[LINK] "GM-Chrysler deal could spark 'significant downsizing'"

[rfmcdonald]

Here's more grand news aboot industrial Ontario's future.

The possibility of General Motors acquiring Chrysler raises the spectre of "further significant downsizing" in Canada and a car assembly plant in Brampton, could be the first to go, says Canadian Auto Workers president Ken Lewenza.

A deal for General Motors Corp. (NYSE: GM) to buy Chrysler LLC from New York private equity firm Cerberus Capital Management LP could come soon as both companies struggle to deal with declining auto sales.

The two companies' products overlap significantly in some areas – including sport utility vehicles, pickup trucks and crossover vehicles – and this fact will likely lead to substantial consolidation should there be a deal, according to TD Bank economist Derek Burleton.

"Given the current challenges and the pressures on the companies, there certainly would be a real thrust to secure cost savings, so that will obviously be a risk to further significant downsizing and to the Ontario economy," said Burleton.

Lewenza said some Canadian plants – including Chrysler's minivan plant in Windsor, Ont. – would likely survive a merger because they provide a unique service. But others – such as the Brampton plant – probably wouldn't be so lucky.

"The Brampton assembly plant has multiple products comparable to what GM has in their product portfolio today," Lewenza said in an interview. "This would be a real challenge for us."

Lewenza added that the potential of an acquisition or merger between the two companies is just one more uncertainty facing the Canadian auto industry, which has been beset by a slowing economy, high gas prices and, until recently, parity between the Canadian and U.S. dollars.

[. . .]

Burleton said concessions on wages and benefits by the U.S.-based United Auto Workers is going to make it difficult to convince North American automakers to continue producing vehicles in Canada.

Anthony Faria, an auto industry specialist at the University of Windsor, estimates that Canadian employees of the so-called Detroit Three – Chrysler, Ford (NYSE: F) and GM – are costing their employers about $25 more an hour than their U.S. counterparts.

But Lewenza said the CAW will not bend on wages or benefits.

[. . .]

A marriage of the two auto giants would create a firm comprising about 36 per cent of the auto market and plants across North America. In Canada, the two companies employ about 30,000 people – 20,000 at GM and 10,000 at Chrysler – and have assembly and parts plants across southern Ontario.

GM operates car and truck plants at Oshawa, components factories in St. Catharines and a transmission plant in Windsor. Chrysler Canada has a car assembly plant northwest of Toronto, minivan operations in Windsor and parts operations elsewhere.