Sep 06, 2008 - 05:00 PM

Joanne Burghardt

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OSHAWA -- It's Christmas in September for General Motors and its Oshawa employees.

An agreement reached today between GM and the federal and provincial governments means the auto giant will avoid paying millions of dollars in loan penalties that were triggered when the company announced the planned shutdown of its Oshawa pickup truck line.

That deal includes a commitment by GM to invest an additional $290 million to manufacture 6-speed transmissions at St. Catharines, produce a hybrid variant of a mid-sized vehicle at the Oshawa car plant, and attract advanced environmental technology research and development projects through GM's Canadian Engineering Centre (CEC) in Oshawa.

Confirmation of the agreement came today from Jim Prentice, federal Minister of Industry, less than 24 hours before an expected election call.  The move is sure to be good news for GM and the thousands of employees in Oshawa.

"The federal government recognizes the importance of the automotive industry to Canada's long-term economic success. Canada's automotive industry is a world leader and provides high-quality jobs in many communities. I look forward to the completion of the supporting agreement and the implementation of your new investments," said Mr. Prentice in a letter today to GM Canada president Arturo Elias

Earlier this year, after the announced closing of the Oshawa truck plant, GM vice-president David Paterson confirmed a penalty of $35 million amounted to “10 to 20 per cent” of a $175-million, 50-year loan that GM got from Premier Dalton McGuinty’s $500 million auto investment fund three years ago. Similar penalty provisions were in effect for a $200-million federal government loan.

The auto giant was on the hook for early loan repayments for not meeting terms requiring it to keep employment levels up. Under the deal, GM was to maintain an average of 16,000 jobs in Ontario over a 10-year period ending in 2013. Sources said the loan is interest free.

Mr. Prentice confirmed in his letter to Mr. Elias that the federal government would amend the Beacon Agreement to commit GM to the new $290 million investment and in return the federal government agrees not to trigger the early repayment provisions. 

Sandra Pupatello, provincial Minister of Economic Development and Trade, announced this afternoon that, "the Government of Ontario has reached an agreement in principle with GM,
and although this does not include any new funding, it allows GM the flexibility to make this new investment and earn their way back into compliance under the Beacon Agreement."

"GM Canada's plan to re-invest in Ontario is great news for St. Catharines, Oshawa, the workers and the auto sector. This is a testament of GM's commitment to Ontario and the company's confidence in our workers," said Minister Pupatello.


Details of the agreement:

• The first part of this investment would commit GM to an approximately $245-million investment in GM's St. Catharines Glendale Powertrain Facility to install a new flexible manufacturing system that would produce more fuel-efficient 6-speed front-wheel drive (FWD) transmissions. The proposed investment in a flexible state-of-the-art manufacturing system would be capable of producing four variants of GMCL's family of 6-speed FWD transmissions on the same assembly line. The planned start of production is April 2011 and would support more than 300 jobs.

• The second portion of the investment commits GM to including a hybrid variant within the production cycle of one of the new mid-sized cars to be built at the Oshawa Car Plant. GM estimates, based on market demand that the hybrid variant could account for some 10 per cent of overall demand for the mid-sized vehicle. The production for the mid-sized car is scheduled to begin in October 2010, with hybrid production commencing in early 2011.

• Thirdly, a minimum GM investment of $40 million over a maximum of five years will go towards transforming the company's vehicle engineering capability at CEC in Oshawa from its current focus on vehicle program engineering design and development to a higher value-added focus on advanced environmental technology development. The CEC would undertake numerous projects in the areas of vehicle electrification (such as advanced battery technology) and fuel efficiency technologies (such as hybrid systems and lightweight materials). GM would conduct this work with the involvement of selected Canadian automotive suppliers and universities, providing them with an opportunity to develop a range of environmental automotive skills and capacity. The breakdown of the $290-million investment noted above represents GM's current estimates of each of the three component investments and, while additional detailed estimates remain to be done, GM is committed to a total incremental investment of $290 million.