Chrysler Canada's assembly plants have shut down, as parts suppliers halt shipments while the automaker's U.S. parent company seeks bankruptcy protection.
Production operations at Chrysler's assembly plants in Windsor and Brampton, Ont. were cancelled effective Friday, "until further notice," the company announced in a statement.
Roughly 2,700 employees at the Brampton plant and 4,400 workers in Windsor are affected.
Chrysler Canada has no plans to seek bankruptcy protection. But its major suppliers stopped production Thursday as soon as they heard the company was filing for bankruptcy protection under Chapter 11 in the United States.
Chrysler plants were also idled in the U.S., putting 38,500 hourly and salaried workers at 23 manufacturing plants and facilities out of work.
The shutdowns will also hurt Canada's auto parts industry. Already, parts supplier Martinrea International Inc. says it will be forced to temporarily lay off workers while Chrysler halts production.
Gerry Fedchun, president of the Automotive Parts Manufacturers' Association, estimates that for every one job lost in an assembly plant, seven jobs are lost in the economy as a whole. The auto parts industry employs about 79,000 Canadians and is largely based in southern Ontario.
In a New York courtroom Friday, lawyers for Chrysler LLC, the third largest U.S. automaker, laid out an ambitious plan to emerge again in as little as 30 days. Documents in the case reveal the automaker plans to close five more U.S. plants by the end of 2010, in addition to two plants that were idled at the end of last year.
Chrysler's plan will see U.S., Canadian and Ontario governments put up a combined US$10.5 billion that Chrysler will use to undertake court-supervised restructuring operations.
As a result of the deal, the U.S. government will take an eight per cent equity stake in Chrysler, while the Ontario and Canadian governments will jointly take a two per cent stake in the company. The United Auto Workers will own 55 per cent of the automaker.
The White House has said Chrysler could come out of bankruptcy protection within 30 to 60 days, a speed that is only possible because of the intense level of involvement of the U.S. government in the proceedings.
On Friday, Industry Minister Tony Clement told CTV's Canada AM that Canadian officials worked alongside the U.S. government to hammer out the details of the financing deal, which includes a still-developing pact Chrysler will make with Fiat SpA.
Clement said Chrysler can come out on top in an alliance with Fiat by providing the Italian automaker with a road into the highly competitive North American marketplace.
"Obviously, we had our officials in Washington for a considerable amount of time, negotiating side by side with the Americans, with Fiat, with Chrysler," Clement said from Ottawa. "We've had our accountants in looking at the books, looking at proprietary commercial information at Chrysler."
Clement said Chrysler can benefit from Fiat's interest in getting into the North American market, something that will motivate the Italian carmaker to take full advantage of Chrysler's existing resources.
"Fiat has a real incentive to enter the North American car market, to use the Chrysler dealerships, to use the Chrysler production capacity," Clement said. "That's what's in it for them. That will be a high motivator for them in the future."
Additionally, Fiat CEO Sergio Marchionne has indicated the Canadian Chrysler plants are "part of their future," Clement said.
"He's looked at those plants, he knows those plants very well," he added. "He has said those plants are part of their future, he knows how productive they are, he wants them to be producing cars."
For his part, Marchionne has said Fiat is preparing for Chrysler "to re-emerge quickly as a reliable and competitive automaker."
He said Fiat plans to reintroduce brands like Alfa Romeo to North America.
The industry minister also said Fiat is obliged to pay back the financing loans to the U.S. and Canadian governments, if the company chooses to take a majority stake in Chrysler.
The other part of the deal that was key to Canadian participation was the fact that Canada will maintain its auto production capacity, Clement said, which amounts to about one-fifth of all North American production.
"We wanted to preserve our share of the market production, preserve our share of this very important industry which translates into hundreds of thousands of jobs throughout Ontario and Canada," he said.
