General Motors Canada will dramatically shrink itself over the next five years. The parent company will phase out the Pontiac brand as it strives to become a leaner firm that can remain financially healthy in tough times.
The cuts are part of the struggling automaker's broad restructuring plan, which also includes massive layoffs of U.S. workers.
GM's Canadian hourly workforce will be slashed from to 4,400 by 2014 from 10,300 -- a reduction of 60 per cent -- while 21,000 American factory jobs will be lost.
As recently as 2005, GM had employed 20,000 people in Canada.
Many of those 5,900 job losses have previously been announced. The total includes the toll from the closure of a truck plant in Oshawa, Ont., which is to shut down on May 14, and a transmission plant in Windsor, Ont. That plant will close in 2010.
GM Canada spokesperson Stew Low said Monday's announcement represents about 1,500 jobs on top of the previous announcements.
Ken Lewenza said he anticipated the announcement.
"The reality is there's been significant plant closure announcements in Canada that are going to take place within the next couple years, and we're not totally surprised by the numbers although they're a little bit more than we'd anticipated," he said.
However, Lewenza said he believes most of the new jobs can be eliminated through attrition.
Officials at the company's Canadian branch said they plan to move "faster and deeper" on its restructuring plans including further layoffs of its white-collar employees.
They said they will likely also look to renegotiate with the Canadian Auto Workers union to try getting the workers to agree to the same concessions they agreed to in a recent deal with Chrysler Canada.
Lewenza said the union is willing to speak with GM about its Chrysler deal.
In Canada, the company plans to also reduce its dealer network by 42 per cent, from 705 to about 400 by the end of 2010. However, GM Canada announced that the Oshawa, Ont. plant and a facility in Ingersoll, Ont. will manufacture three new products for the company.
A Canadian Automobile Dealers Association spokesperson said the group thinks the dealership closures could affect up to 12,000 Canadians.
"It's very significant and that reflects the market share decline they've been experiencing for a number of years now," said Michael Hatch, the association's chief economist.
The parent firm
At a Monday news conference, GM president Fritz Henderson said the cutbacks are intended to help the company survive in the short term, and to eventually regain competitiveness.
"The objective here is not to survive, the objective is to develop an operational plan that will allow us to win," Henderson said.
On Monday the company announced that aside from the job cuts, the Pontiac brand will be phased out and the number of American GM dealerships will be slashed almost in half.
GM will also offer 225 shares for every US$1,000 in bondholders notes as part of a new debt-for-equity swap.
GM also wants the government to accept 50 per cent of the company's common stock as payment for half of the government loans made to the company, effective June 1.
The company also outlined a proposal to offer United Auto Workers stock for at least 50 per cent of the $20 billion GM must pay into a union-operated trust that will begin covering retiree health care costs starting next year.
The ailing automaker has to undergo dramatic cuts restructuring by June 1 in order to qualify for more government aid and avoid bankruptcy protection.
The company is currently surviving on $15.4 billion in government loans.
Henderson said the goal of the bond exchange is to slash GM's $27 billion in outstanding debt by $24 billion.
The debt-for-equity trade-off would reduce GM's debt by $44 billion from the current $62.4 billion.
"We would be substantially less levered as a company," said Henderson.
GM shares rose 34 cents, or 20.7 percent, to $2.03 in morning trading.
The company didn't announce which six plants were slated for accelerated closures. The shutdowns had been announced in February but weren't expected to come so soon.
In total, GM should have 34 factories at the end of 2010, 14 fewer than at the end of last year.
The number of GM dealerships in the U.S. will drop from 6,246 to 3,605 by 2010.
Pontiac -- the brand known for it's Trans Am and GTO muscle cars, will no longer exist by the end of next year at the latest.
"The Viability Plan reflects the direction of President Obama and the U.S. Treasury that GM should go further and faster on our restructuring," Henderson said in the statement.
"This stronger, leaner business model will enable GM to keep doing what it does best -- provide great new cars, trucks and crossovers to our customers, and continue to develop new advanced propulsion technologies that are vital for our country's economy and environment."
The measures reduce the company's break-even point to about 10 million vehicles, putting GM in a better position to once again turn a profit, Henderson said.
Tony Faria, co-director of the automotive research centre at the University of Windsor, said he expects the various levels of government will be happy with GM's plan.
"GM has gotten itself very lean. It's hurt a lot of people, it's hurt all the workers who've lost jobs, it's hurt a lot of suppliers who have far less parts to supply to GM, and it's going to continue to hurt dealerships," Faria said.
"There's been a lot of suffering through all this, but hopefully the end result will be a smaller GM than can be quite profitable."
With files from The Canadian Press
