General Motors of Canada Ltd. wants financial help from both the federal and Ontario governments to help pay for pension and retiree healthcare costs—which the company says, are crippling its competitiveness.
David Paterson, GM Canada’s vice-president of corporate and environmental affairs, said the troubled automaker is undertaking several internal initiatives to find cost savings but added that the company needs government assistance with legacy costs—one of which is the company’s underfunded pension plan.
GM Canada’s pension funds had a shortfall of $4.5 billion as of November 2007, well before 2008’s stock market volatility.
Ontario Economic Development Minister Michael Bryant said any assistance with the legacy costs will be part of the overall financial aid package from the federal and provincial levels. He said at this point, it appears that the aid package will be proportional to Canada’s share of GM’s North American auto production.
However, a government official reported in other media said, before the federal government acts, it wants to see if the Obama administration is prepared to meet GM’s requests for an additional US$16.6 billion in government loans. Because, the official said, without a U.S. bailout, there is little the Canadian governments can do to save GM Canada.
GM Canada has 34,000 retirees and only 14,000 active workers—a number that will drop further when the plants in Oshawa, Ont., and Windsor, Ont., close shop this year.
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CIBC Ups CEO Pension Pay Out
In a time when executives are taking pay cuts, unpaid vacation time and handing back bonuses, the Canadian Imperial Bank of Commerce (CIBC) has increased chief executive officer Gerry McCaughey’s pension payout.
The CIBC’s recently released proxy describes a bump up in the maximum allowable compensation, on which McCaughey’s pension will be based, to $2.3 million from $1.9 million.
According to the proxy, the change was made to bring McCaughey’s allowable compensation for the pension calculation in line with the standards set by other Canadian banks and large insurance companies. Based on the formula, he could qualify for $1.6 million a year—nearly a $300,000 increase.
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Canadians Evenly Split on Markets
There is no shortage of opinions on the direction financial markets will take, but a recent survey finds that sentiment among average Canadians is split almost perfectly into three camps.
An Angus Reid poll conducted for Franklin Templeton Investments found that 33% of Canadians are feeling opportunistic ahead of the RRSP contribution deadline. These respondents said they were willing to take on risk in their investment portfolios.
At the other end of the scale, 34% said they were suspicious or timid regarding risky assets at this time, while 32% were unsure how to define their current investment outlook.
“While Canadians are divided on this question, experience tells us the long-term winners are those who look at challenging markets as an opportunity,” said Don Reed, president and CEO of Franklin Templeton Investments. “History shows us that stocks will recover. Investors should ensure they ‘don’t lose twice’.”
Reed points out that most of the gains made in an upswing are realized early on, and that investors should therefore employ a dollar-cost averaging strategy to deploy their capital gradually.
The national survey of 1,001 Canadians discovered that those in the west were the most bullish, with 39% of Alberta, Saskatchewan and Manitoba residents describing themselves as opportunistic, analytical and willing to take chances.
Men were more willing to take on risk, with 40% saying they felt opportunistic, compared to 25% of women. The greatest risk aversion was found among those over age 55, with only 4% saying they would take on more risk.
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Canadian Employee Salary Increases Decline
According to The Conference Board of Canada’s Compensation Planning Outlook survey, organizations are continuing to lower their projected 2009 salary increases for non-unionized employees.
“The deteriorating financial and economic conditions are having an adverse effect on salary increases,” said Prem Benimadhu, vice-president, governance and HR management, with The Conference Board. “Projected average salary increases fell by a full percentage point in just a few months. This downward trend will persist as the year goes on.”
Projected average increases in the summer 2008 Compensation Planning Outlook survey were 3.9%, and the December and January update reported averages of 2.9%.