Ontario government placing limits on pension bailout funds, says Mitch Frazer in The Globe and Mail

Auto Fears Prompt Tightening of Pension Rules

April 09, 2009

Amid fears of a bankruptcy protection filing by General Motors or Chrylser, the Ontario government is moving to limit the amount of money it would have to pay in a pension bailout.

Proposed new rules in the province's 114-page budget bill would give the finance minister new powers to deal unilaterally with a pension crisis and grant Ontario's pension support fund money. But the rules would also make it illegal for the fund to run a deficit.

"I really think it's the GM issue," says Mitch Frazer. "This is the last remaining too-big-to-fail plan."

Pension experts estimate that GM Canada's total pension shortfall may exceed C$6 billion, while Chrysler says its plans should be almost fully funded this year.

There are also fears that auto parts makers with large operations in Ontario would collapse if one or both of GM or Chrysler filed for court protection. Some parts companies could fail even if GM and Chrysler succeed in restructuring outside the courts.

"The government is basically saying 'If we have a whole series of bankruptcies, we're not going to be there to backstop the fund, let's make that very clear,' " says Mitch. "All you need is one large bankruptcy and you wipe out all the money in the fund."

Tags:

Press Contact