General Motors 2008 losses.

Quarter: $9 billion.

Day: $85 million.

Hour: $3.5 million.

Minute: $58,333.

Mar 10, 2009


Tony Van Alphen and Ann Perry
Business Reporters

General Motors workers must unite to defend the middle class and fight a growing right-wing perception that auto industry wages are too high and they should take bigger pay cuts to save the company, union leaders say.

Ken Lewenza, national president of the Canadian Auto Workers, told members they will be under intense pressure from analysts and conservative politicians during the next few weeks to make even bigger concessions so GM can qualify for more than $6 billion in critical government aid.

"We got to change the mood," Lewenza said at the GM Centre in Oshawa. "Every single day we've been on the defence, defending our right to a good job."

Lewenza told more than 1,500 workers at a morning vote on a tentative contract for concessions that they need to become more active in combating any public attacks on their pay and benefit packages.

"Why is all the pressure on our workers," he added. "Our labour costs represent 7 per cent of production," he noted.

Earlier this week, Conservative MPs on a parliamentary committee ridiculed Lewenza and CAW economist Jim Stanford for the union's wages and suggested more concessions might be necessary at a hearing in Ottawa.

Chris Buckley, president of CAW Local 222 in Oshawa, said he was "absolutely disgusted" with the attitude of the Tory MPs that GM workers are overpaid and underworked.

But he said workers need to counter those attacks and the views of analysts such as prominent industry watcher Dennis DesRosiers by writing letters, sending e-mails and speaking out.

"We have to turn up the heat," Buckley said.

DesRosiers has indicated the concessions by GM workers in Canada are not enough to help the teetering Detroit-based auto giant survive the current crisis of plunging sales and tight credit in North America.

But federal Industry Minister Tony Clement said he did not want to pass judgment on whether the amount of concessions in this week's GM-union deal is sufficient.

"I'm here to say that in order for government money to flow, there has to be the ability to be competitive in the new marketplace," said Clement, who described the deal as "one piece of the puzzle."

"I'm not going to comment on what's satisfactory and what's unsatisfactory. We're going to make a decision based on the totality of it."

GM complimented the CAW for its leadership in reaching the agreement for concessions, which came after only four days of negotiations.

Under the tentative deal, production workers, who currently earn about $34 an hour, would not receive any wage increases or cost of living protection until 2012. Furthermore, they would lose a $1,700 annual bonus, a week of special holidays a year and contribute more for health care benefits.

Retirees face a freeze in pensions and cost of living protection and will also need to pay more for health care.

In his speech to workers before the morning vote, Lewenza stressed that the cuts will mean significant pain for workers and retirees but it's necessary to avoid a deeper recession in the Canadian and North American economies.

Accusing conservative politicians of attempting to destroy the middle class, Lewenza said good auto jobs and pay are major contributors to communities, the economy and the standard of living in Canada.

He noted auto workers in Canada are not responsible for a worldwide financial crisis created by speculators, hedge fund managers and lack of regulation.

Lewenza and Buckley also called once again for a national auto strategy in Canada to enhance investment, jobs and fair trade with other countries. They charged that auto imports continue to "pollute" the domestic market while Canadian-made vehicles can't get fair access to overseas countries.

Union negotiators are unanimously recommending acceptance of the contract concessions and expect strong support. The union held other membership meetings in Oshawa and Woodstock yesterday and St. Catharines and Windsor today. It will release resultsWednesday night.

Ratification will lead to bargaining for similar deals at struggling Chrysler, which is also seeking government aid, and Ford.

"We got to change the mood," Lewenza said at the GM Centre in Oshawa. "Every single day we've been on the defence, defending our right to a good job."

DETROIT — According to a source at General Motors, the company will announce next Monday its new "faster, deeper" reorganization plan, which will likely include a death sentence for the Pontiac brand.

Inside Line called Tom Wilkinson, news relations PR man for General Motors, who said: "There's nothing I can share with you at this time. Keep your eyes on our media site. Officially, nothing has changed with Pontiac's niche-brand status, until you hear differently."

The one-time "Excitement" division and creator of legends such as the GTO and Firebird was relegated to "niche" or "specialty" brand status by General Motors in its first viability plan in December of last year.

The company toyed with competing proposals to either turn the brand into GM's version of Scion or to make Pontiac a very focused purveyor of performance cars based around the critically well-received G8. But ultimately, Pontiac was chosen as the easiest to kill since it was cut from GM's self-defined herd of four "core brands," Chevrolet, Cadillac, GMC and Buick. Most Pontiac franchises have already been combined with Buick and GMC.

If true, Pontiac will join Saab, Saturn and Hummer as brands that will not survive GM's current troubles — at least not as a component of General Motors.

DETROIT — The Treasury Department is preparing a Chapter 11 bankruptcy filing for Chrysler that could come as soon as next week, people with direct knowledge of the action said Thursday.

The Treasury has an agreement in principle with the United Automobile Workers union, whose members’ pensions and retiree health care benefits would be protected as a condition of the bankruptcy filing, said these people, who asked for anonymity because they were not authorized to discuss the case.

Moreover, Fiat of Italy would complete its alliance with Chrysler while the company is under bankruptcy protection.

The only major question that remains unresolved is what happens to Chrysler’s lenders, who hold $6.9 billion in company debt. The government’s most recent offer, presented Wednesday, would give the company’s lenders about 22 cents on the dollar, or $1.5 billion, and a 5 percent equity stake in a reorganized Chrysler. Earlier this week, a steering committee of the lenders proposed that they receive 65 cents on the dollar, or $4.5 billion, and a 40 percent equity stake.

If no agreement is reached, a nasty legal fight could emerge in bankruptcy. The creditors’ claims are backed by virtually all of the company’s collateral, including plants, brands and equipment, and the lenders will argue that they have first claim on those assets.

Officials at Chrysler and the Treasury were not immediately available for comment.

A bankruptcy filing by Chrysler would be the first among Detroit’s troubled automakers, who have been mired in a devastating sales slump since last fall. Treasury is also working with General Motors to prepare a possible bankruptcy case, and the terms of a Chrysler filing might offer a glimpse into the shape of G.M.’s own filing.

Some analysts questioned whether the Treasury’s steps to prepare a bankruptcy case were an effort to put more pressure on lenders, with which it has exchanged proposals meant to reduce Chrysler’s debt. Chrysler faces an April 30 deadline from the Treasury, while G.M. faces a June 1 deadline in its own efforts to draft a new restructuring plan.

Under the most likely assumptions, Treasury will provide the financing that Chrysler needs to operate while under bankruptcy protection. The Canadian government is also expected to participate in backing the company.

The Globe and Mail of Toronto reported the Canadian government’s role on Thursday.

Last month, the Obama administration told Chrysler it would provide up to $6 billion in financing if Chrysler and Fiat could complete a deal by the end of this month. Fiat originally agreed to take 35 percent of Chrysler, but the stake was subsequently reduced to 20 percent. The administration said it would provide up to $6 billion in financing if the two companies agreed, on top of $4 billion in federal assistance that Chrysler has already received.

Although the two companies have been holding discussions on an out-of-court agreement, a bankruptcy case would allow Fiat to more easily select the assets of Chrysler that it wants to preserve, such as dealerships, factories and the company’s product development operations, these people said. The approach, which relies upon Section 363 of the federal bankruptcy code, is somewhat similar to what the government is planning in the case of G,M..

Then, Chrysler could sell or jettison any assets it does not want to keep, and cancel franchise agreements with superfluous car dealers.

The U.A.W., Chrysler and Treasury have reached agreements in principle that would protect workers’ benefits, these people said, and a similar agreement is expected to be reached as soon as this weekend with the Canadian Auto Workers union.

Once Chrysler emerges from bankruptcy protection, it would largely be owned by Fiat, the U.A.W., the Treasury and its lenders, these people said. A bankruptcy filing would likely wipe out existing equity stakeholders, notably Cerberus Capital Management, which took over the carmaker from Daimler in 2007.

Ron Gettelfinger, the U.A.W.’s president, issued a statement on Wednesday saying that the union was “continuing to work toward an agreement that will be in the best interest of Chrysler workers, retirees and the communities where the company does business.”

People close to the talks said Wednesday that the U.A.W. had tentatively agreed to accept Chrysler stock to finance half of the company’s $10.6 billion obligation to the health care trust. The balance would be paid in cash over the next decade. That money presumably could come from either the Treasury, or from Chrysler’s profits, once it emerges from bankruptcy protection.

Chrysler has a $9.3 billion pension shortfall, or 34 percent of its total liability, according to the Pension Benefit Guaranty Corporation. The agency said earlier this month that it would assume $2 billion of the shortfall in the event Chrysler terminates its pension plans.

If that happened, retirees would receive sharply lower benefits than they normally would expect. But Chrysler is not obligated to terminate its pension plans while in bankruptcy, particularly if it received federal assistance to fund them.

It was not clear Thursday where Chrysler would file its bankruptcy case. On Wednesday, Mike Cox, the attorney general of Michigan, urged General Motors and Chrysler to consider filing in the state, rather than Delaware or New York. He said a locally administered case would be more convenient for creditors in Michigan.

The Treasury has an agreement in principle with the United Automobile Workers union, whose members’ pensions and retiree health care benefits would be protected as a condition of the bankruptcy filing, said these people, who asked for anonymity because they were not authorized to discuss the case.

The U.A.W., Chrysler and Treasury have reached agreements in principle that would protect workers’ benefits, these people said, and a similar agreement is expected to be reached as soon as this weekend with the Canadian Auto Workers union.

Ron Gettelfinger, the U.A.W.’s president, issued a statement on Wednesday saying that the union was “continuing to work toward an agreement that will be in the best interest of Chrysler workers, retirees and the communities where the company does business.”