333
General Motors of Canada Ltd. may have to pay back some of the $435-million in incentives it got from Ontario and Ottawa after announcing plans Tuesday to shut down its truck plant in Oshawa, Ont., throwing about 2,500 people out of work next year.
Ontario Premier Dalton McGuinty said GM will probably breach terms of a loan agreement with the province, which has been hurt by the ongoing turmoil in the auto industry, while company officials also acknowledged it may have to return some money.
The Oshawa shutdown, confirmed Tuesday along with the closing of three other plants in the United States and Mexico, will cost an estimated 2,500 GM workers in the city their jobs.
This puts the auto maker in danger of breaching commitments related to overall employment levels in Canada that it made to the federal and Ontario governments when it received $435-million in assistance earlier this decade.
GM's Rick Wagoner
General Motors
Related Articles
“Potentially there may be some repayments,” GM Canada president Arturo Elias acknowledged to reporters during a conference call.
Neither Mr. Elias nor GM North American president Troy Clarke could provide specific numbers on the size of the auto maker's work force in Canada once the truck plant ceases production next year and a Windsor transmission plant closes in 2010.
However, Canadian Auto Workers officials called GM's decision a betrayal of a new labour contract the union and the company signed just recently, May 16, in which GM had pledged to build its next generation of pick-up trucks in Oshawa.
“This is a complete violation of our recent collective bargaining agreement,” Mr. Hargrove told reporters in Toronto.
“No intelligent human being would ever agree that there's been such a change in consumer demand in two weeks,” Mr. Hargrove said.
The CAW leader described the move as a “panic” decision by GM designed in part to prop up a sagging stock price.
The union has not yet assessed the options it has to fight the decision, Mr. Hargrove said, but “we are going to fight General Motors. We are not going to allow General Motors to walk away from the bargaining table.”
At the Ontario legislature, Mr. McGuinty said GM likely will breach terms of its loan agreement.
“Our sense at this point is they will be and if so, there are specific provisions under the contract that we will seek to enforce,” he told reporters.
Under the terms of the loan to GM for the so-called Beacon project, the company agreed to maintain an average of 16,000 employees across all of its operations in the province over a nine-year period.
“If those jobs end up going below a certain level, they will be in breach of the agreement and we will enforce that,” Mr. McGuinty said.
The loan for the Beacon project came out of a $500-million fund for the auto sector set up by the government in 2004. Ontario recently unveiled a new $1.1-billion fund as part of a plan to encourage the sector to build more environmentally friendly cars. None of that funding as been allocated.
“When I asked a CAW worker how I can best help him, he said, ‘keep fighting for our industry in Ontario,' and we intend to do exactly that,” Mr. McGuinty said.
The acknowledgment came after Rick Wagoner, chairman of parent General Motors Corp., confirmed the company is shutting a total of four truck and SUV plants – the others in the United States and Mexico – as U.S. consumers trade in gas-guzzling vehicles because of the economic slowdown and gasoline prices that have rocketed to $4 (U.S.) a gallon.
Mr. Wagoner also said GM is undertaking a strategic review of its most high-profile gas guzzler of all, the Hummer. The likely outcome is that it will be revamped, or partly or completely sold, Mr. Wagoner said.
At the same time, he said, the company is moving to add small, more fuel efficient vehicles to its roster and its board of directors has now approved a production schedule for the Chevrolet Volt plug-in electric car, which should have it in dealers' showrooms by the end of 2010.
“We at GM don't think this is a spike or a temporary shift,” in gas prices, Mr. Wagoner said, adding that the auto maker will develop more cars and crossover utility vehicles to deal with the sea change in the market.
No new products have been allocated to the four plants hit by the impending shutdowns and it is “unlikely” they will be reopened, Mr. Wagoner said.
However, senior GM officials said later that the company is considering adding a third vehicle to its Oshawa car plant beyond the Chevrolet Camaro, and another rear-wheel drive car promised during negotiations for a new contracts reached last month with the Canadian Auto Workers union.
Mr. Wagoner expects the shutdowns to save GM an additional $1-billion a year, bringing total cost savings from this and previous cuts to about $15-billion.
Each of the four plants currently employs about 2,500 workers in all, he said.
The Oshawa truck plant was chosen for shutdown partly because it makes extended cab and crew cab versions of the pickups, which were among the most severely affected by the shift in the market, Mr. Wagoner said.
Union reaction in Oshawa was swift and angry.
Chris Buckley president of CAW Local 222 in Oshawa said the news was “absolutely devastating” and that GM's decision represents a “betrayal” of the new contract the union negotiated with GM just last month.
“We just ratified a new three-year collective agreement on May 16th [in which] the company committed in writing to building the next generation of pick-up trucks in the city of Oshawa,” Mr. Buckley said in a telephone interview. He added that the union had given up “millions of dollars” through a wage freeze and relief on negotiated benefits in order to reduce the plant's operating costs.
Mr. Buckley estimated the shut down will cost about 2,600 workers their jobs. The plant currently runs two shifts, each of which employs about 1,000 assembly line workers, he said, while the balance is made up of about 600 skilled trades workers.
