Jan. 28 (Bloomberg) — Chrysler LLC and Ford Motor Co. say a C$12 billion ($9.9 billion) proposal by Canada to buy pools of auto loans and leases may help revive slumping auto sales.

The federal budget yesterday included a government pledge to buy securities backed by loans and leases for autos and equipment. The so-called Canadian Secured Credit Facility is among measures aimed at boosting lending in Canada.

“Improving access to financing is critical medicine that the Canadian economy needs right now to return to health,” said Reid Bigland, president of Chrysler’s Canadian business. “The creation of the Canadian Secured Credit Facility to support financing of vehicles is a big step forward to helping automobile sales in Canada.”

Leasing has become less popular in Canada, in part because fewer carmakers offer it. Chrysler Financial and Detroit-based GMAC LLC stopped leasing in Canada in August after borrowing costs soared and the value of used vehicles tumbled amid a glut of unsold cars.

“This is definitely a most welcome effort,” Meredith Libbey, a spokeswoman for Ford Motor Credit Co., a unit of the Dearborn, Michigan-based automaker, said in an interview. “Obviously, the goal is to take some quick action and get funding out to the Canadian public.”

The percentage of Ford’s Canadian customers who lease vehicles has fallen to about 10 percent from 40 percent a year ago, David Mondragon, president of Ford’s Canadian unit, said in an interview earlier this month. For Chrysler, that figure dropped to zero from 53 percent, according to Bigland.

Fewer Leases

Leasing accounted for about 30 percent of Canadian car sales last year, according to the Power Information Network of J.D. Power & Associates. That’s down from almost 43 percent in 2007.

Many Chrysler customers haven’t been able to qualify for financing from traditional lenders due to tight credit markets, Bigland said in an interview from Toronto today. The government plan may prompt Chrysler to resume leasing, he said.

“We are interested in getting back into leasing,” Bigland said. “We’re hoping it will make vehicle purchases for those who want to purchase a vehicle accessible, and open up leasing options back to the Canadian marketplace.”

Auto sales in Canada fell 21 percent in December as the U.S. recession spread north. The December decline, the worst for that month since 1996, pushed nationwide sales down 1.1 percent in 2008.

Ford is the second-biggest U.S. automaker, after General Motors Corp. Chrysler, controlled by Cerberus Capital Management LP, ranks No. 3.

SOURCE: BLOOMBERG.COM

The area’s major auto manufacturing plants are putting about 600 workers on layoff to cope with production cutbacks, as new-vehicle sales remain mired in a slump.

Just when those laid-off workers might be called back isn’t clear, since the plants’ workloads depend on demand for new cars and trucks.

“It’s all due to production volume decreases,” said Nina Price, a spokeswoman at General Motors’ Town of Tonawanda engine plant.

Under the United Auto Workers contract, laid off workers are paid about 95 percent of their wages while out of work.

The GM engine plant will lay off about 340 of its 1,130 hourly workers for starting Jan. 26, Price said. The layoffs are for an indefinite amount of time, she said, since they are tied to production needs.

If the plant’s production needs increase, she said, “possibly those employees will be called back to work.”

At Delphi Corp.’s Town of Lockport plant, 175 of its 1,540 hourly workers received layoff notices last Friday, said Gordie Fletcher, president of UAW Local 686 Unit 1.

Ford Motor Co.’s stamping plant in Hamburg has 75 of its roughly 800 workers on layoff, and is preparing for a weeklong shutdown in early February, said Charles Gangarossa, president of UAW Local 897.

No one in the industry is predicting a quick turnaround. Forecasts for U. S. auto sales in 2009, on top of a weak 2008, are gloomy.

Fletcher said he has “no idea” when the laid-off workers at Delphi will be brought back. “Obviously our hope is that we bring everyone back,” he said. “The current state of the economy is putting a crunch on everybody.”

Claudia Piccinin, a Delphi spokeswoman, said the automakers’ production schedules are constantly changing, and Delphi constantly has to adjust the size of its work force to keep up.

Ford’s stamping plant along Route 5 is closely connected to Ford assembly operations in Oakville, Ont., and St. Thomas, Ont. Among the vehicles it supplies stamped parts for are the

Ford Edge, Lincoln MKX and Ford Flex.

Gangarossa said the Oakville and St. Thomas operations will shut down production for one week starting Feb. 2, and that the Hamburg plant will close that same week as a result.

A number of assembly and components plants went through a similar process around Christmas and New Year’s, extending their normal holiday shutdowns to cut production.

“We just hope things get better with the new president” and the stimulus package President Barack Obama has laid out, Gangarossa said. “Hopefully the economy will get better and people will start buying American vehicles.”

Art Wheaton, director of labor studies at Cornell University’s School of Industrial and Labor Relations in Buffalo, said while layoffs are never good news, the area’s plants are holding up better than many others in the industry around the country.

“I think it says it’s good that they’re taking it slow on the slowdowns,” Wheaton said, noting that some other plants have taken more drastic steps to cope with the downturn.

“The products are still valuable,” he said.

The area’s auto plants have reduced the size of their work forces through attrition and buyouts over the years. The local plants have also enjoyed mostly good labor-management relations “to work through what is needed” in order to remain competitive, Wheaton said.

Under terms of their labor contracts, most of the UAW members will receive about 95 percent of their pay and benefits while on layoff, a combination of unemployment benefits and supplemental benefits provided by the automakers, Wheaton said.

Those types of benefits provided to UAW members are under scrutiny as General Motors and Chrysler put together restructuring plans required by the government for the loans they are receiving to stay afloat, he said.

The industry slowdown is being felt in another way at the GM engine plant in Tonawanda. The automaker is delaying the start of production of the “Duramax” 4.5-liter engine that was expected to get under way later this year, Price said. GM has not announced a new launch date for the line but the Tonawanda plant is still GM’s choice to produce the engine, she said.

The $100 million new investment, which was announced in June 2007, was not projected to create new jobs, but it was viewed as another way of shoring up the plant’s viability. Early last year, GM announced it was canceling a V-8 gasoline engine line that was also planned for the River Road site.

SOURCE: Buffalo News.Com

NEW YORK (CNNMoney.com) — More than three out of four auto executives expect more bankruptcies in their industry, according to an annual survey by audit and accounting firm KPMG LLP.

The survey of 200 top executives from automakers and suppliers around the globe found 77% expect more industry bankruptcies, compared to just 36% who expected an increase in bankruptcies a year ago.

So far, major automakers have avoided bankruptcy in spite of years of losses. But there have been widespread bankruptcy filings among auto parts suppliers in recent years.

The survey was conducted in the fall, before the U.S. government offered a federal loan package to General Motors (GM, Fortune 500) and Chrysler LLC to allow them to avoid threatened bankruptcy filings. Other governments around the world are considering assistance for their own automakers due to the sharp downturn in global sales.

The survey also found that 46% of the executives believe the profit outlook for the overall industry will be volatile over the next five years, and another 24% see profitability continuing to decline. Only 15% of those surveyed expect profits to improve.

Betsy Meter, a partner in KPMG’s auto practice, said she believes concerns about bankruptcies are still high, despite the fact that GM and Chrysler have received emergency funding to avoid running out of the cash they need to operate.

“I suspect it’s moderated slightly, but I think there’s a great level of uncertainty,” she said.

While most automakers around the globe haven been hit hard during this recession, the three U.S. automakers are still viewed as particularly vulnerable by industry executives.

More than 60% of those surveyed believe that GM, Ford Motor (F, Fortune 500) and Chrysler will continue to lose global market share in the coming years, while comparable percentages believe that Toyota Motor (TM), Hyundai/Kia, Honda Motor (HMC) and Volkswagen will all gain share.

In addition, about 80% of the executives said they believe Chinese and Indian automakers will gain market share.

Still, industry executives haven’t completely written off the U.S. automakers. Asked if they agreed with the statement that restructuring efforts in the U.S. industry may yet succeed, 50% said they did. However, that was down from 58% who agreed with this statement a year ago.

SOURCE: CNNMONEY.COM