GM and Manufacturing in Ontario

From Calculated Risk this morning, it is looking more and more like GM is headed for court protection in the U.S. by June 1. It cites the NYT which says that

The Treasury Department is directing General Motors to lay the groundwork for a bankruptcy filing by a June 1 deadline, despite G.M.’s public contention that it could still reorganize outside court, people with knowledge of the plans said during the weekend. ...

The goal is to prepare for a fast “surgical” bankruptcy, the people who had been briefed on the plans said. G.M., which has been granted $13.4 billion in federal aid, insists that a quick restructuring is necessary so its image and sales are not damaged permanently.

The preparations are aimed at assuring a G.M. bankruptcy filing is ready should the company be unable to reach agreement with bondholders to exchange roughly $28 billion in debt into equity in G.M. and with the United Automobile Workers union, which has balked at granting concessions without sacrifices from bondholders.

Meanwhile, in Ontario, both GM workers and pensioners and parts manufacturers face potentially devastating losses if bankruptcy proceeds. No one has stepped up to guarantee pensions, parts manufacturers have staggering receivables exposures and there is little sense of how court procedures in Canada and the U.S. would mesh.

In other words, we hit the wall in seven weeks, and very few in Canada seem to be turning their minds to what this might mean and what the policy response might be. Rather, in true Canadian fashion we seem to be turning this into another opportunity for a federal-provincial showdown.