass judgment on GM’s agreement with the CAW, and he said the main thing hurting the auto sector was the plunge in auto sales in the United States.

Sales south of the border are down nearly 50 percent in February over a year earlier. About 85 percent of vehicles built in Canada are sold in the United States.

“The good news is Americans can’t not buy cars forever,” he said. “At the current rate of purchasing, you’d have to assume ... an American is going to keep his car for 25 years. Well, my view is that that’s not realistic.”

($1=$1.29 Canadian)

Additional reporting by Wojtek Dabrowski; Editing by Frank McGurty

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