Ottawa will stay course on stimulus: Flaherty November 22, 2009
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Rather than turning off the stimulus taps or pouring more fuel on the economic fire, Ottawa will stand pat with the $61 billion in stimulus spending announced in January, Finance Minister Jim Flaherty said Friday.
Finance Minister Jim Flaherty says temporary stimulus measures announced last January in his budget will end as planned by the end of the next fiscal year.(Blair Gable/Reuters)
“Budget 2010 will be year two of our two-year economic action plan. We will not undertake major new spending initiatives,” he told a business audience at the Empire Club in Toronto.
Flaherty emphasized that Canadians shouldn’t expect emergency stimulus measures to become permanent policy.
He said the temporary stimulus measures announced last January in his budget will end as planned by the end of the next fiscal year.
“Our focus will not be on new initiatives or added stimulus. Our focus will be on following through in getting the measures already announced out the door and into the economy. We will stay on course,” he said.
Approximately 90 per cent of this year’s portion of Ottawa’s stimulus spending program was committed as of September, with 7,500 infrastructure projects identified and more than 4,000 already underway, Flaherty said.
However, he said, economic recovery has been “tentative” so far with “no evidence of firm growth.”
As the global economy shows signs of a recovery, some have suggested policy leaders need to consider withdrawing the unprecedented levels of stimulus they injected, or face rampant inflation.
Flaherty’s message, of ensuring existing funds make it out the door while showing restraint with regards to future spending, struck the right tone with some economists.
“The recovery is very fragile and we haven’t even seen a recovery in private investment yet. That’s why public-sector investment through infrastructure spending is so important,” said Glen Hodgson, chief economist with the Conference Board of Canada. “It’s too early to talk about withdrawing stimulus.”
No tax hikes, Flaherty vows
The government is forecasting a deficit of roughly $56 billion for the current fiscal year. About half of that, some $28 billion, consists of one-time stimulus and support to the automotive industry as well as temporary measures taken to increase benefits for unemployed workers and freeze EI premiums for individuals and businesses, Flaherty said Friday.
Although he was careful to allow the government wiggle room to alter course as events warrant, he was unequivocal on two points: the current government has no plans to raise taxes to balance the budget, nor will it cut transfers to pay off the deficit.
Transfers to provinces and individuals takes up some $100 billion of the government’s approximately $200-billion annual budget.
“If we have to restrain growth when the time comes, we will find that restraint in the remaining $100 billion of federal program spending that is projected to grow at 3.3 per cent a year,” Flaherty said.
Only when a “firm” economic recovery has taken hold will the government move to balance its budget, Flaherty added. The finance minister has said previously that stimulus spending and lower tax revenues will result in five years of budget deficits.
“Act in haste and one risks precipitating another economic slowdown. Wait too long and the result could be chronic deficits Canadians worked too hard to abolish ? the kind of structural deficits that other nations are dealing with right now,” he said.
Flaherty was smart to safeguard transfer payments, as the Chrétien government’s move to cut transfer payments was hugely unpopular in the 1990’s, Hodgson said.
“Even thinking about transfers to other levels of government is very, very difficult,” he said.
(With files from Canadian Press) (more…)
Airport traffic pickup will be slow: DBRS October 15, 2009
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Air traffic will remain sluggish well into 2010, DBRS said Thursday.
The debt rating service said the recession has caused a significant erosion in traffic at Canadian airports and predicted a slow recovery.
Vancouver International Airport traffic dropped 11.6% in August from a year earlier.(Meera Bains/CBC)
DBRS said traffic was down five to seven per cent over the summer at most airports. The exception was Vancouver, which was worse. The country’s second-busiest airport saw volumes drop by 11.6 per cent in the year ending in August.
The agency said Canadian airport authorities are forecasting that traffic will drop by four to nine per cent overall in 2009, with a slight rebound in 2010.
Vancouver is expected to drop 8.9 per cent overall, Toronto 6.4 per cent, Montreal 5.6 per cent, Edmonton five per cent and Ottawa four per cent.
With files from The Canadian Press (more…)
Air Canada will get pension break, Flaherty says July 25, 2009
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Air Canada is struggling with a $2.85-billion pension shortfall. (Canadian Press)
The federal government is close to letting Air Canada delay certain pension fund contributions, Finance Minister Jim Flaherty said Thursday.
The approval, which Air Canada has said requires a cabinet order, is “virtually ready,” Flaherty said. Air Canada is federally regulated, so it needs the government’s approval to change its pension plan.
The moratorium on payments to the pension fund, which faces a $2.85-billion shortfall, is one leg in the airline’s three-point plan to rebuild its business.
It has already renegotiated pension arrangements with its five unions and non-unionized employees. The deals give the airline a moratorium on past service contributions totalling $645 million until early 2011, and then call for fixed payments till 2013.
The third leg requires the airline to raise at least $600 million in new financing.
But even meeting those three conditions will not be enough, CEO Calin Rovinescu said recently.
“To return Air Canada to profitability will require a fundamental restructuring of our business,” he said. “This will include the execution of a disciplined and significant cost-reduction program, requiring participation by certain suppliers and stakeholders, as well as new revenue-generation initiatives.”
As part of its deal with the unions, Air Canada has negotiated an extension to its contracts, freezing wages and pensions for 21 months.
With files from The Canadian Press (more…)
Deficit will be much bigger than forecast: Flaherty May 26, 2009
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Finance Minister Jim Flaherty speaks to reporters Monday outside a meeting with his provincial and territorial counterparts in Chelsea, Que.(Blair Gable/Reuters)
Finance Minister Jim Flaherty said Monday that weak tax revenue and higher government expenses will mean Canada will run a larger deficit than was predicted in his January budget.
At that time, Flaherty said he expected a deficit of $33.7 billion for the 2009-10 fiscal year.
Speaking to reporters following a finance ministers’ meeting at Meech Lake, Que., Flaherty said the deficit will be “substantially more” than was originally forecast. He said he will provide more details when he briefs the House of Commons in June.
Flaherty also said it would be fair to assume that he would be revising his economic growth forecasts.
Prime Minister Stephen Harper has made similar warnings about the looming size of the deficit. Earlier in May, he told a meeting of Quebec mayors that the deficit, which is expected to be $85 billion over the next five years, could grow as the government deals with the recession.
At Meech Lake, Flaherty said the economic downturn has meant lower government revenues, and higher payouts, such as Employment Insurance benefits.
Flaherty also said the finance ministers agreed to establish a research working group to examine retirement income adequacy and report back to the ministers before the end of the year.
“This issue is going to take on greater and greater significance in the coming weeks and months and years,” said Ontario Finance Minister Dwight Duncan.
Duncan told CBC News that Flaherty’s revised forecast doesn’t mean a bigger deficit for Ontario.
“We were working off of more current data that I think took into greater account the bigger falls in December and January and February,” he said. “So certainly, at this point in time, we are on target for the deficit we had projected.”
U.S. Supreme Court will review Black’s fraud conviction May 18, 2009
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Former media tycoon Conrad Black will have the chance to appeal his fraud conviction before the U.S. Supreme Court.
“We are elated by the decision,” Black’s lawyer, Miguel Estrada, told CBC News Monday after learning that the highest court of the United States agreed Monday to review the case.
The Montreal-born Black, who once ran the fourth-largest newspaper chain in the world, is serving a 6½-year prison sentence. The appeal is Black’s last chance after the 7th U.S. Circuit Court of Appeals in Chicago upheld his July 2007 conviction last year.
Black has served 14 months at Florida’s Coleman minimum-security prison after being convicted of a $6.1-million fraud and obstruction of justice related to his eight years as head of Hollinger International Inc. In addition to being sentenced to prison time, Black was fined $125,000 US.
Estrada, a partner at the Washington, D.C., office of the law firm Gibson, Dunn & Crutcher, said he expects the appeal to be heard in November or December, and that a ruling will be issued by June 2010.
A jury ruled that Black and two other former executives at the media company had committed the fraud when they diverted millions of dollars in non-compete payments from the sale of Hollinger newspapers. Black had also been found guilty of one count of obstruction of justice for removing boxes of documents from his Toronto office.
Black’s lawyers argue the men did not commit fraud because they did no harm to the company. The lawyers also allege that the prosecutor defined the word “fraud” in a way that is very different from the criminal definition of fraud.
“If it turns out that none of this was criminal, a jury might take a very different view of whether he was guilty of obstruction,” Estrada said, adding that would warrant a new trial “at the very least” on the obstruction of justice charge.
Black was acquitted of nine other charges — including racketeering.
Legal experts had expressed doubts that the Supreme Court would agree to hear Black’s case.
Hugh Totten, a business trial lawyer with Valorem Law Group in Chicago, has called Black’s grounds for appeal “the pantheon of esoteric legal theories there are on the altar.”
He said the chance the country’s highest court would review Black’s case was “very slim.”
“I think the court is so busy with much larger issues,” he added.
Jacob Frenkel, a former U.S. prosecutor who has followed the case, had also said Black’s bid was unlikely to succeed.
In November 2008, after his unsuccessful federal court appeal, Black asked then president George W. Bush for a pardon. However, Bush didn’t grant the request.
With files from The Associated Press
GM Canada says ‘unprecedented cuts’ will save $2B March 26, 2009
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General Motors will save $1 billion annually through salaried workforce cuts in Canada and other business changes, as well as $1 billion in future “legacy” costs ?- mainly pension and health-care payments ? through a deal with the Canadian Auto Workers union.
In a letter to a parliamentary subcommittee charged with studying the auto industry, GM Canada president Arturo Elias said the company has taken “unprecedented” steps to reduce costs.
He said executive and white-collar employees have made sacrifices. The company’s executives have taken a 10 per cent salary cut, there will be no bonuses this year and all salaried employees have seen “very significant benefit reductions.”
In addition to the $2-billion saving, the company said it has reduced its hourly labour cost to a level competitive with non-unionized automakers in the United States.
Elias didn’t say how much that will save the company.
GM saved about $900 million in a new contract with the CAW last year that froze wages for three years. Analysts estimate the new contract will reduce costs by another $7 an hour per employee.
The contract freezes wages until 2012 and suspends cost-of-living adjustments for wages and pensions. It also reduces paid time off by 40 hours a year per employee, scraps an annual $1,700 bonus and cuts company contributions to union-sponsored programs by one-third.
Under the agreement, CAW members will also contribute $30 a month to their health benefits.
Chrysler Canada, which is in its own negotiations with the CAW, has characterized the GM agreement as “unacceptable” for its purposes and has said it needs to cut its labour costs by about $20 an hour to be competitive.
But CAW president Ken Lewenza has called that number “utterly false.”
Chrysler and GM must submit finalized restructuring plans, including new labour contracts, to the federal and Ontario governments by the end of March to receive the billions in aid they have requested.
Chrysler has said that if it can’t reach an agreement with the CAW it will be forced to close its Canadian operations.
Housing starts down, and will keep falling: CMHC February 22, 2009
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Fewer basements dug, less concrete poured, and far fewer bricks were laid in Canada in 2008 than in 2007.
Canada Mortgage and Housing Corp. says housing starts fell 7.5 per cent to about 211,056 units in 2008. And that?s just the beginning. The agency forecasts sharply lower levels of starts for the next two years, along with sliding home sales.
2008 (Actual) 2009 (Forecast) 2010 (Forecast)
Nfld. and Lab. 3,261 2,675 2,775
PEI 712 575 625
Nova Scotia
3,982 3,675 3,900
New Brunswick 4,274 3,475 3,650
Quebec 47,901 40,700 40,500
Ontario 75,076 58,255 59,700
Manitoba 5,537 4,748 5,000
Sask. 6,828 4,141 4,500
Alberta 29,164 19,200 22,000
B.C. 34,321 22,800 20,700
Source: CMHC
CMHC says housing starts are expected to be about 160,250 for 2009 and about 163,350 for 2010, before things pick up again.
CMHC also says existing home sales, as measured by the Multiple Listing Service, are expected to decline 14.6 per cent during 2009 to 370,500 units. It expects a 9.3 per cent increase in 2010 to 405,000 units.
Along with the decline in building, expect declines in price.
CMHC sees the average MLS price to be $287,900 for 2009, a decline of 5.2 per cent, while 2010 will see little change from 2009 average prices.
“Housing market activity will begin to strengthen as the Canadian economy rebounds in 2010 and the level of housing starts over the forecast period will be more in line with demographic fundamentals,” said Bob Dugan, chief economist for CMHC.
‘We will maintain our share’ of auto industry: PM February 18, 2009
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Prime Minister Stephen Harper said he believes General Motors will stay put in Canada and that the country will continue to have a strong auto industry, despite troubling economic times.
In a news conference on Tuesday in Toronto, Harper was asked whether he feared GM could declare bankruptcy or pull out of Canada entirely after the company recently decided not to take an emergency loan from the government.
?I?m not concerned about General Motors moving out of Canada. We?ve had good discussions with the company,? Harper told reporters.
The government announced in December a plan to loan General Motors Canada up to $3 billion and Chrysler Canada up to $1 billion ? totals based on the U.S. aid and proportional to their Canadian production.
Last week, GM Canada said it no longer needs the emergency loan because it was able to temporarily support itself through “cost-saving measures and access to other facilities.”
Harper added on Tuesday that the announcement in December was for a short-term financing package to deal with immediate cash concerns. He said that they are anticipating there will be ?greater loans involved in a longer-term restructuring.?
Harper said there are a range of options and the restructuring will be extremely complex, but Canada will maintain a strong industry.
“We have to be frank here, not to say there will not be job losses, because we know there are some very tough decisions to be made, but I am confident, with our participation in the restructuring, that we will maintain our share of this industry in North America.”
Although GM Canada declined Ottawa’s loan offer, Washington is expected to give GM and Chrysler in the U.S. a second instalment of bailout loan funding Tuesday.
GM will receive $4 billion US on top of the $9.4 billion it got earlier, while Chrysler will get $3 billion on top of its earlier $4 billion, said a report from the Associated Press.
With files from the Canadian Press and the Associated Press (more…)
Hudson’s Bay restructuring will cost 1,000 jobs February 7, 2009
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Hudson’s Bay says its restructuring will allow it to “better compete during these challenging economic times.”
The Hudson’s Bay Company says its new restructuring plan will include a five per cent reduction in its full-time workforce, which means about 1,000 job cuts in Canada.
The giant retailer’s new U.S. owner said Wednesday that the plan will result in savings of $150 million in 2009.
Earlier this month, the company announced it would invest $70 million in its operations and created a Shared Services Group designed to provide finance, information technology, supply chain and logistics, and central operations for all its stores.
“We believe this new structure will allow us to better compete during these challenging economic times and ensure our long term success,” Jeff Sherman, CEO of Hudson’s Bay Trading Co., said in a statement. “These changes allow us to be more responsive to customer needs and expectations while at the same time aggressively implement our business strategy in order to grow sales and earnings.”
The Hudson’s Bay Company operates 600 retail outlets and employs about 60,000 full and part-time workers in Canada at The Bay, Zellers, Home Outfitters and Fields stores.
The company’s U.S. operations, owned by an affiliate named Hudson’s Bay Trading, include Lord & Taylor, an upscale specialty retailer with 48 stores in nine states, and Creative Design Studios.
Shrinking auto production will cut economic growth: Scotiabank February 2, 2009
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The North American auto industry virtually shut down in January, and the resulting cutbacks in vehicle production will reduce economic activity by roughly 2.5 percentage points in the U.S and one percentage point in Canada, according to a new report from by Scotia Economics.
“Vehicle output in Canada, the United States and Mexico will plunge nearly 50 per cent below a year earlier in the opening month of 2009, as many companies extended their holiday shutdowns through most of January,” said Carlos Gomes, Scotiabank Senior Economist and Auto Industry Specialist in his latest Global Auto Report.
“We estimate that these cutbacks will reduce North American vehicle output to less than an annualized eight million units in January, a sharp fall-off from a full-year 2008 total of 12.9 million.”
‘In the absence of a hefty pick-up in vehicle production, job losses in the parts sector could accelerate.’?Carlos Gomes, Scotiabank senior economist
Besides loss of production, Gomes believes the shutdowns will have a further negative effect on the Detroit automakers.
Although the Asian and European car companies suffered a 30 per cent year-over-year decline in production this month, they will likely ramp up output faster than the North American automakers.
As a result, these “New Domestic” automakers will produce more vehicles in North America in the first quarter than the “Detroit Three.”
Parts suppliers job losses
Lower vehicle production is also taking its toll on parts suppliers. Employment in the sector has been slashed by more than 22,000 in Canada since late 2003.
?We estimate the value of Canadian-made parts in each North American-built vehicle has dropped to less than $1,700 from more than $2,000 as recently as 2004,” said Gomes. “In the absence of a hefty pick-up in vehicle production, job losses in the parts sector could accelerate.”
The report found Canadian auto sales also dropped in December, with purchases slumping 21 per cent below a year earlier. U.S auto sales plunged 35 per cent during the same time.
Gomes expects sales to remain weak in the first half of 2009 and forecasts full-year 2009 purchases to slump to 1.475 million units, the lowest annual total since 1998.
Porsche results
The luxury car market wasn?t spared from the downturn. German sports and luxury carmaker Porsche said Friday that sales for the first six months of its fiscal year fell 14 per cent.
The Stuttgart-based automaker said sales fell to $4.8 billion Cdn, according to preliminary first-half results. The company said its sales volume dropped 27 per cent to 34,000 vehicles during the period.
The company’s chief executive, Wendelin Wiedeking, said the company would introduce further production cuts, including reducing the number of days worked at its main plant in Stuttgart this summer.
