GM and Chrysler ask for up to $10 billion aid from Canada

By Wojtek Dabrowski

TORONTO (Reuters) - The Canadian units of General Motors Corp and Chrysler are seeking as much as C$10 billion ($8 billion) in aid from the Canadian and Ontario governments as they fight to survive an industrywide crisis, officials said on Friday.

The requests represent a big increase in the amount of aid that the companies had previously said they needed. Canada had pledged C$4 billion in support at the end of last year.

The companies are reeling from the brutal downturn in the highly integrated North American auto sector and are seeking repayable loans to help them survive.

Chrysler, which submitted its plan to the governments on Friday, said the Canadian market had declined significantly since its original request in December, and it sees the market declined further.

GM's plan, outlined on its website, would require the company close no more Canadian plants at this time, and the company did not provide specific details on any further planned job cuts.

But the plan said GM Canada's workforce would shrink to 7,000 by 2010 from 20,000 in 2005 as a result of plant closures that have already been announced.

GM also called for "changes sufficient to achieve legacy cost reductions and align active worker wages and benefits to benchmark levels."

It proposed a 10 percent cut in executive salaries, and reduced pay and benefits for salaried employees.

Significantly, the plan would also keep 17 to 20 percent of GM's production in Canada over the next five years, the company said, a feature the Canadian government signaled was essential.

GM Canada refrained from providing a dollar amount on its proposal, but Tony Clement, the Canadian industry minister, said GM is asking for C$6 billion ($4.8 billion) to C$7 billion in repayable loans.

'AN EXISTENTIAL MOMENT'

"This is not a grant, this is not an indication that the money goes and never comes back," Clement told reporters.

The U.S. market has been hit especially hard in recent weeks, with auto sales dropping to a 27-year low in January. Around nine out of every 10 cars built in Canada are sold in the United States.

The Canadian market had looked more resilient up until November, but sales declines have since been sharp.

"This is an existential moment for the Canadian and indeed the North American car industry and it needs everybody to come to the table," Clement said.