New vehicle sales in Canada fall 15%
Nicolas Van Praet, Financial Post Published: Wednesday, April 01, 2009
General Motors Corp. has reclaimed its number one sales spot in Canada from Chrysler LLC as Canadians punished Chrysler for threatening to pull its manufacturing operations out of the country, an industry consultant said.
GM sold 24,867 cars and trucks in Canada last month, besting Chrysler's 15,846, according to data from DesRosiers Automotive Consultants in Richmond Hill, Ont. Ford Motor Co. grabbed second spot, selling 17,021 vehicles.
In February, Chrysler bumped GM off its perch as Canada's top-selling auto-maker, marking a historic redrawing of the country's auto hierarchy. It was the first time since 1949 that GM has been outsold by a rival.
"We are now back to a more normal world in terms of corporate order," Dennis DesRosiers, president of the consultancy said Wednesday. "Dealers tell me that the buying public reacted very poorly to the threat to leave Canada and this likely cost Chrysler some volume."
Tom LaSorda, Chrysler's president, warned Canadian lawmakers earlier this month that Chrysler would pull its manufacturing operations out of Canada if it fails to win US$2.3-billion in aid from Ottawa and secure a radically new labour contract with the Canadian Auto Workers union that cuts all-in costs by $19 an hour. The company said it was preparing contingency plans to move production if it was unable to secure those terms. The federal and Ontario governments this week offered Chrysler $1-billion, including $250,000 million right away to stabilize its Canadian operations.
In percentage terms, Chrysler Canada sales fell 23% in March over the same month in 2008, the same as declines posted by Toyota Canada and Honda Canada. GM sales fell 17.3%.
New vehicle sales for the industry overall fell 15%, better than previous months when sales were down in the mid 20% range.
Honda Canada Inc., whose Civic car has been Canada's top-selling automobile for the past decade, cast a positive light on its dismal performance .
"Our March results, although down from last year's record results, are only off by 13% over the last five-year sales average," Honda Canada vice-president Jerry Chenkin said in a statement. "We are encouraged to see that showroom traffic at our dealerships in March was up over the previous months, and that consumer confidence is showing a gradual upswing."
Nissan Canada said its sales fell 8.8%. Hyundai Canada, which is selling models under $10,000 at zero per cent financing, saw a 26% sales gain.
Industry-wide sales declined for the fifth straight month, mirroring a volume collapse in the United States. GM and Chrysler, subsisting on more then US$17.4-billion in government loans, will be forced into bankruptcy by June if they cannot make deeper cuts to become viable, the U.S. government said on Monday.
The sales environment is so weak Toyota is now offering 0% financing on its Canadian-built models for the first time in its history, and a program that protects customers in the event they lose their jobs. The company is urging the federal government to act quickly to jump-start sales and boost confidence, saying it could implement a temporary sales tax holiday to get people back into showrooms.
Kia, which is also offering a return program, said its March sales in Canada rose 13% over the same month last year. Audi Canada reported a 25% sales increase for March, proving there is still appetite for certain luxury models.
The sector consensus is that Canadian auto sales will fall 10% this year from 2008, representing 200,000 units lost. But it could get much worse. Canada could experience the same 42% peak-to-trough auto sales decline hitting the United States. In that scenario, Canadian auto sales would tumble from 1.7 million units to 1 million, worth $20-billion of taxable revenue.
The sales results came Wednesday as GM bonds dove over worries U.S. President Barack Obama favours a quick bankruptcy restructuring as the preferred solution to fixing the automaker. GM's $500-million of 7.7 per cent notes due in 2016 fell 8.8 cents to 10.4 cents on the dollar as of 9:45 a.m. in New York, a record low, Bloomberg said, citing Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt yields 79.7%, or 77 percentage points more than similar-maturity Treasuries, Trace data show.
Washington earlier this week asked GM chief executive Rick Wagoner to step down and is engineering a shakeup of the company's board of directors in what is widely seen as the nationalization of America's largest automaker.
General Motors (GM) and  will receive  from the government of Canada and the provincial government of Ontario, however no more will be forthcoming from either Canadian or US governments unless the companies can reinvent themselves.

"This is a regrettable but necessary step to protect the Canadian economy.  We are doing this on the assumption that we obviously cannot afford either in the United States or Canada a catastrophic short-term collapse." said Stephen Harper, .

"We cannot, we must not, and we will not let our auto industry simply vanish.  This industry is, like no other, an emblem of the American spirit; a once and future symbol of America's success," said Barack Obama, . "These companies - and this industry - must ultimately stand on their own, not as wards of the state." 

Chrysler will receive 1 billion and may in fact be eligible for as much as CA$4 billion. If Chrysler succeeds in the next 30 days with a restructuring plan it would be eligible for a US$6 billion loan. A part of Chrysler's restructuring plan must include a partnership with  within 30 days to appease the US administration. Fiat is a supplier of smaller  vehicles, and the merger will help Chrysler to be viable in the North American market. A Chrysler court  would inevitably lead to it being sold off.

As a part of Chrysler's restructuring plans, Tom LaSorda, the president of Chrysler announced that Canadian operations would fold if it does not receive both the US commitment of $2.3 billion of aid and a new  CAW contract to reduce all-in costs by CA$19 per hour.  As a result of this announcement Chrysler's auto sales volume in Canada dropped 23% compared to March of 2008.

GM has until the end of May to restructure its company to receive up to CA$7.5 billion. As part of the companies restructuring, General Motor’s chief executive Rick Wagoner was replaced Sunday with Fritz Henderson, the current chief operating officer. Henderson spoke out on Tuesday that GM has submitted a restructuring plan which would close five plants, and this may be increased to meet the requirements for financial aid.  He is in full compliance with Obama's auto task force to seek bankruptcy if GM cannot negotiate with their unions, bondholders and others.

GM recently brought forward the ''"GM Total Confidence"'' program providing consumer purchase protection for customers who lose their job for economic reasons within the first two years from purchase. As a result of Chrysler's restructuring announcement in Canada, GM's Canadian vehicle sales volume fell only 17.3% compared to 2008, an increase from the previous month.

GM must reduce some of its  which include its pensions and union health care costs. A part of GM's ailments arose from investing in supplying truck and  during an economy of high gas prices when consumers were demanding fuel efficient vehicles.
2009  
, , is hoping that the CAW will support the restructuring process and re-negotiate their agreement. Whereas a  negotiator has said, “I don't see how the UAW will do anything until they see what the bondholders will give up."
 
The Obama administration is looking toward bankruptcy proceedings for the automakers, "as a mechanism to help them restructure quickly and emerge stronger. It will quickly clear away old debts that are weighing them down.  What we are asking is difficult. It will require hard choices by companies. It will require unions and workers who have already made painful concessions to make even more. It will require creditors to recognise that they cannot hold out for the prospect of endless government bailouts." said Obama.

The auto parts suppliers and IT software exporters in India have already been affected by the declining auto sales. GM and Chrysler software contracts provide US$300 to 350 million a year to vendors in India. As well these two major automakers usually award US$1 billion contracts to auto parts suppliers. "We are worried and closely watching the developments in the US to gauge the impact. The decline in auto sales in the US has already hit the order books of Indian suppliers," said a Delhi auto parts supplier. 

"Going forward, the industry will undoubtedly be smaller, but if our efforts are successful it will be viable and it will support good jobs for Canadians," said Clements. 

,  Congresswoman put forward the CARS act which provides a US$3,000 to 5,000 incentive for those who trade in their vehicle for a fuel-efficient car. "It clearly stimulates the economy, and it gets the consumer into the showroom and gets them buying again. But importantly — and this is what I particularly like about it — it really helps the environment quite a bit in two respects." said William Clay Ford Jr., executive chairman of Ford Motor Co.

 has not come forward with requests for assistance.

Since December GM and Chrysler have received US$17.4 billion government loans.