Thank you very much, Mr. Chair.
Good evening, everyone. My name is Arturo Elias. I am the president of General Motors of Canada.
I am joined here by John Stapleton, GM Canada's vice-president of finance and CFO, and by David Paterson, our vice-president of corporate and environmental affairs. I will ask both of them to join me in answering your questions tonight.
I have just a few minutes of opening remarks concerning the current economic crisis and its impact on the automotive sector and GM Canada. We will suggest a few policy responses that would greatly assist our sector, and we know you'll be interested in our GM Canada restructuring plan.
Let me start with the 52-page restructuring plan we submitted to the Ontario and Canadian governments on February 20. Our plan is not simply a request for a loan, or a quick fix. Rather, it sets out what we believe is needed in the face of the current economic crisis to ensure a viable, leaner, and greener GM Canada for the long term, a restructured company able to fully repay Canadian taxpayers for any support it may receive from them.
It is an achievable plan. It's based on conservative market assumptions. Not only will it sustain GM's business for the benefit of tens of thousands of GM Canada employees and retirees, but it will also sustain our production of combined U.S.-Canadian vehicle production; our multi-billion dollar local purchasing and logistics leadership in Ontario and Quebec; and our research and development leadership, in collaborative work with universities across Canada, to help reinvent our industry and our products for the future.
GM Canada's submission is consistent with GM Corporation's viability plan, which was submitted to the U.S. Treasury on February 17. Both documents have been made available to the committee and the public at large.
Let me speak about the challenge we face. Like all companies operating in our large, complex, and highly capital-intensive sector, GM Canada is working hard to cope with the unprecedented declines in industry auto sales and the general unavailability of credit for our company, our dealers, our suppliers, and our customers. As you are no doubt reading, these challenges are being faced not just by our domestic auto companies but increasingly by all competitors around the world, from Europe to Japan to North America.
For GM Canada, a perfect storm of economic events hit us here in Canada in 2008, when we were already in the midst of an expensive business restructuring that saw us operating with lower-than-normal cash reserves. As industry revenues collapsed and private capital markets rapidly closed off, we were not able to raise funds by pledging our global assets and intellectual property to raise a large pool of restructuring funds. With capital markets essentially closed, we reluctantly found it necessary to seek financial assistance from governments in the U.S., Canada, and elsewhere.
You will recall that on December 20, the Ontario and federal governments made a most welcome and appreciated offer of financial support, proportional to what was being discussed between the auto companies and the U.S. government in the United States. This sent a very positive message to all levels of our company, the U.S. government, and GM's many stockholders. We began detailed discussions and due diligence with the Province of Ontario and the Canadian government. Those have continued well, under appropriate non-disclosure agreements with respect to competitive information.
In the United States, on December 31, 2008, our corporation reached an agreement with the United States Treasury. This financial support, together with our own efforts in Canada to conserve cash, has enabled us, up to now, to operate our business without having to draw support from the Government of Canada. While we welcomed the offers of support in Canada in December, I think we also agreed it was far preferable to take the approach we have in, first, developing a credible long-term restructuring plan that will enable GM to repay any loans and, second, reaching an agreement for support.
Our plan for Canada is based on significant shared sacrifices, and it respects the government's stated principles of maintaining our proportion of production in Canada in exchange for drawing support proportional to that offered in the United States.
Let me spend a few minutes talking about our restructuring plan. The plan we have developed and discussed, with considerable input and review by the governments, has three broad elements, which might be compared, if you will, to the need of a homeowner, facing a large mortgage and a severe cut in income, to first significantly reduce household expenses and then seek to refinance the mortgage.
Our plan does that in three elements. The first is to adopt a new, lower-cost contract manufacturing business model that will help ensure a more steady stream of income while taking all necessary steps to reduce our costs. This has included significant cuts in executive and salaried work benefits and wages.
The second element is a negotiated new contract with our Canadian Auto Workers partners to bring wages and benefits for our active and retired hourly workers to benchmark levels, and also the establishment of a new post-retirement health care structure similar to the U.S. VEBA model. This work remains under discussion and is very important, as the more we can together reduce our costs the less we will need to borrow.
The third element is the necessity to refinance GM Canada's balance sheet, to reduce our carrying costs and ensure a viable stand-alone business in Canada able to generate profits and repay loans from the Canadian taxpayer. We are working very hard to reach these necessary agreements in the month of March, as GM Canada will then start approaching the minimum cash levels required to sustain our business.
Let me also highlight a few things our plan would enable us to do in Canada. The plan would maintain our share of Canada-U.S. production in the 17% to 20% range. It would have no further plant closures or significant structural reductions in employment beyond those we have already announced. It enables the launch of five new product mandates in Oshawa and our CAMI joint venture, including Canada's first hybrid car production and new transmission investments in St. Catharines. It allows us to proceed in Canada with research and development work related to the electric car systems for future vehicles that would follow our new Chevrolet Volt, and we will build upon our collective university research and development relationships, including with four key universities in Quebec. It would allow us to sustain our auto supply chain and dealer operations across Canada. These have been mapped out for you in our submission.
Of course we will proceed with a very attractive new GM vehicle lineup, which now includes more available hybrid models than any competitor in Canada and will soon include the Chevrolet Volt extended-range electric vehicle.
Now, we also understand the committee is interested in what can be done to assist the auto sector through this difficult period. Let me conclude with just a few of the recommendations we have thought of, and then we will be pleased to take your questions.
On the credit front, credit is now critical for companies, suppliers, dealers, and consumers. The government has responded with an initiative to provide $12 billion in financial assistance for secured credit, and a consultation period is under way. This support truly needs to move fast and extend to groups like GMAC, who assist auto dealers to maintain their operations and finance their vehicle inventories. We were also pleased to see that Export Development Canada has extended receivable insurance to assist Canadian auto parts suppliers.
Relative to consumer stimulus, around the world governments are now providing new direct forms of stimulus to help consumers with the purchase of new vehicles. This help comes in many forms, ranging from targeted income tax credits or sales tax reductions to scrappage programs like Germany's offer of approximately $4,000 in assistance for consumers who retire old, higher-polluting vehicles from the roads and buy new ones. It would be equally beneficial to start removing some of the outdated federal and provincial taxes or levies that remain in place on automotive manufacturers, dealers, and Canadian new buyers. Clearly, all action to accelerate the return of the consumer to the new car market would be welcome.
Finally, relative to regulations, we must recognize, as I believe the federal government clearly understands, that Canada enjoys a significant amount of automotive investment, employment, suppliers, R and D, and related spinoffs because we are fortunate to be part of the largest integrated auto market in the world in North America. In Canada, we have approximately 10% of the North American market sales, yet we have 20% of the production here. It is, therefore, critical that Canada not regulate its way out of the integrated market through the tyranny of small differences in automotive regulations. You would be hard pressed to find a more regulated industry in the world than the automotive industry. We can cope with regulations, but we cannot cope with a patchwork of disharmonized regulations that generally offer little or no incremental benefit, but do add massive incremental costs that we must ultimately pass to the consumer.
Mr. Chairman, with that overview, let me turn it back to you for guidance. David, John, and I would be pleased to take your questions.