May 13, 2009 / 4:31 PM / 9 years ago

Pension issue threatens GM Canada's survival

TORONTO/OTTAWA (Reuters) - Pension issues are stymieing efforts to reach a new concession deal between the Canadian Auto Workers union and General Motors Corp that is needed to keep the automaker’s Canadian operations from liquidation, the head of the union said on Wednesday.

<p>A GM inflatable sign is seen during the Barrett-Jackson auto auction in West Palm Beach, Florida April 11, 2009. REUTERS/Carlos Barria</p>

The two sides have until Friday to strike a new cost-cutting deal or the automaker could miss out on billions of dollars in government loans needed to keep GM Canada afloat.

“We’re not making much progress at all,” CAW President Ken Lewenza told Reuters during a break in the negotiations, which have been ongoing since Sunday.

”We’re talking to each other, but we’ve got some major issues,“ he said.”

A GM spokesman was not immediately available for comment.

The biggest hurdle involves the cost of pensions for GM’s retired workers, Lewenza said.

GM Canada has been making vehicles for around a century and has about five retirees for every active worker.

Complicating matters is a pension fund shortfall at GM Canada estimated to be as high as C$7 billion ($6 billion).

GM and the CAW signed a cost-saving contract agreement in March that the company said would cut nearly C$1 billion related to retirees from its books, on top of big savings on the active worker side.

Industry Minister Tony Clement said on Wednesday the concessions from March did not go far enough.

Ottawa recently sent the two sides back to the bargaining table with a deadline of May 15 and a goal of bringing costs at GM Canada into line with those at the nonunionized Toyota and Honda plants in Canada.

“The general determination is, given the deterioration of the market, even since that moment (March), there is no question that for GM to be viable there has to be more on the table,” Clement told Reuters.

“We’re at a very critical juncture. Over the next 48 to 72 hours there’s a lot that has to fall into place and then we’ll make a determination on where we stand,” he said.

Jim Stanford, the CAW’s economist, said on Wednesday that Ottawa had given little in the way of guidelines about what it expects to see in the final deal.

“We don’t have an agreement on a particular target, other than the broad, nonspecific direction from government to be comparable to Toyota Canada,” he said.

Labor costs for automakers include the costs of both active and retired workers, among a host of other items.

Toyota Canada has a similar pension plan to GM Canada‘s, but it has only been producing autos in the country for just over 20 years, and has nowhere near as many retirees as GM.

“It’s not apples to apples,” Lewenza said. “We can’t handle the pensions. That can’t be dealt with at the bargaining table.”

The CAW and GM are also involved in ongoing committee discussions with the governments of Canada and the province of Ontario on how to deal with pension and healthcare issues, Stanford said.

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

The company’s Oshawa, Ontario, truck plant will be shuttered on Thursday, putting about 2,600 people out of work.

($1=$1.17 Canadian)

Editing by Rob Wilson

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