That was January. This is now.

Some figures in yesterday’s Globe and Mail regarding the bailout of GM and Chrysler, and in particular the support of the pension funds, made for pretty shocking reading:

Ottawa and Toronto were already asking a lot of Canadians – most of whom have no private retirement fund and earn significantly less than auto assembly workers – by allowing some of the bailout money to go toward fixing an estimated $7-billion shortfall in GM Canada’s pension plan.

But with the latest forecast pegging the overall bailout bill at as much as $13.5-billion, or more than three times the original estimate, politicians are testing the limits of recession-racked Canadians’ tolerance and financial wherewithal. The ballooning bailouts are pushing Ottawa deeper into the red, with this year’s deficit projected to surpass $50-billion.

At General Motors of Canada Ltd. alone, the rescue package could amount to a staggering $1.4-million for every job saved, with no guarantee that the bailout will ensure the long-term survival of the company’s remaining auto assembly and engine plants.

I don’t have the latest figures on what GM workers earn, but two years ago the average gross hourly wage in the US was US$39.68 (£24.60 at current exchange rates), which becomes $73.26/hour (£45.42) when benefits are taken into account. In comparison, this latter figure is about $30 more per hour than the equivalent rates paid in US-based Japanese plants. The auto workers unions have made concessions as part of the negotiations with GM and Chrysler to bring their wages closer to those in Japanese plants, but the question remains as to how the average tax payer, who is likely to be receiving very little support in their industry of employment and to be earning considerably less than the wage rates mentioned above, is left paying $1.4 million per worker to the pension funds of mismanaged (and grossly overpaying) companies in one particular sector.

Unfortunately, the Government of Ontario doesn’t come out of this affair in a particularly good light. In 1992 Ontario decided to exempt companies with over CAN$500 million in assets from its plans to force all companies to fully fund their pension schemes, under the assumption that such companies were ‘too big to fail’. The Canadian Auto Workers union is now arguing that the Ontario Government was negligent, and is on the hook for the shortfall. Although the government has claimed not to have the money to fund the amount, recent reports suggest that either the provincial and/or the national government are likely to end up footing the bill.

The automakers’ lobbyists also haven’t been slow to take advantage of the industry’s geographical spread across the US-Canadian border. If one government played ball and the other one didn’t, you could expect a massive migration of automotive supply chain across the frontier. In the end, Stephen Harper, not a man with a great history of supporting government intervention in the private sector, felt he had no choice but to hold his nose and match Obama’s guarantees or see vast swathes of southern Ontario jobs disappear into thin air. Since that time, the bailout sum has ballooned to potentially three times the amount originally anticipated.

Canadians, and particularly those living in Ontario, will be paying for the bailouts in tax rises and government cutbacks for many years to come, and given the automakers’ previous reneging on promises, there is little guarantee that the money will see a long term future for GM and Chrysler in Canada. GM’s workforce in Ontario has fallen from 20,000 five years ago to 14,000 in advance of the recent difficulties, and a planned 7,000 by next year, not taking into account any further cut backs deemed necessary in the forthcoming bankruptcy proceedings. The argument goes, however, that there are more than just the jobs at GM and Chrysler at stake. Both companies would be likely to bring down much of their supply chains with them if they disappeared or relocated, and as a result would endanger production at the other car manufacturing plants in Ontario.

Surely, however, the costs of supporting the affected automotive suppliers in order to guarantee continued supply to Ford, Honda and Toyota, and of retraining and sensibly compensating those thrown out of work by the exodus/collapse of GM and Chrysler would be considerably lower than the mind-boggling sums now under consideration and, perhaps more importantly in the long run, would avoid the dangerous precedent set by such lavish rewarding of failure and excess.