Within hours of General Motors filing for Chapter 11 bankruptcy protection, the U.S. and Canadian governments announced billions in new funding to bail out the troubled automaker.
U.S. President Barack Obama confirmed Monday that his government will be giving GM another US$30 billion in investment cash while taking a 60 per cent stake in the company.
Meanwhile, Prime Minister Stephen Harper said the federal and Ontario governments will have a 12 per cent stake in GM, secured by an additional investment of US$9.5 billion.
Under the deal with Ottawa and Ontario, GM was able to avoid filing for bankruptcy protection in Canada.
In an exclusive interview with CTV Toronto's Ken Shaw Monday afternoon, Harper defended his government's investment, saying that he had no choice but to follow the U.S. government's lead and help to politically restructure the companies.
"It's difficult for me as a Conservative to come to terms with this," Harper said. "But the fact is this, the reality is this: either we put this money in to save all of those jobs, to make sure we have a viable company in the long term, or the entire thing moves to the United States and will not come back."
Harper laid the blame for GM's financial problems squarely on the executives of the company, who he said failed to make cars that consumers wanted to buy at a price that would turn a profit.
But he lauded the company's stakeholders -- management, the unions and the bondholders -- who took "some pretty deep cuts" to ensure that the new, smaller company that emerges is economically viable.
"We would not be putting this money in unless we thought the new companies, the smaller companies, will be viable in the long haul," Harper said.
He also said he was confident that this would be the last injection of Canadian taxpayer money into GM.
Speaking in Washington earlier Monday, Obama said the U.S. government has no interest in running GM and will "get out quickly" once the troubled automaker transitions into the "new GM."
"We are acting as reluctant shareholders because that is the only way to help GM succeed," Obama told reporters Monday afternoon.
Obama thanked the governments of Canada and Ontario for making the investment in GM.
"Our countries share a stake in this company's future, and I look forward to our close partnership through this restructuring period," he said.
Harper said during his own news conference Monday afternoon that the investment is necessary "to protect the Canadian economy during the worst global recession in half a century."
"I wish there were an alternative but the alternative to what we're doing today would be vastly more costly and more risky."
The United Auto Workers trust for health care expenses is also expected to have a 17.5 per cent share in the company.
Jeff Schuster, executive director of global forecasting for J.D. Power and Associates, said GM's bankruptcy move will "essentially wipe the slate clean" with the goal of moving the company "out of bankruptcy as quickly as possible."
Monday's filing is the largest industrial bankruptcy in U.S. history.
U.S. officials expect GM's bankruptcy process to last 60 to 90 days. The company is expected to reemerge with a focus on its core brands -- Chevrolet, Cadillac, Buick and GMC.
GM President and CEO Fritz Henderson said the company was on a fast-track plan to form a leaner, quicker, customer-focused automaker.
"This new GM will be built from the strongest parts of our business, including our best brands and our very finest products," Henderson said Monday.
"We will have far less debt, fully competitive labour costs, and the ability to generate sustained and positive bottom line performance."
Ken Lewenza, the president of the Canadian Auto Workers Union, said Monday he expects some of GM plants in Canada to suspend production during the U.S. bankruptcy process.
Lewenza said he would be "incredibly surprised" if all plants remained open.
Meanwhile, it's expected that GM will cut about 21,000 jobs and close about a dozen plants by the end of 2010 in the U.S.
GM has already said it will slash 40 per cent of its network of 6,000 U.S. retail dealerships by next year and drop four of its brands -- Hummer, Saab, Saturn and Pontiac.
