Chrysler to leave Canada?

Extent of concessions questioned, analyst says

OTTAWA–The head of Chrysler issued a grim threat to federal politicians last night, warning the struggling automaker may shut down its plants in Canada if it doesn't get significant labour concessions and government aid.

"Chrysler LLC cannot afford to manufacture products in a jurisdiction that is uncompetitive, relative to other jurisdictions," president Tom LaSorda told a parliamentary committee.

Chrysler's labour costs in Canada are about $20 an hour more than the costs of automakers like Toyota and Honda, LaSorda told the committee.

"Currently, Chrysler CAW (Canadian Auto Workers) are not competitive," he said.

The automaker also asked for roughly $2.3 billion (U.S.) from the Canadian and Ontario governments and demanded relief in a tax dispute with Ottawa.

"Failure to satisfactorily resolve these three factors will place our Canadian manufacturing operations at a significant disadvantage relative to our manufacturing operations in North America and may very well impair our ability to continue to produce," LaSorda said.

The tax issue involves tax assessments from the 1990s that Chrysler Canada should have earned greater profits than reported in Canada, the automaker said in a brief submitted to the committee.

Chrysler is challenging the assessments, but has had to pay a security and wants an assurance it won't have to pay any more while the dispute is being resolved.

Analysts say the automaker is teetering on the brink of bankruptcy and labour costs are only a small part of its problems.

LaSorda told reporters after his testimony to the House of Commons finance committee that his direct tone was needed to lay out the facts in a serious situation.

"Bottom line, we needed to be very, very clear, and ambiguity doesn't help the process. These are the things that Chrysler needs," he said. "I thought when I came up here today the Canadian government wanted to hear what are the true facts."

He said the Canadian Auto Workers agreement reached with General Motors Corp. last weekend would not eliminate even half of Chrysler's labour cost gap.

"The current agreement with GM is unacceptable and we have to break the pattern," LaSorda said.

Chrysler has 9,400 direct employees in Canada, including more than 3,000 at its Brampton assembly plant. Another 25,900 work at dealerships.

Including suppliers and retirees, the company said 100,000 Canadians depend directly or indirectly on Chrysler Canada.

Meanwhile, an industry watcher says consumers, politicians and the media don't think worker concessions at General Motors of Canada Ltd. are significant enough to qualify for taxpayers' money.

Dennis DesRosiers, president of DesRosiers Automotive Consultants, said yesterday the three groups don't believe freezes in wages and extra costs for health care are sufficient to qualify for more than $6 billion in government loans.

They also think public assistance in shoring up the company's pension shortfall is inappropriate, DesRosiers said in a note to clients.

"These groups are wrong on all these perceptions. All of these items and the many others negotiated are `transformational' and will save hundreds of millions.

"But they don't accept this and don't understand this and they have been `spun' so many times in the past they have a hard time believing GM when told the opposite."

DesRosiers, who appeared before a parliamentary subcommittee last night, said he senses the extent of concessions will create trouble for GM in its bid for aid.

"I hope I'm wrong, but I'm very worried that GM misread public sentiment and that this whole thing might blow up in their face," DesRosiers said.

"In the meantime, we should support what GM did with their labour agreement and hopefully Ford and Chrysler will address these very visible irritants in their negotiations."

DesRosiers said the public can't understand why GM workers didn't lose all their special holidays plus company funding for legal bills, child care and tuition, since many employees in the country don't have such benefits.

Furthermore, he said GM workers don't contribute to their own pension plan, but now the company wants the Ontario government to help cover a huge shortfall.

"How does a politician explain to a taxpayer who has lost a third to half of their RRSP contributions that they have to cover part of the liability of the CAW pension fund when these workers don't contribute to their own pensions," he said.

The Canadian Press, with files from Tony Van Alphen and Reuters