The financial aid is part of the parent company's bankruptcy restructuring filing Monday and will be used to maintain 16 per cent of GM's North American manufacturing output in Canada into the future.
However, by the time GM's restructuring is complete, the 101-year-old Canadian business will be a shadow of its former self and will shed more jobs from plants in southern Ontario.
No new cuts to GM Canada's operations were announced Monday as General Motors Corp. (NYSE:GM) filed for bankruptcy protection in a New York court, outlining plans to close nine more U.S. factories and idle three others, displacing 18,000 to 20,000 employees.
Instead, the federal and Ontario governments were able to secure several promises from the company that they said make one of the largest Canadian corporate bailouts in history worthwhile.
As one of the conditions of the Canadian loans, GM has promised to maintain the Canadian proportion of its North American manufacturing capacity at 16 per cent. According to an analysis by AutomotiveCompass LLC, that's down from 22 per cent in 2007.
The overall GM restructuring hinges on the former global auto giant gaining new customers for its lineup of new fuel-efficient vehicles planned over the next several years, including the Volt electric car that will be built in the United States.
In Canada, GM closed its truck plant in Oshawa earlier this month and said last year it would close its Windsor transmission factory in 2010. Over the next five years, GM Canada expects its workforce to shrink to 4,400, excluding the CAMI facility which it runs jointly with Japanese carmaker Suzuki.
Including CAMI, the Canadian Auto Workers estimates GM Canada will employ about 7,500 people.
The company, which employed 20,000 people in 2005, also previously announced the closure of about 250 dealerships and further reductions to its white-collar workforce.
CAW president Ken Lewenza said he was "pleasantly surprised" to hear that GM Canada will avoid filing for bankruptcy protection, but said today's good news is the result of years of bad news.
"Just think: 25 years ago when we formed the CAW we had 30,000 GM workers. At the conclusion of this agreement, we will have about 7,500," Lewenza said.
GM Canada said it will spend $2.2 billion on capital and $1 billion on research and development between now and 2016 and its three remaining plants -- a car complex in Oshawa, an engine plant in St. Catharines and CAMI -- will see a host of new products.
In a statement, the company said five new vehicles, including new hybrid products, will be launched in Oshawa and Ingersoll and a new engine module will be produced in St. Catharines.
GM spokesman Stew Low said these new vehicles will include the Chevrolet Equinox and the GMC Terrain at the Oshawa facility and three other products that have not yet been announced at CAMI.
GM Canada president Arturo Elias said GM's plants and supply chain should experience "minimal disruption" and customers can continue to purchase GM vehicles with confidence.
Automotive analyst Bill Pochiluk said the big concern for Canada now is how plant closures and prolonged shutdowns in the U.S. will affect the Canadian supply base.
"What it really boils down to is some suppliers are going to have major cash flow problems between now and fall," said Pochiluk, president of AutomotiveCompass.
-- The Canadian Press