The leader of GM Canada's largest union says a filing by the car maker for court protection from creditors is likely.
The federal and Ontario governments have ordered the Canadian Auto Workers and General Motors of Canada Ltd. to slash hourly labour costs by May 15.
CAW president Ken Lewenza says the company faces liquidation if a cost-saving agreement is not reached.
“This is an unbelievable situation,” says Mr. Lewenza, who believes the car maker may have to file for Chapter 11 and CCAA creditor protection.
The union and the auto maker will head back to the table just two months after signing a new labour agreement that GM chief executive officer Fritz Henderson said made the auto maker's Canadian operations competitive with offshore-based car companies in North America.
Since the CAW-GM deal that was approved in March, the union reached a new agreement with Chrysler Canada Inc. that trims labour costs by about $12 an hour more than the GM agreement.
The CAW-Chrysler deal cut costs for the auto maker by $240-million annually.
GM Canada never revealed how much its hourly labour costs were reduced by the March deal, but said the agreement narrowed the competitive gap with offshore-based companies and reduced legacy costs.
Ontario Premier Dalton McGuinty said the Canadian governments want auto workers to agree to make concessions with GM Canada that are similar to those they made with Chrysler Canada.
“I would ask folks to keep in mind what happened in the case of Chrysler,” Mr. McGuinty told reporters.
Based on his conversations with Mr. Lewenza in recent days and with an executive in GM's global operations on Wednesday, Mr. McGuinty said he expects “a bit of pushing to and fro” between both sides, but he said there is plenty of goodwill.
“We cannot come to the table on behalf of Canadian taxpayers unless there are significant contributions made by everybody else,” he said. “I'm convinced that can be done.”
The Canadian governments could be asked to take equity in General Motors, even though they did not enter into the bailout talks looking to become shareholders of an auto company, Mr. McGuinty said.
But as part of the negotiations, the governments may have to take equity in GM, as they did in Chrysler, he said.
“Obviously, we're going to take a serious look at that.”
Ontario Finance Minister Dwight Duncan said federal and provincial government officials met with GM Canada and the CAW on Wednesday to set down conditions in return for providing loans.
“People raised eyebrows at the thought that Chrysler may not pay back loans,” Mr. Duncan told reporters on Thursday. “This is a very serious amount of money that's involved here. The government of the United States has called for a full viability plan.”