What is clear from the article is that the Canadian government has allowed GM not to adequately fund their pension plan so that the pensioners would still be OK even when the company was not. At least it is good to know that courts have so far never touched pension benefits but that does not solve the problem of how they are to be financed!
GM bankruptcy likely: CAW TheStar.com - Business - GM bankruptcy likely: CAW
Ottawa, Queen's Park order union to slash costs or aid will be denied and GM will face liquidation
May 08, 2009 Tony Van AlphenBusiness Reporter
General Motors will probably seek bankruptcy court protection in Canada and the U.S. in its fight for survival, a top union leader warns.
Ken Lewenza, president of the Canadian Auto Workers union, said yesterday the company's worsening financial condition is increasing the likelihood of court protection from creditors in both countries.
"It is very clear General Motors is in serious trouble," he said.
His remarks came after parent GM Corp. reported it lost $6 billion (U.S.), the equivalent of $7 billion Canadian, in the first quarter, as revenues tumbled 47 per cent due to consumers' fears that the company could collapse and stop honouring warranties. GM, which doesn't break out the financial performance of its Canadian arm, has lost $82 billion since 2004.
Lewenza said the federal and Ontario governments have issued an ultimatum to the union that if it doesn't agree to significant concessions within the next week, they won't provide billions of dollars in crucial public aid and the company will face liquidation.
"If we don't get a deal, the governments will provide no financing and GM Canada will be liquidated," he said. "Plants will close, jobs will be gone, retiree benefits are gone and the pensions are sacrificed. This is an unbelievable situation."
GM must submit new restructuring plans to Ottawa and the province by June 1 to qualify for more than $8 billion (Canadian). It has already received $500 million.
That sets up the prospect of more than 9,000 GM workers voting on concessions for the third time in a year to help offset the company's plummeting fortunes.
Lewenza noted that if GM moves to bankruptcy court proceedings, the union will gain assurances that workers won't face additional concessions beyond the cuts from bargaining during the next week.
The latest negotiations at GM follow a recent concession deal at Chrysler that saw workers vote overwhelmingly to accept about $240 million in labour cost savings annually to save plants and jobs.
That hasn't led to much stability at Chrysler, which filed for bankruptcy court protection in the U.S., despite deals with workers and most stakeholders.
That triggered a halt in production at almost all of the company's North American operations, including two assembly plants in Canada.
Meanwhile, CAW leaders expressed frustration at government demands for both sides to deal with a massive deficit of more than $4 billion in GM's pension plan and the formation of a retiree health-care trust during the negotiations. Talks will start Sunday or Monday.
"It's absolutely impossible that we can do this at the bargaining table," Lewenza said.
CAW officials repeated that the Ontario government needs to accept responsibility for allowing GM to not properly fund the pension plan and said Ottawa must make tax changes so a health-care trust can work.
They also said it is difficult to compete on labour costs with Toyota Canada when the governments include pension expenses. Toyota has few pensioners; Chrysler has a ratio of 1.5 retirees for every active worker, while GM will have a five-to-one ratio within the next year.
"We can become fully competitive if we threw 25,000 (GM) retirees overboard," union economist Jim Stanford said. "Is that what the government wants when it tells us to equalize our costs?"
Lewenza added he finds it incredible that the governments want more concessions at GM when the company has already indicated it is satisfied with cuts that will make it competitive with rivals in the U.S.
But Michael Bryant, Ontario's minister of economic development and trade, eased retirees' concerns by saying the cost cuts won't affect retiree pensions, even in bankruptcy court proceedings.
"No Canadian judge has ever touched a retiree's pension in the history of CCAA (the Companies' Creditors Arrangement Act)," he said.
In Ottawa, NDP MP Malcolm Allen (Welland) accused Industry Minister Tony Clement of asking auto workers to sacrifice more than other stakeholders.
Clement replied in the House of Commons that everyone must co-operate in the restructuring.
"What will not work is if the union heads do not want to be part of the solution," Clement added. "Then the choice of the workers is to have a job that is cost-competitive or to have no job at all."
With files from Les Whittington and Madhavi Acharya-Tom Yew