TORONTO — While General Motors Corp. (NYSE:GM) will almost certainly file for bankruptcy protection in the U.S. on Monday, its Canadian subsidiary should emerge from a massive restructuring process relatively unscathed.
The restructuring, which has already been in the works for months and will cost governments around the world tens of billions of dollars, will see the company that once defined the automobile — and capitalism — in North America emerge a government-controlled shadow of its former self.
GM's Hummer, Pontiac, Saab and Saturn brands will be casualties of the restructuring, and its European Opel unit has already been sold to Canadian auto-parts maker Magna International (TSX:MG.A).
It will also close 14 more plants, shedding 21,000 additional jobs, and is working to end relationships with 2,600 dealers, including about 250 in Canada.
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However, GM Canada's operations — which have already been hit by the closure of a southern Ontario truck plant earlier this month and the planned closure of a transmission plant next year — face a relatively stable future, at least compared to their U.S. counterparts.
Like Chrysler, GM will likely file for Chapter 11 bankruptcy protection in the U.S. but won't file for the same protection under the Companies' Creditors Arrangement Act in Canada.
Unlike Chrysler, however, GM's southern Ontario-based Canadian operations should continue running as it restructures.
Chrysler temporarily shut down its U.S. plants when it announced it would file for bankruptcy protection. Although its Canadian plants weren't included in the shutdown, they were forced to close after parts makers stopped supplying them out of fear they wouldn't get paid.
Bill Pochiluk, president of industry adviser AutomotiveCompass, said GM has taken careful steps to make it doesn't find itself in the same situation.
"I believe GM has taken great care to build a process so it can continuously move forward, continue to get suppliers paid," Pochiluk said..
"(CEO Fritz Henderson) was very clear that they had worked hard to put together a transition plan that would not entail shutdowns because of procedures specifically put in place to get suppliers paid."
Canadian Auto Workers president Ken Lewenza has echoed this, saying he believes the company plans to keep its Canadian operations up and running while it restructures due to burgeoning demand for the cars it produces in Oshawa.
In the longer run, GM plans to launch three of six new products at its car plant in Oshawa and the CAMI joint-venture factory in Ingersoll, which the company runs with Japanese carmaker Suzuki.
These will include the Chevrolet Camaro, the Chevrolet Equinox and the GMC Terrain.
However, a source who asked to remain anonymous said GM's most recent production plan indicates that there are no plans to introduce new products to the CAMI facility after August 2014, implying that plant could be a long-term casualty of GM's restructuring.
Scotiabank economist and auto industry analyst Carlos Gomes said the overall economic picture seems to be brightening for the auto industry. He said Canadian sales numbers appeared to stabilize in April and should improve throughout 2009.
"We think that the first quarter likely set the bottom in terms of overall economic activity as well as the pace of the sales level," Gomes said.
"We're not expecting a sharp increase, but we do think that we'll likely trend somewhat higher from here."
Gomes said the pain of GM and Chrysler's restructuring won't be felt in the Canadian assembly industry, but rather in the parts industry. He said the number of supplier jobs has already declined from a high of 100,000 to about 75,000 in 2008, and will shrink by another 15,000 or so jobs before the restructuring process is complete.
It is expected that the federal and Ontario governments will announce on Monday how much bailout money they're giving GM and what they will receive in terms of job guarantees and a stake in the company.
One U.S. government official said the Canadian governments' portion of the bailout is expected to be about US$9 billion, or approximately C$10 billion.
Federal Finance Minister Jim Flaherty said Friday the alternative was losing "thousands and thousands" of jobs to the United States.
GM presented a restructuring plan to governments in the United States and Canada at the end of March, but both countries said it didn't go far enough. Since then, the company has been working with its unions, bondholders and other stakeholders to come up with a new cost-cutting plan.
In Canada, the company reached a new labour agreement with the Canadian Auto Workers — its third in a year — that slashes labour costs by a total of about $22 an hour.
GM Canada currently employs approximately 7,500 people at a car plant in Oshawa, a transmission plant in Windsor and an engine plant in St. Catharines. It expects its workforce will shrink to 4,400 over the next five years, due in large part to the previously announced closure of its transmission plant. The company employed 20,000 Canadians as recently as 2005.