Newly installed General Motors chief executive Fritz Henderson told CBC News on Wednesday there is a group of people at the company doing paperwork in case the automaker files for bankruptcy. (CBC)
That’s it – the President of GM Canada is counting down 60 days
By Stephen Pate, NJN Network, Charlottetown, PEI, April 9, 2009 with story from CBC
GM chief says company is preparing in case it files for bankruptcy. Mr. Henderson “newly installed” which means the experienced and capable staff have left the building along with Elvis. The show is over. A manager who gets parachuted in when the company is on life support is a caretaker. He has a package that includes his salary plus assurances he gets looked after in case they pull the plug. His job is to keep calm and ride out the storm. He hasn’t got a snow ball’s chance in hell of sorting out the problems. Henderson admits he has accepted the inevitable and is shuffling from “fix it” mode to “plan for the end”.
The impact of GM’s bankruptcy is enormous. Housing prices in Ontario will probably fall as the sector reorganizes at a lower level. If Ontario loses GM to the US, Canada will suffer in ways we don’t want to even consider. It will be a catastrophe for our equalization system that relied on Ontario and Alberta’s bounty to distribute billions across the country.
No wonder the dealers are grouchy and the Federal government is heading for cover. It’s all over but the crying. The situation is very stressful for the employees, management, creditors, the government, dealers, their employees and customers. In good times, auto buyers are a fickle lot. Today, they are either sitting on the wallets or moving to a another brand. Most of the talk I hear is buying cheap used cars and avoiding the new car scene altogether. Times are tough, times are hard – better pay down that credit card.
The unions are being unrealistic. The CAW has been beating up GM for decades. The CAW is dreaming the Canadian taxpayers will take GM’s place. The headline says it: $100M Ontario fund ‘nowhere near’ enough to cover autoworkers’ pensions, says McGuinty. For decades we have been paying higher and higher prices for cars, into the stratosphere. It’s hard to think that we will have to pay higher taxes to underwrite the pensions of Canada’s over-paid industrial workers. That’s worse than being on the hook for PEI’s civil servants pension.
GM chief says company is preparing in case it files for bankruptcy
$100M Ontario fund ‘nowhere near’ enough to cover autoworkers’ pensions, says McGuinty
The head of General Motors Corp. told CBC News the company is using the 60 days it has been given to pull together a more aggressive turnaround plan and also preparing paperwork in case it files for bankruptcy.
“If we need to resort to bankruptcy, we have to do it quickly,” chief executive Fritz Henderson told the CBC’s Peter Mansbridge in an interview at GM’s headquarters in Detroit, Mich., on Wednesday afternoon. “And there’s no way you could do it quickly without being prepared for it.”
Late last month, the White House removed chief executive Rick Wagoner and rejected GM’s restructuring plan, giving it 60 days to develop a more aggressive approach.
GM has received $13.4 billion US in U.S. government loans, and the Obama administration has said if the company fails to gain concessions from stakeholders, the bankruptcy code could be used “in a quick and surgical way” to restructure the company.
The Canadian and Ontario governments have given GM’s Canadian division 60 days to come up with a restructuring plan as well. The two governments are giving GM Canada $3 billion Cdn in repayable loans.
Henderson said in the interview that GM will use the allotted time to work on a more aggressive plan, but said, “if it’s apparent to us that it can’t be accomplished out of court, we wouldn’t necessarily wait for the full 60 days.”
With bankruptcy a real possibility for GM, concerns turned to workers’ pensions. In Canada, GM has roughly three retired workers for every worker who is still on the job, and the company’s pension plan is in brutal shape, underfunded by billions.
The Canadian Autoworkers Union said the Ontario government has a “moral and legal responsibility” to intervene and help workers. It said the province allowed GM’s pension plan to carry on underfunded since the early 1990s.
But the emergency fund for Ontario’s pensions isn’t large enough to cover autoworkers should GM or Chrysler go bankrupt, Premier Dalton McGuinty warned Wednesday.
“The money available in that is very, very modest,” McGuinty said, noting the Pension Benefits Guarantee Fund has about $100 million in it — not nearly enough to cover the billions of dollars involved in the automakers’ pensions.
“That comes nowhere near meeting any liabilities — for example, for the auto sector alone, to say nothing of all the other sectors.”
McGuinty wouldn’t say whether he agreed with Ottawa’s assertions about the likelihood of bankruptcy for GM and Chrysler, and maintained he’s committed to helping the sector, whether it faces court-ordered bankruptcy protection or not.
“I just don’t want people to equate proceedings inside the court as somehow spelling the end of the industry in Ontario because that’s not what it would be about,” he said.
Still, there’s a “real pension issue” in the province, and even topping up the safety net may not be an option.
“We would never have all the money that would be needed to top it up to meet all the demands for all Ontarians who are experiencing troubles with their pension plans,” McGuinty said.
The Pension Benefits Guarantee Fund has provided pensioners with up to $1,000 per month in case a pension plan fails to provide its full benefit, or any at all.
Interim Progressive Conservative leader Bob Runciman expressed concerns about suggestions to help bail out the pension plans, saying taxpayers who themselves face dwindling pensions may be forced to prop up those of the automakers.
“There may be some way the government and taxpayers can assist, but to come in with a 100 per cent bailout of pension plans that most taxpayers will not have access to, I think, would be troublesome to the vast majority of people in this province,” Runciman said.
In the interview, Henderson said GM is working with the Canadian government on “future funding support,” describing the talks as “constructive.”
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