So What is Plan B, Dalton?

Premier McGuinty's office has just announced the obvious, that the Pension Benefits Guarantee Fund cannot make good on pension liabilities for GM and Chrysler.

I commented on this in March, asking whether tax payers would be on the hook for GM pensions. The question remains.

McGuinty acknowledges that there will be a role for government though he is not forthcoming on which government or what the role might be. Given the premier's track record, this could be the opening move in a game of chicken with the feds.

However this plays out, the provincial government is likely to be caught between public outcry over what are often perceived as exceedingly generous pensions and driving the final economic nail into the coffins of communities such as St. Catharines, Windsor, Oshawa and St. Thomas among others.

Stay tuned.

Will We All Pay for GM Pensions?

One of the questions that continues to haunt the big three auto makers, particularly GM, is what would happen to unfunded pension liabilities if the automaker were to enter into bankruptcy proceedings.

Under a regulatory provision introduced by the Rae government, GM was allowed to underfund its pension plan, or "fund it as a going concern" (not!) in return for contributions to Ontario's Pension Benefits Guarantee Fund. It currently contributes a laughable $5 million per year to a fund that already has a deficit of $102 million. This fund would guarantee $1000 per month to retirees if GM were to fail, also a laughable amount. It would, however, cost the fund billions, not a laughable amount, which the Ontario government would have to backstop.

Even with the historic concessions on pensions made yesterday by the CAW (without the consent or retirees), this continues to be a sword hanging over the head of GM and in fact all Ontarians.

Is this perhaps the chief motive behind the provincial government's willingness to provide massive assistance to the auto makers?