May 7, 2009 / 5:29 PM / in 9 years

CAW says Canada issued ultimatum on new GM pact

TORONTO (Reuters) - Canada has warned the Canadian Auto Workers that General Motors would get no government aid and would likely liquidate its operations in the country if the union fails to make more contract concessions, the head of the CAW said on Thursday.

GM, which earlier in the day reported a net loss of $6 billion in the first quarter, faces a May 15 deadline to reach a new deal with the union, CAW President Ken Lewenza said at a press conference.

Senior union members met with representatives of GM and the governments of Canada and the province of Ontario on Wednesday and were told that GM Canada’s costs had to come down to the same level as Toyota Canada‘s.

“If we don’t get a deal, and here’s the ultimatum, the governments will provide no financial support, and GM Canada will be liquidated,” Lewenza said.

If an agreement is reached, GM may qualify for billions of dollars in long-term loans.

Lewenza said government officials also assured the union that the company’s Canadian operations would be protected if GM filed for bankruptcy protection in the United States and Canada. He said a bankruptcy filing seemed likely no matter what happened.

“It was very clear that General Motors is in serious trouble,” Lewenza said.

Industry Minister Tony Clement was asked in Parliament on Thursday why he was putting heavy pressure on the GM workers.

“What will not work is if the union heads do not want to be part of the solution,” he responded. “Then the choice of the workers is to have a job that’s cost-competitive or to have no job at all.”

GM and the CAW reached a new collective agreement in March that the automaker said would wipe nearly C$1 billion ($855 million) related to retirement costs off its books.

The Canadian government later said the GM-CAW cost savings plan did not go far enough.

Jim Stanford, the CAW’s economist, said that the labor costs of GM Canada’s active workers were already very close to the costs of Toyota Canada’s active workers.

But GM, which has been in operation in Canada for nearly a century, has about five retirees for every worker, while Toyota Canada, which set up shop in 1987, has almost no retirees.

That means so-called “legacy costs” are far higher at GM than at Toyota, which otherwise has similar worker compensation.

“It is impossible to imagine that the 5,000 or 6,000 or 7,000 GM (Canada) employees that are left at the end of this process could somehow pay -- they’d be working for free and then some -- they’d have to take money out of their own pockets to pay back to GM.”

GM Canada currently employs about 10,300 hourly workers but has said that number will fall substantially as planned plant closures take effect.

After the GM-CAW agreement in March the union moved on to Chrysler and reached a deal near the end of April to cut costs by about C$240 million annually, or C$19 an hour, based on the number of hours Chrysler Canada employees worked last year.

That helped Chrysler qualify for long-term funding in Canada and the United States, but the company was still forced to seek U.S. bankruptcy protection in order to get all of its costs in line.

The governments said they would provide Chrysler with so-called debtor-in-possession financing to help it emerge from Chapter 11 protection.

Chrysler has about 1.5 retirees for every active worker.

Chrysler Canada spokeswoman Mary Gauthier said on Thursday the company had recently received the final C$250,000 installment of its C$1 billion in Canadian short-term loans.

GM Canada also recently received some short-term funding in Canada, accepting a C$500 million of a possible C$3 billion in loans, to help it restructure in time to qualify for longer-term aid.

A GM Canada spokesman could not immediately be reached for comment.

($1=$1.17 Canadian)

Reporting by John McCrank; editing by Frank McGurty

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