By Frank Pingue
TORONTO (Reuters) - The Canadian dollar rose to its highest level in over two months versus the U.S. currency on Tuesday, helped by a combination of firmer oil prices and a rally in overseas equity markets.
The rise in the domestic currency, while backed mostly by a solid fundamental background, got a sudden boost as it pierced a key technical level around C$1.2180.
With the move higher, the Canadian dollar managed to move further away from the multi-year low it hit in early March when falling equities sent investors flocking to the greenback given its perceived safe haven status.
"Most base metals are higher. Gold is gold higher, oil is higher and so all of that is playing into the Canadian dollar's favor." said Matthew Strauss, senior currency strategist at RBC Capital Markets.
"So we have a good fundamental backdrop and there was this looming support level, and once it was successfully tested it rallied."
The Canadian currency rose as high as C$1.2127 to the U.S. dollar, or 82.46 U.S. cents, which marked its highest level since February 9.
By 7:55 a.m. EDT, the domestic currency retreated slightly to C$1.2138 to the U.S. dollar, or 82.39 U.S. cents, but remained up from C$1.2193 to the U.S. dollar, or 82.01 U.S. cents, at Monday's close.
With no key domestic data due out on Tuesday, the currency's moves will likely be dictated by the performance of equities and moves in the U.S. dollar.
The next Canadian data that may draw attention is Thursday's February manufacturing sales report and the consumer price index data for March due out on Friday.
The CPI report will be the last major piece of data for the Bank of Canada to consider ahead of its key interest rate announcement on April 21.
The central bank cut its key rate to a historic low of 0.5 percent in March and has signaled it may take extra steps to pump money into a system that remains short of credit.
BONDS PRICES TILT HIGHER
Canadian bond prices were a touch higher across the curve, mirroring a move by the bigger U.S. Treasury market, as some upbeat U.S. banking news left dealers with little interest in more secure assets like government debt.
After the markets closed on Monday, Goldman Sachs delivered a higher-than-expected first-quarter profit, seen by some experts as evidence it managed to sidestep the worst of the financial crisis.
The two-year bond was up 1 Canadian cent at C$100.31 to yield 1.102 percent, while the 10-year bond rose 12 Canadian cents to C$107.17 to yield 2.925 percent.
The 30-year bond was up 10 Canadian cents at C$123.75 to yield 3.643 percent. In the United States, the 30-year treasury yielded 3.705 percent.
More at Johnathan Vrozos http://www.johnathanvrozos.ca
Tuesday, April 14, 2009
Wednesday, April 8, 2009
Housing starts jump, but more gloom seen
By David Ljunggren
OTTAWA (Reuters) - Housing starts rose an unexpectedly strong 13.7 percent in March, breaking a six-month losing streak, but analysts said the recovery is likely to be temporary.
Ground breaking on new homes climbed to a seasonally adjusted annualized rate of 154,700 units from an upwardly revised 136,100 units in February, Canada Mortgage and Housing Corp said on Wednesday.
Analysts had predicted 130,000 starts in March.
The housing downturn in Canada has hit starts, home prices as well as sales activity. Economists describe this as part of a "correction" in the sector, which is expected to last the better part of this year before there is a rebound in 2010.
"On the surface, this was a very strong report ... However, in the grand scheme of things, the key economic fundamental factors continue to point to further weakness in Canadian housing sector activity," said Millan Mulraine, an economics strategist at TD Securities.
"As such, we believe that this surprising pick-up in construction activity is likely to be a one-month wonder, and expect activity to soften in the coming months."
Construction of urban single-family homes rose 1.3 percent to 46,400 units last month from 45,800 in February.
Construction of multiple dwellings, such as condos, jumped by 28.3 percent to an annual rate of 81,500 units from 63,500. Analysts say this sector is particularly volatile.
"New home construction is now at a more sustainable level after having been exceptionally strong over the past seven years, exceeding 200,000 units per year," the CMHC said in a statement.
Rural starts in March were estimated at an annual rate of 26,800 units, unchanged from February.
The Canadian dollar strengthened on the data and by 9:45 a.m. EST was at C$1.2315 to the U.S. dollar, or 81.20 U.S. cents, compared to C$1.2378, or 80.78 cents, at Tuesday's close.
Doug Porter of BMO Capital Markets Economics, noting the March starts were down 35 percent from March 2008, said the latest figure was likely to be a one-off.
"The housing sector is still trying to find a bottom, and with prices in retreat in most major cities, we wouldn't look for a lasting rebound in homebuilding until at least 2010. Starts are expected to average 145,000 units this year, and this report does nothing to alter that view," he said.
The March surge was fed by increased activity in multiple units in the central provinces of Quebec and Ontario, while the once hot economy in Western Canada continued to cool.
Derek Holt and Karen Cordes of Scotia Capital said the jump was "a step backward in the push to work off increasingly bloated Canadian housing inventories in the new and existing home segments, so higher than expected construction volumes are bearish for prices going forward".
($1=$1.23 Canadian)
(Additional reporting by Ka Yan Ng in Toronto; editing by Peter Galloway)
johnthanvrozos.ca
OTTAWA (Reuters) - Housing starts rose an unexpectedly strong 13.7 percent in March, breaking a six-month losing streak, but analysts said the recovery is likely to be temporary.
Ground breaking on new homes climbed to a seasonally adjusted annualized rate of 154,700 units from an upwardly revised 136,100 units in February, Canada Mortgage and Housing Corp said on Wednesday.
Analysts had predicted 130,000 starts in March.
The housing downturn in Canada has hit starts, home prices as well as sales activity. Economists describe this as part of a "correction" in the sector, which is expected to last the better part of this year before there is a rebound in 2010.
"On the surface, this was a very strong report ... However, in the grand scheme of things, the key economic fundamental factors continue to point to further weakness in Canadian housing sector activity," said Millan Mulraine, an economics strategist at TD Securities.
"As such, we believe that this surprising pick-up in construction activity is likely to be a one-month wonder, and expect activity to soften in the coming months."
Construction of urban single-family homes rose 1.3 percent to 46,400 units last month from 45,800 in February.
Construction of multiple dwellings, such as condos, jumped by 28.3 percent to an annual rate of 81,500 units from 63,500. Analysts say this sector is particularly volatile.
"New home construction is now at a more sustainable level after having been exceptionally strong over the past seven years, exceeding 200,000 units per year," the CMHC said in a statement.
Rural starts in March were estimated at an annual rate of 26,800 units, unchanged from February.
The Canadian dollar strengthened on the data and by 9:45 a.m. EST was at C$1.2315 to the U.S. dollar, or 81.20 U.S. cents, compared to C$1.2378, or 80.78 cents, at Tuesday's close.
Doug Porter of BMO Capital Markets Economics, noting the March starts were down 35 percent from March 2008, said the latest figure was likely to be a one-off.
"The housing sector is still trying to find a bottom, and with prices in retreat in most major cities, we wouldn't look for a lasting rebound in homebuilding until at least 2010. Starts are expected to average 145,000 units this year, and this report does nothing to alter that view," he said.
The March surge was fed by increased activity in multiple units in the central provinces of Quebec and Ontario, while the once hot economy in Western Canada continued to cool.
Derek Holt and Karen Cordes of Scotia Capital said the jump was "a step backward in the push to work off increasingly bloated Canadian housing inventories in the new and existing home segments, so higher than expected construction volumes are bearish for prices going forward".
($1=$1.23 Canadian)
(Additional reporting by Ka Yan Ng in Toronto; editing by Peter Galloway)
johnthanvrozos.ca
Tuesday, April 7, 2009
TSX pulled down by oil, but gold shines
By Ka Yan Ng
ADVERTISEMENT
TORONTO (Reuters) - Toronto's main stock index finished more than 2 percent lower on Tuesday, hurt by lower oil prices and worries about toxic assets in the global banking industry.
Oil prices fell more than 3 percent to nearly $49 a barrel and pulled down the energy group 2.7 percent. Shares of EnCana Corp , one of the biggest drags on the overall index, were down 3.7 percent at C$52.84, while Canadian Natural Resources was off 3.8 percent at C$51.47.
Worries about the health of the global banking system were raised anew on Tuesday as the market focused on what may be revealed in upcoming earnings statements.
Toronto's financial sector was down 2.7 percent, pressured also by news that the International Monetary Fund was to soon forecast that toxic assets racked up by banks and insurers could hit $4 trillion.
Royal Bank of Canada was off 2.1 percent at C$37.40, while Bank of Nova Scotia dropped 2.97 percent to C$30.76.
The S&P/TSX composite index finished down 191.42 points, or 2.12 percent, at 8,824.75. All 10 of the TSX's main sectors were lower.
"It's tough for the Canadian market to have a good day when oil and commodities are down and (there are) increased worries in the financial sector," said Michael Sprung, president at Sprung & Co. Investment Counsel.
The sharp declines in financials and energy were partly offset by rebounding gold-mining issues.
Shares of Goldcorp , the main lift on the index, gained 0.8 percent to C$37.70, while Barrick Gold rose 0.56 percent to C$35.81. The materials group as a whole ended 1.37 percent lower.
The TSX has fallen in the past three sessions after four weeks of gains. In early March it plunged its lowest level in more than five years.
"It's not a drastic selloff, it's still within a five-day range. It's jitters and nervousness ahead of earnings. Alcoa will give the head start tonight," said Francis Campeau, a broker at MF Global Canada, in Montreal.
Nervousness ahead of release of aluminum producer Alcoa's results on Tuesday, which traditionally kicks off the start of the U.S. earnings parade, also contributed to the general malaise on equity markets, which were bracing for more gloom after the worst fourth-quarter earnings season on record.
Alcoa's results could set the stage for sentiment on equity markets in the weeks ahead. The company reported a second consecutive quarterly loss after the market close on Tuesday.
Canadian jobs figures this Thursday could also strain sentiment if data shows another month of severe job losses.
The blue-chip S&P/TSX 60 closed 11.57 points lower, or 2.11 percent, at 537.18.
($1=$1.24 Canadian)
(Reporting by Ka Yan Ng; editing by Peter Galloway)
Johnathan Vrozos
ADVERTISEMENT
TORONTO (Reuters) - Toronto's main stock index finished more than 2 percent lower on Tuesday, hurt by lower oil prices and worries about toxic assets in the global banking industry.
Oil prices fell more than 3 percent to nearly $49 a barrel and pulled down the energy group 2.7 percent. Shares of EnCana Corp , one of the biggest drags on the overall index, were down 3.7 percent at C$52.84, while Canadian Natural Resources was off 3.8 percent at C$51.47.
Worries about the health of the global banking system were raised anew on Tuesday as the market focused on what may be revealed in upcoming earnings statements.
Toronto's financial sector was down 2.7 percent, pressured also by news that the International Monetary Fund was to soon forecast that toxic assets racked up by banks and insurers could hit $4 trillion.
Royal Bank of Canada was off 2.1 percent at C$37.40, while Bank of Nova Scotia dropped 2.97 percent to C$30.76.
The S&P/TSX composite index finished down 191.42 points, or 2.12 percent, at 8,824.75. All 10 of the TSX's main sectors were lower.
"It's tough for the Canadian market to have a good day when oil and commodities are down and (there are) increased worries in the financial sector," said Michael Sprung, president at Sprung & Co. Investment Counsel.
The sharp declines in financials and energy were partly offset by rebounding gold-mining issues.
Shares of Goldcorp , the main lift on the index, gained 0.8 percent to C$37.70, while Barrick Gold rose 0.56 percent to C$35.81. The materials group as a whole ended 1.37 percent lower.
The TSX has fallen in the past three sessions after four weeks of gains. In early March it plunged its lowest level in more than five years.
"It's not a drastic selloff, it's still within a five-day range. It's jitters and nervousness ahead of earnings. Alcoa will give the head start tonight," said Francis Campeau, a broker at MF Global Canada, in Montreal.
Nervousness ahead of release of aluminum producer Alcoa's results on Tuesday, which traditionally kicks off the start of the U.S. earnings parade, also contributed to the general malaise on equity markets, which were bracing for more gloom after the worst fourth-quarter earnings season on record.
Alcoa's results could set the stage for sentiment on equity markets in the weeks ahead. The company reported a second consecutive quarterly loss after the market close on Tuesday.
Canadian jobs figures this Thursday could also strain sentiment if data shows another month of severe job losses.
The blue-chip S&P/TSX 60 closed 11.57 points lower, or 2.11 percent, at 537.18.
($1=$1.24 Canadian)
(Reporting by Ka Yan Ng; editing by Peter Galloway)
Johnathan Vrozos
Wednesday, April 1, 2009
Canada to give US$10 billion to IMF
OTTAWA (AFP) - Canada is to give an extra 10 billion US dollars in emergency aid to the International Monetary Fund to assist emerging markets and developing countries, Prime Minister Stephen Harper said in a statement.
"Canada is joining other G20 countries in committing an additional 10 billion US dollars that can be mobilized for IMF emergency assistance to ensure emerging markets and developing countries have the access to capital they need," said Harper.
The IMF has said it needs hundreds of billions of dollars more to meet increased demands from its 185 members as the global economy moves toward negative growth.
In the midst of the global economic downturn the body has come under intense pressure to reform, with critics charging it was unable to meet the crisis' challenges by injecting sufficient liquidity into under-stress markets.
The European Union has vowed to contribute around 100 billion dollars more to the fund, while the US has called for a tripling of the IMF's funds, without specifying what it would be willing to pay in dues.
In February Japan inked a deal to provide the fund with up to 100 billion dollars.
Brazil, Russia, India and China have also backed increasing the IMF coffers.
These emerging economies are also keen to break the US and European stranglehold on the institutions by adjusting voting rights.
For more discussion go to Johnathan Vrozos www.johnathanvrozos.ca
"Canada is joining other G20 countries in committing an additional 10 billion US dollars that can be mobilized for IMF emergency assistance to ensure emerging markets and developing countries have the access to capital they need," said Harper.
The IMF has said it needs hundreds of billions of dollars more to meet increased demands from its 185 members as the global economy moves toward negative growth.
In the midst of the global economic downturn the body has come under intense pressure to reform, with critics charging it was unable to meet the crisis' challenges by injecting sufficient liquidity into under-stress markets.
The European Union has vowed to contribute around 100 billion dollars more to the fund, while the US has called for a tripling of the IMF's funds, without specifying what it would be willing to pay in dues.
In February Japan inked a deal to provide the fund with up to 100 billion dollars.
Brazil, Russia, India and China have also backed increasing the IMF coffers.
These emerging economies are also keen to break the US and European stranglehold on the institutions by adjusting voting rights.
For more discussion go to Johnathan Vrozos www.johnathanvrozos.ca
Rail Line To Pearson Airport One Of Four Major Transit Projects That Will Forever Change Toronto
CityNews.ca Staff
It's finally going to happen - a way for you to get to Pearson International Airport by subway. It's part of a huge transit funding announcement made on Wednesday that will forever change the way you get around in the city.
The provincial money is coming from the recently announced stimulus packages designed to get Toronto moving - and building - again. Some of the transit plans have been in the works for a while, but up until now we never knew when both the money and the go-ahead would come together.
It appears that time has arrived and the announcement covers four new distinct changes that will affect the entire the GTA.
The most significant one involves the airport, with a 30-kilometre long rapid transit line on Eglinton Ave. set to move travellers from Kennedy station to PIA. Some of the new track - from Leslie to Keele - will be underground, the rest above the surface. That part will resemble a modernized version of the current route that runs along Spadina.
It's been a cherished dream of travellers for years, because airport parking is expensive, it's often difficult to get to and navigating the maze of the giant complex can be a challenge even for those who are familiar with the layout. It's expected to be completed by 2016.
The other major Toronto project involves a new rapid transit line that will extend the Yonge subway system from Finch to Highway 27 and Humber College, and then east to Don Mills. That one should be ready in just four years.
The Scarborough LRT will also be upgraded and expanded by 2015.
And congestion in York Region will be eased by an expansion of the Viva line, featuring more buses, more stations and dedicated bus lanes. That one is about four years away from reality, too.
There will also be a study launched to find the best way to improve Hamilton's transit system.
The plans are worth a total of $9 billion and will create thousands of job. And while many had been in the background for years, there was always a lack of funds to get them started. This announcement promises shovels in the ground almost immediately.
"The projects we're announcing today are only the start," promises Premier Dalton McGuinty. "Together, we are taking a big step towards our broad vision for regional transit for the GTA. It's the most ambitious project of its kind in Canadian history."
A beaming Mayor David Miller could hardly contain his excitement about the projects, which he's been working towards for years.
"It means that no longer will someone who lives in northeast Scarborough and works in southwest Etobicoke have to spend hours taking four different modes of public transit to get from 'A' to 'B'," he proclaims. "They'll be able to navigate the city and the region quickly, efficiently and reliably."
Many commuters hope the plans - especially the airport link - flies soon. "It's a great idea and will provide easier transport for people working downtown and living downtown," praises one traveller, who had to get to Pearson some other way on Wednesday.
But while the new facilities will be welcome and most will agree they're badly needed in congestion clogged Toronto, it won't come without some pain. Those with businesses on Eglinton and Finch Aves. are bracing for disruptions that could last years as the projects are put into place.
"I think it's a great idea," admits Larry Visiladis of Alexis Hair Design on Eglinton. "The only concern I have is how long this will take and how much disruption with the neighbourhood while the construction is going on."
McGuinty admits it will be tough for a while. "I think we have to be honest at the outset. No way we do this without creating some disruption."
But at the other end, those businesses will suddenly find themselves on a subway line and that may increase traffic because their stores will be easier to reach. If they can survive the long construction it takes to reach that point.
For more goto to johnathanvrozos.ca Johnathan Vrozos
It's finally going to happen - a way for you to get to Pearson International Airport by subway. It's part of a huge transit funding announcement made on Wednesday that will forever change the way you get around in the city.
The provincial money is coming from the recently announced stimulus packages designed to get Toronto moving - and building - again. Some of the transit plans have been in the works for a while, but up until now we never knew when both the money and the go-ahead would come together.
It appears that time has arrived and the announcement covers four new distinct changes that will affect the entire the GTA.
The most significant one involves the airport, with a 30-kilometre long rapid transit line on Eglinton Ave. set to move travellers from Kennedy station to PIA. Some of the new track - from Leslie to Keele - will be underground, the rest above the surface. That part will resemble a modernized version of the current route that runs along Spadina.
It's been a cherished dream of travellers for years, because airport parking is expensive, it's often difficult to get to and navigating the maze of the giant complex can be a challenge even for those who are familiar with the layout. It's expected to be completed by 2016.
The other major Toronto project involves a new rapid transit line that will extend the Yonge subway system from Finch to Highway 27 and Humber College, and then east to Don Mills. That one should be ready in just four years.
The Scarborough LRT will also be upgraded and expanded by 2015.
And congestion in York Region will be eased by an expansion of the Viva line, featuring more buses, more stations and dedicated bus lanes. That one is about four years away from reality, too.
There will also be a study launched to find the best way to improve Hamilton's transit system.
The plans are worth a total of $9 billion and will create thousands of job. And while many had been in the background for years, there was always a lack of funds to get them started. This announcement promises shovels in the ground almost immediately.
"The projects we're announcing today are only the start," promises Premier Dalton McGuinty. "Together, we are taking a big step towards our broad vision for regional transit for the GTA. It's the most ambitious project of its kind in Canadian history."
A beaming Mayor David Miller could hardly contain his excitement about the projects, which he's been working towards for years.
"It means that no longer will someone who lives in northeast Scarborough and works in southwest Etobicoke have to spend hours taking four different modes of public transit to get from 'A' to 'B'," he proclaims. "They'll be able to navigate the city and the region quickly, efficiently and reliably."
Many commuters hope the plans - especially the airport link - flies soon. "It's a great idea and will provide easier transport for people working downtown and living downtown," praises one traveller, who had to get to Pearson some other way on Wednesday.
But while the new facilities will be welcome and most will agree they're badly needed in congestion clogged Toronto, it won't come without some pain. Those with businesses on Eglinton and Finch Aves. are bracing for disruptions that could last years as the projects are put into place.
"I think it's a great idea," admits Larry Visiladis of Alexis Hair Design on Eglinton. "The only concern I have is how long this will take and how much disruption with the neighbourhood while the construction is going on."
McGuinty admits it will be tough for a while. "I think we have to be honest at the outset. No way we do this without creating some disruption."
But at the other end, those businesses will suddenly find themselves on a subway line and that may increase traffic because their stores will be easier to reach. If they can survive the long construction it takes to reach that point.
For more goto to johnathanvrozos.ca Johnathan Vrozos
Monday, March 30, 2009
Canada bails out carmakers, says they could fail
By John McCrank and Randall Palmer
TORONTO/OTTAWA (Reuters) - Canada joined the tough talk of the Obama administration about the auto industry on Monday, saying no car maker is too big to fail, but it nonetheless offered billions of dollars in bridge financing to the Canadian units of General Motors and Chrysler.
Industry Minister Tony Clement said the plans set out by GM Canada and Chrysler thus far fall short of making them viable and called for further concessions all around.
"The old rule book is thrown out the window. I don't think anything is too big to fail, but we're going to give it our best shot at having a restructured auto sector and this is all part of it," Clement told CBC television.
He made the statement after announcing C$4 billion ($3.2 billion) in loans to tide the two automakers over while they come up with new restructuring plans.
The governments of Canada and the province of Ontario will provide Chrysler with C$1 billion, advancing C$250 million right away. They will distribute another C$500 million in early April and the remainder as of May 1.
"Very clearly, if the money had not been forwarded today, (Chrysler) would not have been able to meet payroll today or tomorrow," Clement told a news conference in Ottawa.
"So we were faced with this choice of a disorderly bankruptcy ... We felt now was the time to announce this."
GM is eligible for up to C$3 billion in bridge loans and the government said it hoped to close that deal "very soon".
Ottawa and Ontario first announced the short-term financing in December but neither company has drawn on it.
Canada will provide no further financing unless acceptable plans are produced. If they aren't, the government would have the option of calling the loans.
In addition to proving their viability, the companies will have to commit to maintaining 20 percent of their North American production in Canada.
On Monday, Washington demanded tough new restructuring plans at GM and Chrysler and forced out GM's chief executive.
Clement said the Canadian and U.S. governments were working closely on the file. He said Ottawa endorsed plans arrived at jointly with the United States under which Chrysler would have until the end of April to come up with a viability plan that must include a link-up with Italy's Fiat SpA.
LABOR CONCESSIONS
Chrysler will also have to find a compromise with the Canadian Auto Workers union on cutting labor costs, while Canada says a deal that the union already cut with GM does not go far enough.
The union recently agreed to reopen the three-year contract deals it reached with the companies last May to help GM and Chrysler qualify for government aid.
Earlier this month, the CAW reached a deal with GM that the company said will eliminate nearly C$1 billion of costs related to its retired workers from its books, on top of cutting active labor costs by more than C$7 an hour.
Chrysler has said it needs a better deal from the union, or it could be forced to pull its operations out of Canada.
Clement said the GM-CAW deal falls short of what's required.
The Canadian government is "expecting General Motors and the CAW to continue their discussions, particularly on the issue of legacy costs where it has become apparent there wasn't as much progress as we would have liked to have seen," he said, referring to costs related to retiree benefits.
CAW President Ken Lewenza dismissed the idea of reopening the contract with GM to address legacy costs, saying there was nothing the union could do even if it wanted to.
"You can't do it in bargaining, and nor will we," he said at a press conference in Toronto. "I mean, at the end of the day, it's not legal to say to pensioners that you're not entitled to the pension benefits that you left on."
However, Clement said that if the companies enter bankruptcy protection in the United States, they would do the same in Canada, and the unions would then be forced to take a "haircut" along with everyone else.
"While we believe in the long-term viability of these companies, I agree with President Obama that we must also consider the possibility of court-supervised restructuring," he said.
Later, he elaborated to the CBC: "Bankruptcy protection is a whole new ball game for unions as well as for pension holders and others. I would suggest to them that it's in their best interest to start discussing these things directly with the companies."
Lewenza said the union would be willing to sit down with the federal and provincial governments, and the companies, to look at the possibility of setting up a plan similar to what the United Auto Workers union and the companies have agreed.
In the United States, GM and Chrysler have obligations to a retiree healthcare trust, known as a Voluntary Employee Beneficiary Association, and are pushing the UAW to allow them to pay the union in stock rather than cash for half of the remaining obligations.
($1=$1.26 Canadian)
(Additional reporting by Louise Egan and David Ljunggren; Editing by Peter Galloway)
TORONTO/OTTAWA (Reuters) - Canada joined the tough talk of the Obama administration about the auto industry on Monday, saying no car maker is too big to fail, but it nonetheless offered billions of dollars in bridge financing to the Canadian units of General Motors and Chrysler.
Industry Minister Tony Clement said the plans set out by GM Canada and Chrysler thus far fall short of making them viable and called for further concessions all around.
"The old rule book is thrown out the window. I don't think anything is too big to fail, but we're going to give it our best shot at having a restructured auto sector and this is all part of it," Clement told CBC television.
He made the statement after announcing C$4 billion ($3.2 billion) in loans to tide the two automakers over while they come up with new restructuring plans.
The governments of Canada and the province of Ontario will provide Chrysler with C$1 billion, advancing C$250 million right away. They will distribute another C$500 million in early April and the remainder as of May 1.
"Very clearly, if the money had not been forwarded today, (Chrysler) would not have been able to meet payroll today or tomorrow," Clement told a news conference in Ottawa.
"So we were faced with this choice of a disorderly bankruptcy ... We felt now was the time to announce this."
GM is eligible for up to C$3 billion in bridge loans and the government said it hoped to close that deal "very soon".
Ottawa and Ontario first announced the short-term financing in December but neither company has drawn on it.
Canada will provide no further financing unless acceptable plans are produced. If they aren't, the government would have the option of calling the loans.
In addition to proving their viability, the companies will have to commit to maintaining 20 percent of their North American production in Canada.
On Monday, Washington demanded tough new restructuring plans at GM and Chrysler and forced out GM's chief executive.
Clement said the Canadian and U.S. governments were working closely on the file. He said Ottawa endorsed plans arrived at jointly with the United States under which Chrysler would have until the end of April to come up with a viability plan that must include a link-up with Italy's Fiat SpA.
LABOR CONCESSIONS
Chrysler will also have to find a compromise with the Canadian Auto Workers union on cutting labor costs, while Canada says a deal that the union already cut with GM does not go far enough.
The union recently agreed to reopen the three-year contract deals it reached with the companies last May to help GM and Chrysler qualify for government aid.
Earlier this month, the CAW reached a deal with GM that the company said will eliminate nearly C$1 billion of costs related to its retired workers from its books, on top of cutting active labor costs by more than C$7 an hour.
Chrysler has said it needs a better deal from the union, or it could be forced to pull its operations out of Canada.
Clement said the GM-CAW deal falls short of what's required.
The Canadian government is "expecting General Motors and the CAW to continue their discussions, particularly on the issue of legacy costs where it has become apparent there wasn't as much progress as we would have liked to have seen," he said, referring to costs related to retiree benefits.
CAW President Ken Lewenza dismissed the idea of reopening the contract with GM to address legacy costs, saying there was nothing the union could do even if it wanted to.
"You can't do it in bargaining, and nor will we," he said at a press conference in Toronto. "I mean, at the end of the day, it's not legal to say to pensioners that you're not entitled to the pension benefits that you left on."
However, Clement said that if the companies enter bankruptcy protection in the United States, they would do the same in Canada, and the unions would then be forced to take a "haircut" along with everyone else.
"While we believe in the long-term viability of these companies, I agree with President Obama that we must also consider the possibility of court-supervised restructuring," he said.
Later, he elaborated to the CBC: "Bankruptcy protection is a whole new ball game for unions as well as for pension holders and others. I would suggest to them that it's in their best interest to start discussing these things directly with the companies."
Lewenza said the union would be willing to sit down with the federal and provincial governments, and the companies, to look at the possibility of setting up a plan similar to what the United Auto Workers union and the companies have agreed.
In the United States, GM and Chrysler have obligations to a retiree healthcare trust, known as a Voluntary Employee Beneficiary Association, and are pushing the UAW to allow them to pay the union in stock rather than cash for half of the remaining obligations.
($1=$1.26 Canadian)
(Additional reporting by Louise Egan and David Ljunggren; Editing by Peter Galloway)
Sunday, March 29, 2009
General Motors CEO To Step Down
CityNews.ca Staff
An announcement out of Detroit has taken the auto world by surprise.
Officials with the Obama administration say General Motors CEO Rick Wagoner will step down immediately at the request of the White House. The news comes as President Obama prepares to unveil additional restructuring plans designed to save the domestic auto industry.
Obama will put forth the strategy Monday as part of the conditions for more government loans for GM and Chrysler.
Wagoner, 56, has been chairman and chief executive since 2003 and has said it would be better if he led the company through its current crisis.
Canadian Auto Workers Union head Ken Lawenza says word of Wagoner's departure is a shock and comes at a bad time for the ailing company.
An announcement out of Detroit has taken the auto world by surprise.
Officials with the Obama administration say General Motors CEO Rick Wagoner will step down immediately at the request of the White House. The news comes as President Obama prepares to unveil additional restructuring plans designed to save the domestic auto industry.
Obama will put forth the strategy Monday as part of the conditions for more government loans for GM and Chrysler.
Wagoner, 56, has been chairman and chief executive since 2003 and has said it would be better if he led the company through its current crisis.
Canadian Auto Workers Union head Ken Lawenza says word of Wagoner's departure is a shock and comes at a bad time for the ailing company.
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