TORONTO (Reuters) - General Motors Corp and the Canadian Auto Workers have reached a tentative deal for a substantial reduction in labor costs that will pave the way for a major GM restructuring package, the union said on Friday.
The deal, if ratified by union members, will bring labor costs at GM's Canadian operations down to about C$57 ($50.90) an hour. That's a reduction of roughly C$22 to C$23 an hour when cuts agreed to by the union and GM in March are included, CAW President Ken Lewenza said.
"It has been the toughest two weeks of our collective career of this bargaining committee," Lewenza told a news conference.
Base wages, pensions and core benefits will be protected, but the C$3,500 bonuses awarded to employees last year in lieu of lost vacation time will be filtered into GM's pension plan.
The deal will also freeze pension rates until 2015 and new hires will contribute C$1 an hour toward the pension plan from now on. The CAW said the plan is currently underfunded by C$6.5 billion to C$7 billion.
Lewenza said the deal, which includes a number of other cost-saving measures, was struck Thursday night at about 11 p.m. (0300 GMT Friday) and that it has the support of the Canadian government.
GM has been kept afloat with about $15 billion in U.S. government loans and C$500 million in loans from the governments of Canada and the province of Ontario.
For it to get long-term financing, the United States and Canada have given GM a June 1 deadline to win concessions from all its stakeholders and to prove it can be a viable company.
"The tentative agreement is a critical step forward toward ensuring GM's future in Canada," Stew Low, a GM Canada spokesman, said in a statement.
"GM Canada will continue to work tirelessly with the governments and our other key partners to complete our broader restructuring activities in Canada."
Prime Minister Stephen Harper said he was glad "in principle" that the CAW and GM had reached a deal.
"I am hopeful that everybody involved ... has made the difficult decisions necessary to make sure they create a viable company," he told reporters in Calgary.
GM struck a deal with the United Auto Workers union in the United States on Thursday, but still needs to get its creditors on board to avoid having to file for bankruptcy protection.
The company would need billions more in government funds to emerge from a Chapter 11 bankruptcy filing in the United States and from its Canadian legal equivalent, the Companies' Creditors Arrangement Act.
"All of the discussions we've had, it's very likely they're going to go into Chapter 11," Lewenza said.
He said that as of Thursday night, the company was unsure if it would have to seek bankruptcy protection in Canada, but he added that if it did, the collective agreement just reached would be protected.
Ratification votes are scheduled on Sunday and Monday at GM plants in Oshawa, St. Catharines, Woodstock, and Windsor, all in Ontario.
GM, which also has a joint-venture plant with Suzuki Motor Co in Ingersoll, Ontario, employs about 12,000 people in Canada.
Additional reporting by Scott Haggett in Calgary; editing by Peter Galloway