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union to come back four times in the course of a year to re-bargain. . . ." — NEIL MACDONALD, VICE PRESIDENT AND GENERAL COUNSEL, GENERAL MOTORS OF CANADA LTD. agreement with the CAW that reduced its annual hourly labour costs by 50 per cent from US$1 billion to $500 million until 2014. The automaker is also going to get dramatically smaller: shrinking from 10,300 employees in 2008 to just 4,400 in 2014. (GM Canada's non-union- ized workforce agreed to accept cuts of between three and 10 per cent). Most of the negotiations surrounding union concessions between GM Canada and its union were handled by manage- ment and in-house counsel. "It was a tough, very tough set of negotiations," says Lewis Gottheil, in-house counsel to the CAW, who characterized the discussions as "adversarial and respectful at the same time." The CAW also geared up for a pos- sible CCAA filing by GM and Chrysler Canada Inc., neither of which happened. Preparing for that eventuality also includ- ed retaining an outside "labour law firm that has expertise as well with insolvency work," says the CAW's top lawyer. The union's seven-lawyer team was very much on the periphery during the rounds of negotiations surrounding union givebacks with both automakers. The main focus for the CAW legal team has surrounded the creation and implemen- tation of independent health-care trusts for workers of the two companies. "The key legal issue is really the development of what we have called the Canadian Health Care Trust," says Gottheil. "The legal [issues] there pertain to the establishment of the trust, its tax treatment, the legal dimensions connected to basically taking undertakings or promises that were in a collective agreement and now that are going to be administered outside of a col- lective agreement context." The CAW has agreed to set up and administer the trusts, which are being funded by cash and loan payments by the respective auto companies. In the case of GM Canada, the health-care trust covers about 9,000 active members and another 27,000 retirees. Similar to U.S. voluntary employee beneficiary associations estab- lished by the Detroit-based automakers and the United Auto Workers union, the new trusts required Ottawa to give more favourable tax treatment to companies that agree to pre-fund retiree benefits. While putting GM Canada into CCAA protection was widely recognized as a poor second choice that potentially jeopardized the timing of the main U.S. restructuring, the main focus of the parties was on creating a smaller, prof- itable automaker. "It was getting to an agreement with the CAW that would be considered appropriate and competi- tive and sufficiently fair given what was being asked of all the stakeholders," says one lawyer with a firm retained by the province of Ontario. Governments step up Money losers even before North American vehicle sales drove off a reces- sionary cliff, Chrysler and General Motors required more than union give- backs and plant closures to survive. Both needed massive transfusions of government capital, renegotiation, and relief from debtors and, in the case of GM, shrinking its sprawling franchised dealer network. Getting Chrysler, and to a greater extent, GM back on the right finan- cial track appeared daunting: "I would therefore had expected at the outset that this would have been a very difficult, complex protracted [and] lengthy pro- cess with potentially a lot of contentious issues played before the courts," says Tony DeMarinis, partner and co-chair- man of Torys LLP's restructuring and insolvency practice. "It became pretty clear as we headed toward the finish line that there was an overwhelming determination and will coming out of Washington that [the GM] restructur- ing happen and that it happen quick- ly." DeMarinis headed a Torys' team that represented former GM finance arm General Motors Acceptance Corp. Torys also represented the Canadian Development Investment Corp. with another team of lawyers headed by Patrice Walch-Watson. With economies tottering on both sides of the border, governments here and in the U.S. were unwilling to stand by and let the two automakers fail. On this side of the border, besides the tens of thousands of direct jobs at stake, GM purchased $10 billion in goods and ser- vices from Canadian firms, the largest outlay of any company in the country. Chrysler Canada represented an easier fix for the parties involved in its restructuring: its operations were smaller; its dealer network had already been rationalized and it did not have GMC's bondholder complications. "In some ways Chrysler was a test case for us," said one Canadian government lawyer involved in both restructurings. Ottawa and Queen's Park threw their first lifeline to Chrysler Canada late last year in the form of a $1.2-billion bridge loan. Unwilling to lose thou- sands of Ontario manufacturing jobs in Windsor and Brampton, the two levels of government eventually committed to put up $3.8-billion to fund the bailout while the U.S. Treasury put in billions more. Chrysler Canada was able to skirt creditor protection in the U.S. and underwent a surprisingly swift reorga- nization and recapitalization under a Chapter 11 filing. Michigan-based Chrysler In the Chrysler Canada restructuring, McCarthy Tétrault LLP represented the automaker in Canada while Goodmans LLP represented Ontario's Ministry of Economic Development and Trade and the ministries of Finance and Revenue. The federal government was represented by McMillan LLP (Export Development Canada), Cassels Brock & Blackwell LLP (Industry Canada) and Torys (the CDIC). In the U.S., Chrysler was represented by a 70-lawyer team at Jones Day. Having made the decision to save as www. C ANADIAN Law ye rmag.com A UGUST 2009 33 "You take a look at the CAW, they stepped forward to do what they needed to do to assist us in getting a deal. It is highly unusual for a