TORONTO -- The 2,600 jobs General Motors of Canada Ltd. is slashing at its pickup truck plant in Oshawa, Ont., likely will cause the company to default on terms of interest-free government loans, forcing it to repay them before the original due date of 2053.
When GM was given the $375-million in loans by the federal and provincial governments for its Beacon manufacturing project three years ago, it pledged to retain at least 16,000 workers at its plants across Ontario. But those job guarantees all but vanished yesterday in the wake of the latest round of GM job cuts.
Ontario's Liberal Premier, Dalton McGuinty, confirmed yesterday that GM must maintain an average of 16,000 employees in Ontario over nine years as well as an unspecified number of workers at the truck plant in return for the 50-year, interest-free loans. He said he won't know for certain whether GM will fall below that threshold until September, 2009, when the firm halts production at the truck plant.
"Our sense at this point is they will be," Mr. McGuinty said at a news conference yesterday. "If those jobs end up going below a certain level, they will be in breach of the agreement and we will enforce that."
Under its agreement with the Ontario government, GM has until 2053 to repay a $175-million loan. The company also received a $200-million loan from the federal government for the Beacon project on similar terms, a GM spokesman said. "Potentially, there may be some repayments," GM Canada president Arturo Elias told reporters in a conference call.
Opposition members at the Ontario legislature criticized the government, saying job guarantees made by auto companies in return for government aid are doing little to stem layoffs in the sector.
When the Beacon project was unveiled in 2005, Joseph Cordiano, then-economic development minister, boasted that investments made by the government in the auto sector would support manufacturing at GM plants across Ontario.
Under the Beacon project, GM is in the process of transforming two car plants in Oshawa into one flexible facility and investing in its Cami joint venture in Ingersoll, Ont. To date, it has received $139-million of the provincial loan, said Sandra Pupatello, Mr. Cordiano's successor at economic development.
New Democrat Leader Howard Hampton said it is now apparent that there are no job guarantees. He also said it has now emerged government funding for GM is, in fact, a loan. "This is a government that is playing fast and loose with the truth, all in a desperate attempt to cover up money going out the door," he told reporters.
Progressive Conservative Leader John Tory called on the government to disclose terms of the loan. He said taxpayers have a right to know how their money is being spent.
Closing the truck plant would leave GM with a single passenger car plant in Oshawa, 50 per cent of the joint venture in Ingersoll and engine and parts plants in St. Catharines, Ont.
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By the numbers
U.S. AUTO SALES
GM saw a 28-per cent drop in sales for the month of May, compared with a year earlier.
| GM | -28% |
| Ford | -16% |
| Toyota | -8% |
| Honda | 14% |
| Chrysler | -25% |
| Nissan | 8% |
CANADIAN AUTO SALES
In Canada, GM sales fell off 20 per cent compared with the previous year.
| GM | -20% |
| Ford | -6% |
| Toyota | 15% |
| Honda | 4% |
| Chrysler | 8% |
| Nissan | 19% |
TOP-SELLING U.S. BRANDS
For the first time in 31 years, the Ford F-series truck is not the top-selling brand in the United States, falling to fifth behind the Civic, Corolla, Camry and Accord.
% CHANGE
| 17% | Honda Civic | 53,299 |
| 2% | Toyota Corolla | 52,826 |
| 33% | Toyota Camry | 51,291 |
| 37% | Honda Accord | 43,728 |
| -31% | Ford F150 | 42,973 |
KATHRYN TAM/THE GLOBE AND MAIL
SOURCE: COMPANY REPORTS
© The Globe and Mail
