The restructuring plans prepared by General Motors of Canada Ltd. and Chrysler Canada Inc. do not go far enough to ensure their future competitiveness, the federal government and the province of Ontario said Monday.

The plans are not sufficient to certify the companies’ restructuring plans, and the governments have requested that additional work be undertaken by GM and Chrysler as part of ongoing restructuring efforts.

“While the restructuring plans represent progress, they do not go far enough to ensure the long-term viability of these companies. Therefore, we are not certifying their proposals,” said federal industry minister Tony Clement. “Together with our U.S. counterparts we believe that further fundamental changes are needed.”

In conjunction with the U.S. government, the governments of Canada and Ontario are requesting that both companies undertake additional work to ensure their future competitiveness and that all stakeholders contribute appropriately to improving the overall cost structures in their plans.

On Monday, U.S. President Barack Obama said GM will get 60 days to come up with a new plan and the U.S. government will provide the troubled automaker with enough working capital during that time.

Obama said the U.S. government has determined that Chrysler is not viable on its own, and has given the company 30 days to come up with a technology transfer agreement with European automaker Fiat. If an agreement can be reached in that time, the U.S. government will consider providing Chrysler with the US$6 billion in financing it has requested.

In Canada, General Motors has been asked to undertake a more fundamental restructuring of its products and its operations, while Chrysler has been asked to come to terms with labour on a contract that works for the company and with Fiat on a workable alliance.

This additional work will be supported in Canada by the interim loans announced by Prime Minister Stephen Harper and Ontario Premier Dalton McGuinty on Dec. 20, 2008. Canada is contributing 20% of the existing U.S. interim financing, in keeping with its share of Canada–U.S. production.

Interim loans will be advanced as necessary in the amounts of $3 billion for General Motors of Canada Ltd. and $1 billion for Chrysler Canada to assist the companies while they work on their restructuring plans. These loans are not to pay off debts to parent companies, taxes or underfunded pension liabilities.

In the loan agreement, the federal government puts limits on executive compensation to senior Canadian employees from 2008 through the term of the loan. The borrowers must provide regular reports on cash and liquidity positions, production and revenues.

In the case of Chrysler Canada, the loan agreement has been signed and $250 million will be advanced as soon as possible. The federal government will provide two-thirds of the loans, while the Ontario government will contribute one-third.

The auto industry directly employs over 150,000 Canadians plus another 340,000 indirectly. It is Canada’s largest industry within the manufacturing sector and represents 14% of our manufacturing output and 23% of manufactured exports.

IE