General Motors bankruptcy ranks as the highest manufacturing bankruptcy, and the fourth largest overall in American history. It follows weeks of speculation, and a period of chaotic labour negotiations.
US, Canada, Ontario Take Ownership Stake in GM
Governments in both the United States, and Canada have taken an ownership stake in GM. In the United States, the Obama Administration pledged an additional $30 billion to help the automaker through its bankruptcy period. The U.S. government will eventually own 60% of the company.
In remarks published on cbc.ca President Barack Obama said his government was a hesitant shareholder: “We are acting as reluctant shareholders because that is the only way to help GM succeed.” Obama’s comments continued stating General Motors would be independently managed.
Canada, and the Ontario governments followed suit. Governments on this side of the border have contributed a total of $10.6 billion dollars to help Chrysler and General Motors. GM’s final ownership structure will give the federal government 12% ownership of the company, and the right to name one person to the board of directors.
In remarks published by Reuters, Prime Minister Stephen Harper echoed Obama’s reluctance in taking ownership calling it a necessary to protect the economy: “Today’s (June 1st) announcement is a regrettable but necessary step to protect the Canadian economy during the worst global recession in half a century.” The Harper government has contributed approximately $7 billion Canadian, while the Ontario Government has contributed $3.6 billion.
Ontario Premier Dalton McGuinty echoed Harper’s sentiments. In remarks published by Citynews.ca McGuinty added that without government contributions, the country’s auto sector would quickly die out: “Without Canadian money, we would be out of the game.”
McGuinty added he was confident the move to save jobs was the right one.
General Motors Plans To Invest Canadian Bailout Money
General Motors (GM) Canada has managed to remain solvent thanks to the government’s bailout money. The company has plans, which include spending $1 billion on research and development, and $2.2 billion on capital. The three remaining Ontario car plants are going to see new products including five new cars built at the company’s Oshawa Plant. Those new products include a new hybrid gas-electric car, and new engine modules at the GM plant in St. Catharines. It is expected GM’s plants, and supply chain will face little disruption as a result of the bankruptcy.
GM Canada's President thinks his company will emerge from bankruptcy a better one. In comments published by Canadian Press, GM Canada’s President Arturo Elias shared his vision of a new GM Canada: “Our customers can confidently continue to purchase new vehicles and obtain service and take full advantage of GM’s leading warranty coverage throughout this process. The New GM Canada will be even more focused on our customers.”
The long-term plan is for the Canadian governments to slowly decrease their ownership interest in the company over an 8-year period. Because the auto bailout is considered a one-time thing, the money spent will not count towards the deficit.
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