Telecom: BCE chief warns Ottawa to tread carefully on foreign-ownership reforms

By Jamie Sturgeon | National Post - CBC.ca | May 18, 2010

George Cope, chief executive of BCE Inc., cautioned yesterday that government should carefully weigh a decision to change or scrap foreign-ownership restrictions in the telecommunications sector, an area of the economy he says is already flush with investment.

This follows comments last week from Industry Minister Tony Clement further suggesting Ottawa is moving toward a policy shift to promote competition.

At a lunch speech in Toronto, the CEO of the country’s largest communications company said the Canadian market has become highly competitive in the two years since he took over, forcing BCE’s Bell Canada to pump $6-billion into new wireless and wireline upgrades through 2010 to stay ahead.

He pointed to Bell’s new, multibillion-dollar 3G+ wireless network jointly built with rival Telus Corp. as an example of how domestic needs are being met, and warned that allowing in firms from the U.S. and elsewhere may hinder future advancements.

“Do you think Summerside, P.E.I., would come up before Chicago? Not going to happen,” he said. “It happened in this case. So let’s be very, very careful about what we’re trying to solve in Canadian telecom rules because the investment is actually working.”

The network blankets 93% of the country.

Mr. Clement told a special parliamentary committee last week that restrictions could be lifted on the telecom sector by allowing key content assets owned by the biggest providers like Bell and Rogers Communications Inc. to remain in Canadian hands, while opening up distribution and network assets to foreign ownership.

The comments follow a pledge in the Throne Speech in March to liberalize the sector. “Our government will open Canada’s doors further to venture capital and to foreign investment in key sectors, including the satellite and telecommunications industries, giving Canadian firms access to the funds and expertise they need,” Gov. Gen. Michaëlle Jean said at the time.

Ottawa’s move stems from two federal blue-ribbon reports completed in 2006 and 2008, that call for a relaxing of the rules as a way to spur more investment in economically important communications service.

This year however has seen three new entrants into the wireless market, in Wind Mobile, Mobilicity and Public Mobile, with cable giants Videotron Ltee. and Shaw Communications Inc. are on their way with wireless in Quebec and Western Canada.

Competition in broadband is also heating up as Bell and Telus Corp. invest billions this year overlaying copper networks with fibre, bringing alternatives to rival services provided by Rogers and Shaw. “What problems are we trying to solve, what’s the objective?” Mr. Cope said.

Still, the industry, especially in wireless, remains dominated by Bell, Rogers and Telus.

Some analysts suggest that without consolidation or access to more foreign capital (through a change in policy), the young startups face near-certain failure and a retrenchment in services in the market.

jasturgeon@nationalpost.com

Media: Regulator says cable viewers willing to pony up more for TV

J. Sturgeon | Vancouver Sun | 03.24.10

TORONTO - Cable subscribers have shrugged at rate increases in the past and may be willing to do so again if new fees are passed on to them, the national broadcast regulator suggested yesterday.

In a report submitted to the federal Cabinet, the Canadian Radio-television and Telecommunications Commission said it does not believe "significant affordability issues would be created" for consumers if a new compensation regime were introduced as early as 2011.

Called "value for signal" or "fee for carriage," the new system would see big cable firms such as Rogers Communications Inc. and Shaw Communications Inc. for the first time pay conventional TV networks such as Global and CTV Inc. a fee for station signals.

On Monday, the CRTC moved to adopt the controversial measure to help offset declining revenue at network TV stations and preserve the Canadian content they produce.

Yesterday's report stems from a rare order-in-council from Heritage Canada in September and a subsequent public hearing in December. The Harper Conservatives have been cautious to support a CRTC ruling that would raise consumer costs and create a potential voter backlash.

The regulator's recommendation would almost certainly do just that, causing "modest price increases" for cable.

But Canadians may be willing to eat the charge, the CRTC's submission suggests.

The average cable rate was $53.22 a month last year, CRTC figures show. That's up almost 50% since 2002 when rates were deregulated, representing an annual rise of 5.6% to the average bill.

"Such results do not seem to suggest a significant withdrawal of demand for [cable or satellite] television services when consumers are faced with rate increases," the CRTC said.

The rise has help lift revenue and profit at the major cable firms. Now, with the fortunes of networks dimming, the CRTC aims to buoy the entire system with a new negotiation regime similar to one that exists in the United States.

The CRTC has put the decision to the Federal Court of Appeal, which is to determine whether it has the jurisdiction to impose what some term a new "TV tax."

The move opens a new battleground on which the broadcast and cable-satellite consortiums will continue the years-long fight over fees for over-the-air station signals.

Mirko Bibic, senior vice-president of regulatory affairs at BCE Inc., which operates satellite service Bell TV, said the telecommunications giant is preparing its case. Phil Lind, vice-chairman of Rogers Communications Inc., the largest cable company in the country, also said the company would fight the decision in court.

CTV or Global could not be reached for comment. (Global is owned by Canwest Global Communications Corp., parent of the National Post.)

The most critical scrutiny, however, could come from the federal government, which has the option of overturning Monday's decision.

Prime Minister Stephen Harper reiterated his party's position during Question Period yesterday. The government, he said, is "concerned about anything that imposes fees on consumers without their consent."

The price tag on an individual station signal is anyone's guess. Specialty channels such as TSN and HGTV command upwards of $1 or more a month, a fee lumped into a customer's cable bill.

In previous proceedings, the CRTC has used a price of 50¢ per subscriber for local station signals. All in, estimates received by the commission during hearings last year ranged from as low as $1 per subscriber per month to as high as $10.

But "since any fee charged would be the result of a negotiation, there is no way to accurately predict what the ultimate charges would be for consumers," the CRTC admitted.

Telecom: Wireless startup shut out by regulator

J. Sturgeon | Financial Post | Oct. 1, 2009

Globalive Wireless's bid to become the country's fourth major cellphone provider was stopped dead in its tracks on Thursday after the industry's regulator said the company was controlled by its foreign backer and offside with Canadian telecom law.

The fledging Toronto-based carrier has been preparing for months to shake up Canada's staid wireless market, and was to introduce services in Calgary and Toronto within weeks.

Those plans have been in limbo for the last month as the Canadian Radio-television and Telecommunications Commission has deliberated on whether or not Globalive -- which is almost totally reliant on a Egyptian carrier Orascom Telecom Holdings (OTH) for its financing, technical expertise, even branding -- was in fact Canadian. Domestic ownership is a requirement under the current regulatory framework.

"The Commission considered whether non-Canadians do not own or control Globalive as currently structured. The Commission determined that Globalive does not meet that test," the regulator said.

The decision will surely be seen as shocking to Globealive and its backers, but a relief to the country's big wireless carriers.

Earlier this year, critics led by Rogers Communications Inc., BCE Inc. (Bell Canada) and Telus Corp. attacked Globalive's partnership with Orascom -- a wireless behemoth and the largest provider in the Middle East. They charged that the US$700-million Orascom pledged to the startup combined with its operational involvement handed the foreigner de facto control.

A lot is at stake for the incumbents who pull in hundreds of millions in profits annually selling wireless plans to Canadians that rank among the most expensive in the world. Globalive has vowed to offer cheaper services, presenting itself as the alternative for Canadian subscribers fed up with the established players.

In rare public hearings held last month at the behest of the incumbent carriers, CRTC chairman Konrad von Finckenstein seemed inclined to side with the them, blasting Globalive for tabling a proposal on its ownership structure that virtually split decision-making powers with the Middle East operator. The chairman also criticized certain rights Orascom held in connection with the US$508-million in loans the firm has already extended to Globalive.

In response, the startup carrier agreed to reshuffle and enlarge its Canadian board representation and amend its agreements with Orascom to give Globalive clearer operational control.

The commission ruled on Thursday that the amendments did not go far enough to bring Globalive in line, in part because Orascom, which holds a 65% overall equity interest mostly through non-voting shares, still held too much economic control.

"In circumstances such as the present, where a company is heavily debt financed, this opportunity can translate into significant influence," the CRTC found.

During last month's proceedings, Globalive's chairman Anthony Lacavera (left, photo above) as well as the head of Orascom, Naguib Sawiris, said their original plan did not call for a massive injection of capital solely from the foreign carrier.

However, the financial crisis that turned capital markets into a desert last year -- after Globalive had already committed $442-million to acquire airwave licenses from Ottawa -- required Orascom to extend almost complete start-up financing.

Mr. Lacavera said Globalive planned to pay back the loans or have institutional investors take portions when the firm was beginning to generate cash and could demonstrate its viability.

Yet the commission rebuffed that promise on Thursday, stating it "has no authority to issue a conditional approval on the basis that the carrier undertakes to bring itself into compliance in the future."

In a recent interview with the Financial Post, Mr. Lacavera said he attempted to find other sources of money but was turned down by domestic and international financial institutions. "This was the only way to do it, I believe. We looked inside Canada," he said. "Banks don't lend money easily into companies like this."

Most observers agree that a decision in favour of the would-be cellphone startup would have established a new precedent that undermined Canada's foreign-ownership rules for the telecom sector, which are designed to prevent international giants from overrunning the domestic market.

"The CRTC really had no choice," said Ken Engelhart, senior vice-president of regulatory affairs for Rogers, the country's biggest cellphone provider. "The facts in this case were just so overwhelmingly pointing to control by Orascom. I don't think the commission could have done anything else."

Two other wireless startups, DAVE Wireless and Public Mobile plan to launch within months after acquiring licenses of their own, but both lack the backing of a global wireless heavyweight.

The CRTC ruling flies in the face of an approval from Industry Canada in March that determined Globalive was Canadian-owned and controlled.

For its part, Globalive, which has hired more than 500 employees since last year and is rolling out its network now, said on Thursday it was determining its course of action, which could include returning to the commission with another proposal.

The decision must also come as a personal shock to Mr. Lacavera.

"I'm very confident we'll get a favourable ruling. We've fully cooperated and fully complied with all their concerns and made all the changes they've raised," he said last week.

"For us, it's about getting into the market."

Financial Post

jasturgeon@nationalpost.com

Telecom: Mike Z steps down, says Nortel 'stabilizing'

J. Sturgeon | Financial Post | Aug. 11, 2009

In November 2005, he was hired by Nortel Networks Corp. to open a new chapter for the struggling telecommunications firm. Almost four years later, Mike Zafirovski has left Nortel as it moves through what most say is its last.

Monday, Mr. Zafirovski stepped down as chief executive of the bankrupt firm, as did most of Nortel's board of directors.

The decision, which comes as the Toronto-based company is in the process of selling off all of its business operations, was jointly made by Mr. Zafirovski, Nortel's bankruptcy monitor Ernst & Young Inc. and the company's creditor committee.

In an interview, the 55-year-old executive said the decision to go was made because the company, while still losing considerable amounts of money, was "stabilizing" now and that it was in the best interest of all for him and certain board members to step aside.

Nortel's two largest business units have or are on the verge of being acquired by rivals while Nortel is in advanced talks to sell its remaining units. The moves put the company's employees and technological legacy on a secure and "promising path," he said.

The announcement coincided with the release of Nortel's second-quarter results, which showed the company lost US$274-million during Mr. Zafirovski's final three months at the helm, more than double the loss from the same quarter a year ago. Revenue declined 25% to US$1.97-billion.

However, revenue did increase 14% quarter over quarter, indicating some customers are gaining more confidence that the company will honour future contract obligations - or at least whatever company acquires its businesses will.

Mr. Zafirovski said in June that Nortel would sell all its divisions through so-called "stalking horse" auctions as it tries to pay back creditors. The court-supervised sales are designed to set a floor price on the assets and encourage rival bids.

Last month, the company sold its major wireless business, which makes network equipment for mobile-phone carriers, to Sweden's Ericsson for US$1.13-billion. That bid trumped a US$650-million offer from fellow European giant Nokia Siemens Networks. Avaya Inc. has placed an initial US$475-million bid for the Enterprise unit, Nortel's second biggest by revenues, which develops networks for large corporations. An auction is slated for early next month.

"Frankly, we've done a pretty significant job of stabilizing the company, producing good results and increased the interest in our businesses from buyers," Mr. Zafirovski said of Nortel's performance since its bankruptcy filing on Jan. 14.

The 127-year-old company was forced to seek bankruptcy protection after its turnaround plans were sideswiped by the economic downturn last year, Mr. Zafirovski said.

"We were there in the middle of 2008," he said adding that he and other senior managers worked tirelessly to overcome the accounting scandals and related legal woes with investors that had plagued the firm since before his arrival.

He said he expected growth in most of the company's markets last year until the recession hit, leading to double-digit declines in sales across the telecommunications industry.

"We certainly did not have the flexibility to withstand that," he said.

More than a dozen appeals to the federal government made between October and January were rebuffed, Mr. Zafirovski said, as lawmakers were not convinced a bailout would save the firm. "I feel it's something the government should have done," he said. "I understand why it wasn't, but certainly we believe we provided a compelling case."

Alongside Mr. Zafirovski, five directors left the company yesterday. Chairman Harry Pearce as well as John Manley, James Hunt, Richard McCormick and Claude Mongeau stepped down.

Pavi Binning, Nortel's chief restructuring and financial officer will remain to manage operations for the time being. Nortel is also seeking a greater role for Ernst & Young, its court-appointed monitor, in its restructuring activities.

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Telecom: Ericsson poised for supremacy in North America

By J. Sturgeon | Financial Post | Aug. 01, 2009

The sun had set on the Statue of Liberty hours before on Friday, July 24, harkening the arrival of another summer weekend in New York City. Far above the din of the streets, executives from Telefon AB LM Ericsson and Nokia Siemens Networks BV, two of the world's biggest telecommunications firms, remained hard at work.

"We had Nokia Siemens sitting on one side of the table and Ericsson on the other," James Bromley, Nortel Network Corp.'s lead U.S. attorney, told a Delaware court this week. Representatives of the two international tech giants had been huddled since the morning around the U-shaped boardroom table on the 39th-floor offices of Cleary Gottlieb Steen & Hamilton LLP, in the heart of Manhattan's financial district. They were bidding at a live auction for the most coveted assets bankrupt Nortel Networks had up for sale.

Shortly before midnight, Ericsson emerged the victor with a bid of US$1.13-billion. Mr. Bromley called the court-supervised sale a "milestone transaction." And for Ericsson it was. The Swedish teleco's prize was Nortel's vaunted wireless assets - the very technology powering the tens of thousands cellphone calls, text messages and mobile tweets being made by New Yorkers on the streets below.

The sale, which will close on Sept. 30 barring any regulatory hurdles, will help transform Ericsson into a mobile network behemoth in North America, giving it the technology it needs to sign lucrative contracts with Canadian and U.S. carriers for years to come.

It caps a remarkable string of deals by Ericsson since February that has made North America the company's most important.

"Being able to acquire this part of Nortel gives a very well-rounded base to tackle the business that we already have, plus a lot of the new business that we're going to have," Angel Ruiz, head of Ericsson North America, said in an interview. "It positions us very well."

North American operations will represent upward of 20% of the company's business worldwide after the deal closes, making it far and away its most valuable region. "With the added market share this brings to the table with customers like Verizon and Bell and Telus and US Cellular and a number of Tier-2 carriers, it's going to go from a US$2-billion business to perhaps over a US$5-billion business [annually]," the executive said.

The completion of the Nortel sale will finish off a troika of deals that have catapulted the company to a market-leading position in a North American market readying itself for a massive upgrade cycle.

In February, Ericsson won the contract to become the principal supplier of U.S. giant Verizon Wireless's build-out of its next-generation network. That was followed by a seven-year, US$5-billion deal to manage the networks of Sprint Nextel Corp., another major U.S. operator.

The transactions will leave Ericsson with more than 14,000 employees in North America, including 2,700 in Canada spread between offices in Vancouver and Toronto, where its Canadian operations are headquartered, as well as a sizeable research facility in Montreal. The acquisition will also hand to Ericsson Nortel's highly regarded research labs in Ottawa.

It's no surprise the sudden and formidable rise has left many wondering where Ericsson has come from.

The history of the company in many respects mirrors Nortel's, once a chief rival. Founded in 1876 in Stockholm, Ericsson spent much of the past century developing and selling phone equipment and systems, fuelled in part by the same nationalistic patronage from the Swedish government that Nortel enjoyed from Ottawa through contracts and generous tax incentives.

"They've been around for a very long time," says Douglas Reid, professor of international corporate strategy at Queen's University's School of Business and an expert on the telecommunications industry.

The company has held a presence in Canada for decades, as well, opening its first offices here in 1953. Ericsson is also a considerable investor in Canadian R&D, spending more than $2-billion over the past 10 years - more than $126-million in 2008 alone - primarily through its labs in Montreal, which represent the company's second-biggest facilities in the world.

Mr. Ruiz said the political furor that has erupted in recent weeks over the Nortel sale has come as a bit of shock to the company. "Considering our history," he says," I'm a bit surprised at some of the comments and perception."

Dwight Duncan, the Minister of Finance for Ontario, for example, has called for the sale to be stopped on grounds that it constitutes a national security concern and could spell the end of some high-tech jobs. The federal Liberals have also implored Industry Minister Tony Clement to conduct an in-depth review of the transaction to see if it violates foreign-ownership provisions in the Investment Canada Act.

Echoing what Ericsson's incoming CEO Hans Vestberg said this week, Mr. Ruiz said the company has no plans to scale back Nortel's Ottawa operations for the time being. "We have always touted our R&D presence in Canada, and that will continue to be very, very strong," he said.

The two product lines that comprise Nortel's wireless unit are CDMA networks, a technology still widely deployed by North American carriers, but which is undergoing a gradual decline here and around the world, and so-called long-term evolution or LTE systems, the ultra-fast technology now gaining ascendance with carriers and the gear that will most likely power the next generation of wireless networks.

In LTE, the 500 or so researchers that work at Nortel's Ottawa labs are resources that Ericsson will want to retain, and indeed grow, as the race toward the commercial deployment of the new technology gathers pace through 2010 and beyond, Prof. Reid said.

"The people will likely remain," he said, adding that "meaningful and important telecom work here will still be done."

The only difference? "They'll be doing it under the Ericsson flag not the Nortel."

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Ericsson confident of Nortel sale, but braced for hurdles

Jamie Sturgeon | Financial Post | July 28, 2009

Swedish telecommunications giant Ericsson said Monday it was confident that its acquisition of Nortel Networks Corp.'s wireless business would be approved by bankruptcy courts as well as Canadian and U.S. regulators, but acknowledged that hurdles remain.

Primarily, Hans Vestberg, chief financial officer of Ericsson noted Canadian technology giant Research In Motion Ltd.'s attempts to interfere with the sale, including urging federal authorities, which still must approve the deal, to intervene.

"We feel confident that this will go through but we have a lot of respect for the process that will come," Mr. Vestberg said on a conference call. "There are some regulatory issues left to be defined."

Ericsson won a three-way auction for most of bankrupt Nortel's wireless assets early Saturday, agreeing to pay US$1.13-billion for the Toronto-based company's technology and certain patents related to CDMA and LTE wireless network technologies.

The unit, Nortel's biggest by revenue, makes and develops CDMA networks used by many major mobile-phone carriers including Bell Mobility and Telus Corp., as well as next-generation Long-Term Evolution, or LTE networks.

Led by North American carriers, LTE, which will be able to deliver data at high speeds to mobile devices even more sophisticated than today's smart phones such as Apple Inc.'s iPhone or RIM's BlackBerry, is poised to become the global standard over the next several years.

Ericsson outbid European telecom rival Nokia Siemens Networks, as well as U.S. private equity firm MatlinPatterson Global Advisers LLC.

Waterloo, Ont.-based RIM has expressed interest in the assets, saying last week it would have bid as much as US$1.1-billion for them, but said it was blocked by Nortel from participating in the auction.

In a statement released late Sunday, RIM said it remained interested in pursuing certain assets, and urged Canadian authorities to review the sale, which would see Nortel's extensive technological base fall to a foreign firm.

"The government has the authority and responsibility to get involved to protect vital Canadian interests," the company said.

Tony Clement, the federal Industry Minister, has said it was his preference to see Nortel's technology remain in Canada, but has so far declined to step into the sale process.

Nortel will bring a request to have the sale approved by bankruptcy courts in the U.S. and Canada on Tuesday. The deal will also be subject to further regulatory approval.

Mr. Vestberg said Ericsson expects the deal to close late in the third quarter and have the business fully integrated by the fourth.

He said that while there were synergies to be found between its existing North American operations and the new assets, Ericsson planned to keep Nortel's wireless operations in Dallas and Ottawa unchanged for the time being.

The unit employs about 2,500 people, with about 800 workers based in Canada, primarily in Ottawa, Nortel's historical research and development hub.

Nortel, an icon of Canada's technology sector for more than a century, filed for bankruptcy protection in January, citing the recession for thwarting a turnaround plan begun in 2005 with the appointment of Mike Zafirovski, the company's current chief executive.

The company, which has its shares delisted from the Toronto Stock Exchange on June 26, is in the process of selling off its major business lines.

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News: No need for wage cuts, CAW says

J. Sturgeon | Financial Post | 03. 06. 2009

Auditors of General Motors Corp. say North America's largest automaker may be forced to seek bankruptcy protection as it fights for financial survival, raising the odds that workers in Canada will be compelled to accept reduced wages and substantial clawbacks to legacy benefits.

If the Canadian Auto Workers union does not agree to concessions, it could spell the end of GM manufacturing in Canada, experts say.

The auditors' warning, filed in GM's annual report last week but acknowledged by the company yesterday, also raised concern among federal and provincial lawmakers over the "sustainability" of the U. S. automaker -- and the billions in Canadian taxpayer-backed loans being extended to it.

Part of GM's path toward returning to profitability lies in labour-cost reductions both in Canada and the United States. Union officials for the CAW began yesterday the unenviable task of renegotiating a collective bargaining agreement for the roughly 10,000 workers the automaker employs here.

"The auto workers are in a desperate situation going in," said Dennis DesRosiers, a senior Canadian auto analyst and president of DesRosiers Automotive Consultants Inc. in Richmond Hill.

CAW officials said they have reviewed a tentative agreement that union workers in the United States have reached with the company and plan to amend the Canadian union's terms to maintain the same level of investment and production that GM dedicates to Canada now, which is about 20% of North American operations.

GM's mounting losses, a negative net worth and massive cash-burn rate may mean the Canadian union will have to absorb heavy concessions in the coming days just to keep the automaker in Canada, Mr. DesRosiers said.

"[The CAW would] be fortunate to get a term sheet that says, 'Here's what it is going to take for us to stay in Canada, take it or leave it.' "

Ken Lewenza, the CAW president, told reporters in Toronto yesterday the terms reached between GM and the United Auto Workers, the U. S. union, did not cut wages or "core" benefits. There is no reason why the CAW could not draft a similar agreement, he said. "We believe we can maintain our existing wage and benefits package."

New bargaining agreements with workers in Canada and the United States may be for naught, though, if North American lawmakers lose faith in GM's ability to revive its fortunes. Yesterday, the grim auditor assessment created fresh uncertainty among lawmakers whether taxpayer money should go toward a company that may well fail anyway.

Ontario's minister responsible for the auto sector acknowledged there is the possibility that money from the province may not be forthcoming.

"If it is not a viable company, we will not make a deal," said Michael Bryant, Ontario's Economic Development Minister, which is partnering with Ottawa in providing potential financial aid to the Detroit automakers. "If it is a company that doesn't have a profitable future, haven't addressed their legacy costs, don't have a business plan that makes sense to us, we will not make that investment -- because it would be a bad investment."

Speaking from Washington where he is consulting with U. S. officials, Jim Flaherty, the federal Minister of Finance, reiterated in a television interview that "viable" plans must be demonstrated by GM and Chrysler if loan support is to remain in place. That includes potential wage concessions and benefit clawbacks, the Minister said.

"There are the costs of labour, the overall costs of benefit packages -- are they competitive between the Detroit Three and the other automobile companies in Canada?" Mr. Flaherty said. "Those are some of the variables that need to be looked at in order to come to some sensible determination on the sustain-ability of these enterprises."

GM reported a US$30.9-billion loss in its 2008 annual report, which also contained an auditor assessment that stated "substantial doubt" existed that the automaker could make good on certain looming debt payments, forcing it into bankruptcy protection.

GM said yesterday it has received waivers from its lenders to have loan recalls deferred.

A spokesperson for GM told The Wall Street Journal GM's main concern at present was attaining the lender waivers, which will buy more time for the company to restructure.

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News: Auto bailout tip of iceberg: JP Morgan

By Jamie Sturgeon Financial Post 11.25.08

The tens of billions of U.S. taxpayer dollars being asked for by Detroit could be the tip of the iceberg, analysts at JP Morgan said Tuesday.

With Congress preparing to hand struggling automakers General Motors Corp., Ford Motor Co. and Chrysler LLC US$25-billion in loans, JP Morgan analysts said any emergency cash would just be a lifeline until Barack Obama's administration takes over in January.

Mr. Obama's economic team would be put to work quickly, tasked with crafting a second, more comprehensive bailout package involving concessions from creditors and labour in what would amount to a sweeping restructuring of the Big Three.

Structural costs would be a primary target under any Washington-brokered overhaul, JP Morgan said, with concession from creditors and the United Auto Workers "inevitable."

The so-called "shared sacrifice scenario" would take months to negotiate, analysts said, likely equating to further injections of operating capital for Detroit.

What all of this means for Canada, which has already shed more than 10,700 auto-manufacturing jobs this year, is uncertain.

Ottawa, too, is mulling a co-ordinated effort to prop up the North American industry, as GM, Ford and Chrysler's Canadian operations pine for up to $6.5-billion in loan guarantees here.

What is certain is that a significant turnaround is of paramount importance. Reeling from a maelstrom of economic headwinds, Canadian auto manufacturers are expected to collectively lose $1.7-billion this year, according to a report by the Conference Board of Canada, also published Tuesday. The loss will be the third in as many years.

Moreover, as demand crashes in the United States, where 90% of Canadian automotive production heads to, 2009 is shaping up to be equally as bleak. New vehicle sales are expected to fall to their lowest point since 1992, leading to another loss of more than $1-billion.

The decline in the Canadian dollar will provide little support, the Ottawa-based independent research association said, adding it expects the loonie to recover to US85¢.

"At this level, the dollar dampens prospects for vehicle exporters, who are being forced to contend with competitive headwinds from low-cost foreign suppliers and more competitive U.S. labour settlements."

Another certainty is that the lines of communication between the federal Conservatives and the Canadian Auto Workers union are quiet for the time being.

Industry Minister Tony Clement said on Monday any restructuring effort would require concessions from the union, but has yet to begin in earnest any dialog with CAW officials.

"He's not talked to me. I've sent him a letter asking for a meeting," said Ken Lewenza, CAW president. "He has not followed up in terms of talking to us about what role the labour movement can play. And until I hear from [the Minister], I prefer to continue to do what we've been doing, and that's building cars."

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