Industry Minister Tony Clement said Sunday the Canadian government is preparing for the possibility two major automakers will file for bankruptcy -- a last resort the new head of General Motors is seriously considering.
Clement told CTV's Question Period that both General Motors and Chrysler have major hurdles to clear if they wish to avoid filing for bankruptcy in the next eight weeks.
It's an undesirable scenario Clement said could have many outcomes, depending on the progress the company makes before the deadlines they are facing.
"At the worst end of the scale is an unplanned, or accidental, bankruptcy situation where all of a sudden things seize up and we're not prepared," Clement said, noting that the government is preparing their "plan Bs" should either automaker face immediate problems.
"If we're in a situation where we're organizing for a kind of creditor protection situation, that at least is slightly better and we can retain our loans, at the same time protect our loans and at the same time reorganize the companies."
Clement said the government's "plan B" involved preparing to protect the taxpayer-backed loans, should the automakers fall into immediate trouble.
But he defended the loans as being necessary for the protection of the entire auto sector, which Clement said provides 460,000 jobs to Canadians and affects some 600 auto parts firms.
"We're talking about saving a sector, rather than how you feel, in particular, about GM or Chrysler," Clement said.
Meanwhile, Fritz Henderson, the newly-appointed CEO of General Motors, said Sunday that bankruptcy is something his company will do if necessary.
Henderson told CNN's State of the Union, that "if it's required, that's what we'll do."
He reiterated that position on NBC's Meet the Press, when he said: "We either accomplish this job outside of bankruptcy in the short term, or alternatively, if it's necessary, we'll go into bankruptcy in order to get this job done."
But Henderson said the automaker still prefers to restructure without bankruptcy protection.
At the end of March, the U.S, Canadian and Ontario governments rejected the restructuring plans that the struggling, one-time auto giants put together in the wake of their imminent financial problems.
Clement said that Chrysler must seal a deal with European automaker Fiat to "get involved with their management and investment," while coming to an agreement with the CAW on their labour costs.
As for General Motors, the Detroit automaker must "downsize" their overly-optimistic U.S. sales expectations, while cutting their bottom line costs, Clement said.
If the companies cannot come up with satisfactory alternatives, they will not get any more government help.
The deadline for Chrysler to make its deal with Fiat is the end of April, while the deadline for GM is the end of May.
With files from The Associated Press and The Canadian Press
