3 hours ago

TORONTO — Ontario is refusing to lower its levies on alcohol as it moves towards tax harmonization and may also increase the cost of buying a privately sold used car.

Under its deal with Ottawa, Ontario is supposed to standardize its eight per cent provincial tax on products and services as it merges the PST with the five per cent federal GST.

Although alcohol taxes should come down under the merged tax, the government will add new fees to make up the difference when the blended tax takes effect next year.

A government spokeswoman says the fees on alcohol will ensure social responsibility.

When it comes to used car sales, people who buy from a private seller currently pay the provincial sales tax while both the PST and GST are applied to vehicles that are sold through licensed dealerships.

Last week’s budget suggested that province may increase the tax on privately sold cars to ensure a level playing field with dealerships, but the spokeswoman says no final decision has been made yet.

Copyright © 2009 The Canadian Press. All rights reserved.

The numbers are in….and Canada’s economy is in big trouble. It shrank 0.7 per cent in January, in line with expectations from economists and a slight improvement over December, when economic output plunged a full 1 per cent.

No one is celebrating: The decline marks the sixth consecutive monthly contraction in the economy, with gross domestic product down 2.4 per cent over the past 12 months and showing signs of getting a lot worse based on recent performance.

Benjamin Reitzes, economist, BMO Nesbitt Burns: “The December/January declines mark the worst two-month performance for GDP in at least 11 years. If GDP manages to stand pat in February and March (which might be wishful thinking), the economy would still be on pace to contract at a more than 6 per cent annualized rate, a record back to 1961. The global recession hit home in the first quarter.”

Millan Mulraine, economics strategist, TD Securities: “There is no getting away from the fact that the Canadian economy is in the depths of a rather profound economic recession, and from the evidence so far this year, it clearly appears that the economy may have taken a dramatic turn for the worse. … In the final analysis, this report will provide further ammunition for the Bank of Canada to reduce the policy rate even further when they meet late April with a real likelihood that they may engage in quantitative easing as they attempt to provide further monetary stimulus to the Canadian economy.”

BERTRAND MAROTTE

Globe and Mail update

March 31, 2009 at 2:22 PM EDT

CAE Inc. plans to invest up to $714-million over the next five years in an ambitious research and development program aimed at expanding the company’s role in flight simulation and training, as well as diversifying into other areas.

Montreal-based CAE said today the federal government will invest up to $250-million in the program.

The investment is being made through the Strategic Aerospace and Defence Initiative (SADI).

About 1,000 jobs will be created or maintained, the company said.

CAE said in a press release it wants to open new markets in the aerospace and defence sectors, such as analysis and operations.

In a telephone interview, CAE president and chief executive officer Robert Brown said CAE feels it is crucial to continue significant R&D spending, despite the more difficult economic times.

“We need to make sure we have a high level of effort in R&D, even in the period we’re in right now. We’re absolutely determined to maintain our competitiveness.”

CAE will finance the investment through the cash flow it generates, he said.

Ben Cherniavsky, an analyst with Raymond James Ltd. in Vancouver, said CAE is making sure it is well positioned for an economic recovery.

Among the six main technology thrusts of the project are the development of an augmented “visionics” system, enabling a pilot to take off and land safely even when visibility is restricted; and the development of networking technologies to allow military of several countries to participate simultaneously in real-time training and mission rehearsal exercises.

TARA PERKINS

Globe and Mail Update

March 31, 2009 at 9:49 AM EDT

Prime Minister Stephen Harper gave Canadian banks some unsolicited advice on the pages of the Financial Times Tuesday, saying that they should capitalize on the relative strength of their balance sheets by acquiring assets abroad.

“I’m not going to try running banks, but I hope our banks will see this as an opportunity to build the brand - the country’s brand, their own brand – and to expand their scope and profitability over time,” Mr. Harper is quoted as saying in a front-page story.

“I can assure you that the steps we’re taking in the financial sector will not be designed to promote greater protectionism,” he added.

Mr. Harper said the banks should be looking to buy assets in the U.S. and other countries, and that he would support such efforts as “an opportunity for Canada to expand its role in the world financial sector,” the article said.

The Prime Minister boasted of the country’s system of banking regulation, which he suggested has kept Canadian banks from requiring the degree of government support that has been propping up institutions in other countries.

“Canada itself has shown that if you have a reasonable system of regulation, there is no need for governments to be nationalizing banks and directing executive compensation and trying to micromanage economic activity,” he said.

“One could say we were overregulated, but our solution is going to lead to us having the most free-enterprise financial sector in the world. We’re the only one not nationalizing or partial-nationalizing or de facto nationalizing.”

Mr. Harper said the fact that Canadian banks will now be competing against banks that are being supported by governments is a “very real worry” in the short term, but not in the long term.

“I think in the longer term this government intervention in the final sector, if it’s not unwound, will lead to politicization of the sector and poor management. I just don’t think government-run or … partially run banks are going to be very effective institutions over time,” he said.

BRENT JANG

Globe and Mail Update

March 31, 2009 at 3:11 PM EDT

Air Canada has made another key appointment that it hopes will help it stave off filing for bankruptcy protection as new president and chief executive officer Calin Rovinescu prepares to streamline the company.

The appointment of Duncan Dee as chief operating officer is seen as a move to keep the cash-strapped carrier operating and avoid bankruptcy court as it seeks to cut costs and keep creditors at bay.

Mr. Dee, an Air Canada executive who resigned from the airline last November, will be named COO effective Friday, replacing the retiring Bill Bredt, a source familiar with the Montreal-based carrier said Tuesday.

The return of Mr. Dee reunites him with Mr. Rovinescu. The two men, who helped restructure Air Canada in 2003-04, are friends of Robert Milton, chairman of Air Canada’s parent, ACE Aviation Holdings Inc.

Industry analysts are speculating anew about Air Canada potentially filing for bankruptcy protection, after the airline appointed Mr. Rovinescu as president and CEO, effective Wednesday – a surprising change at the top as the carrier struggles to survive the recession.

Resigning is Montie Brewer, an American who joined the airline in 2002 and became president and CEO in 2004. Air Canada is facing a cash crunch, and some industry analysts are speculating that it could be forced to file for bankruptcy protection for the second time in six years.

Mounting debts, a growing pension deficit, weakening travel demand, expiring labour contracts and stiff competition from WestJet Airlines Ltd. are among the challenges awaiting Mr. Rovinescu, a Canadian lawyer who helped restructure the carrier in 2003-04. Calgary-based WestJet, which is launching an aggressive seat sale Tuesday, has been taking domestic market share from Air Canada.

“While the challenges in front of us are large, we will continue to build upon the successes of the airline to date and deliver a quality product for our customers, employees and shareholders,” Mr. Rovinescu said in a statement.

Research Capital Corp. analyst Jacques Kavafian said Mr. Rovinescu’s cost-cutting expertise will be all too familiar to Air Canada’s unionized employees. “Calin is a restructuring expert. He will be able to lead Air Canada, and his appointment could be a signal of a possible bankruptcy protection filing,” Mr. Kavafian said, noting that the airline’s stock price has plunged.

McGill University business professor Karl Moore said Air Canada will be examining its options, including filing for court protection from creditors. He said WestJet will be seeking to boost its revenue as Air Canada is “distracted” by changes to be implement by the new CEO.

Mr. Moore said Mr. Brewer is an airline industry veteran who knows the operating side of Air Canada well, but the company needs the restructuring skills of Mr. Rovinescu to find ways to keep creditors at bay.

Raymond James Ltd. analyst Ben Cherniavsky added that the decision by the board of directors to install a new CEO underscores the “extreme turmoil” occurring at Air Canada. He said these are tough times for the airline, noting that Mr. Rovinescu is not a traditional airline executive, but someone who has gained expertise from advising the carrier in warding off a hostile takeover bid from Onex Corp. in 1999, and then helping cut costs during the 2003-04 restructuring.

Mr. Cherniavsky said he believes Air Canada’s chances of avoiding a bankruptcy protection filing appears to be 50/50 at best.

Other analysts say the airline may be able to restructure without being forced to take a trip through bankruptcy court again. BMO Nesbitt Burns Inc. Claude Proulx said he believes “the company still has significant cash and has recently concluded a financing with GE Commercial Aviation Services, an unlikely event if Air Canada was on the verge of filing.”

Even if Air Canada were to seek creditor protection, it is widely expected that it would continue to fly passengers, as it did in the last round of court-approved restructuring.

Since emerging from bankruptcy protection in 2004, Air Canada has reduced certain services on basic fares that were formerly free, scrapping complimentary hot meals on North American flights and charging for items such as an inflatable pillow and polyester blanket. For the cheapest fares, collecting Aeroplan points is harder than before, frustrating travellers trying to save up for free flights.

WestJet plans to start its own frequent flier program by the end of 2009, attempting to woo business travellers from Air Canada, which is also feeling the financial squeeze from the growth of Porter Airlines in the busy Toronto-Montreal-Ottawa corridor.

Air Canada class B shares fell as much as 18 per cent on Tuesday morning, hitting an intraday low of 94 cents. The stock has fallen 95 per cent since its initial public offering at $21 a share in 2006.

ACE Aviation Holdings Inc., created after the airline emerged from bankruptcy protection in 2004, owns 75 per cent of Air Canada. ACE class B shares fell 3 per cent early Tuesday afternoon to $5.62.

CALGARY — Investors have long been frustrated by Petro-Canada’s share price, so it’s not surprising if some are pressing for the company (TSX:PCA) to change its direction but it might be difficult to do so in the current environment, an analyst said Monday.

One source reported that the Ontario Teachers Pension Plan, which owns about three per cent of the oil and gas company’s shares, will soon file documents to U.S. securities regulators that it intends to take a more aggressive role in Petro-Canada’s strategy.

A Petro-Canada spokeswoman acknowledged Monday that Teachers has been in touch with the company but the pension hadn’t indicated that it intended to make such a filing.

BMO Nesbitt Burns analyst Randy Ollenberger said Monday that Petro-Canada’s share price has lagged behind its peers over the past five years and the company “just didn’t seem to take advantage of the high commodity price environment.”

“There’s been investors agitating for a change in strategy here for a little while and these things typically do take time to unfold,” he said.

Ollenberger said shareholders want to see “evidence of more capital discipline,” which could involve better focusing Petro-Canada’s widely spread asset base, which includes operations in the oilsands, offshore East Coast, the North Sea, Libya and Syria.

But it may not be the ideal time to be overhauling the company, with financial markets in disarray and commodity prices languishing at less than a third of their July peak, he said.

“This is a tough environment to be thinking about repositioning a company if you’re going to be selling assets in order to buy other assets. It’s difficult and I think you’d want to be pretty cautious about doing that right now,” Ollenberger said.

Petro-Canada spokeswoman Andrea Ranson said the company and pension plan have had discussions “that have been very cordial and constructive and they’ve certainly not indicated to us that they had any intent to make such a filing.”

“We have a strong balance sheet. We have an excellent suite of growth projects and a great suite of assets to generate cash. We think we’re well positioned to deliver long-term value.”

One major Petro-Canada shareholder told the Globe that the rate of return from major projects, like a joint venture with Libya’s national oil company, has not been good enough.

The newspaper also said investors have floated the idea of Petro-Canada selling of its 12 per cent stake in Syncrude Canada Ltd., the single largest oilsands operation. The proceeds would be used to buy back shares.

“We’re not looking at share buybacks in 2009 because our strategy is to preserve financial flexibility during the economic downturn,” Ranson said.

“We’re very much strategically pacing our growth projects right now.”

Petro-Canada’s board has given the go-ahead to three major growth projects: the Libya oil development, natural gas fields in Syria and an expansion to the White Rose field off Newfoundland’s coast.

Decisions on three other projects have been put on hold until commodity prices recover and the economic picture brightens. Those include a revamp to Petro-Canada’s Montreal refinery, an expansion to its MacKay River oilsands development and the Fort Hills oilsands project.

Petro-Canada holds a 60 per cent stake in Fort Hills, with Teck Cominco Ltd. (TSX:TCK.B) and UTS Energy Corp. (TSX:UTS) evenly splitting the remainder.

The partners disclosed last fall that costs at Fort Hills had swelled 50 per cent over the previous estimate, prompting the consortium to delay a decision on the mining portion and shelve an accompanying upgrader indefinitely.

Petro-Canada shares were up slightly to $26.91 in midday trading on the Toronto Stock Exchange Monday. Over the past 52 weeks, they have swung from a high of $61.85 in May to a low of $20.10 in November.

Others expect short recession and sharp rebound

Alia McMullen, Financial Post
Published: Monday, February 02, 2009

The federal government’s fiscal stimulus package, while eventually expected to exert some positive economic influence, will not prevent Canada’s slide into a deep recession in 2009, said David Wolf, the Canadian economist and strategist at Merrill Lynch.

He said the Bank of Canada will consequently lower interest rates to an effective 0% and step up efforts to ease credit conditions as the recession worsens.

Mr. Wolf said while the fiscal stimulus package would benefit the economy, the amount of stimulus was not unprecedented and would not be enough to spark a strong recovery in 2010, as projected by the Bank of Canada.

He said a large part of the government’s projected $34-billion deficit for fiscal 2009, which is equal to 2.2% of GDP, was a result of the normal deterioration in revenues during a recession. He said the cost of new initiatives was about $18-billion, which is “nearly identical” to the measures put in place in the 2007 budget.

“Net marginal stimulus provided in the budget comes solely from allowing the ‘automatic stabilizers’ to work, which is surely a positive for the economy, but can’t plausibly play a dominant role in producing strong rebound in 2010,” he said.

Mr. Wolf, who was already one of the most bearish economic forecasters in the market, said the continued deterioration in economic data has caused him to increase his outlook for economic contraction to 1.7% for 2009 from his prediction of a 1.2% decline in December. He said the weaker projection largely reflects a further decline in consumer spending as well as continued shaky housing investment. The estimate is far bleaker than the Bank of Canada’s outlook for a 1.2% contraction this year.

He said the continued deterioration of economic activity would have a negative impact on inflation, resulting in the Bank of Canada slashing rates to an effective 0% and holding them there until growth resumes, possibly in 2010.

“In the meantime, expect the BoC to participate more directly in the program of ‘credit easing’ which the federal government expanded further in Tuesday’s budget,” Mr. Wolf said.

Mr. Wolf also rejected the central bank’s expectation for a strong economic rebound in 2010. He forecast GDP to rise 2.4% next year compared with the Bank of Canada’s outlook for a 3.8% rebound.

Mark Carney, the governor of the Bank of Canada, said last week he expected the government’s 2009 federal budget to provide significant stimulus to the economy. He said the domestic package combined with fiscal stimulus around the world and signs of an improvement in credit markets would help facilitate a strong economic recovery in 2010 as global demand picked up.

The outlook for a short recession and sharp rebound has merit in the eyes of Stefane Marion, the chief economist and strategist at National Bank. He said Canadian interest rates were the lowest ever entering into this recession, a proactive move that would act faster to kick start growth.

“It is very likely that the Canadian recession of 2008-09 will be shorter than the previous two, despite the fact that the present U.S. recession will be the longest since 1960,” he said. “If we consider all the U.S. and Canadian recessions since 1960, never has the real policy rate of either central bank been lower at the outset of a downturn than where Governor Carney and his team managed to bring it this time around.”

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By Doug Alexander and Sean B. Pasternak

Feb. 2 (Bloomberg) — Royal Bank of Canada Chief Executive Officer Gordon Nixon agreed to forgo C$4.95 million ($4 million) in bonuses, more than half his total compensation, after profit fell for the first time in four years on debt writedowns.

Nixon was awarded about C$3.8 million in salary and a cash bonus after he forfeited stock options and deferred shares for 2008, according to a statement today by Toronto-based Royal Bank.

Nixon is the first Canadian bank executive to forgo a portion of his pay after combined profits at the country’s biggest lenders dropped 37 percent in the year ended Oct. 31. He joins Wall Street executives including Bank of America Corp. CEO Kenneth Lewis, Citigroup’s Vikram Pandit, Goldman Sachs Group Inc.’s Lloyd Blankfein and Morgan Stanley’s John Mack.

Nixon, 52, said his decision to forfeit C$2.75 million of deferred shares and C$2.2 million in 10-year stock options was “a personal one,” unrelated to Royal Bank’s performance, the bank said in a separate statement. Nixon also agreed to spend his C$2.4 million cash bonus to buy Royal Bank stock.

“In light of the current state of global markets and the challenges faced by so many in Canada and around the world, I feel this decision is right for both me and the bank,” Nixon said in the statement.

Royal Bank’s annual profit fell 17 percent to C$4.56 billion on rising U.S. loan defaults and writedowns tied to the U.S. housing market and debt securities. The bank missed four of its five financial goals for 2008 after taking C$2.78 billion in pretax writedowns. The stock fell 42 percent over the last 12 months.

Scotiabank Pay

Scotiabank, Canada’s third-biggest bank, cut CEO Richard Waugh’s total compensation by 16 percent, the bank said today.

Waugh, 61, received C$8.68 million in salary, bonus, options and other compensation, down from C$10.3 million a year earlier. Waugh’s cash bonus was cut 69 percent to C$500,000. All figures exclude pension costs.

National Bank of Canada said it awarded CEO Louis Vachon C$4.92 million, a 23 percent increase from the year earlier. Bank of Montreal said Jan. 26 that CEO William Downe was awarded C$6.38 million in 2008, a 9.4 percent increase from a year earlier. Toronto-Dominion Bank, the second-largest lender, is expected to release its compensation report this month.

Canadian Imperial Bank of Commerce, the fifth-biggest bank, won’t determine 2008 total compensation for CEO Gerald McCaughey until the end of this fiscal year.

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net; Sean B. Pasternak in Toronto at +1- spasternak@bloomberg.net

Last Updated: February 2, 2009 14:48 EST

STEVE LADURANTAYE

Globe and Mail Update

February 2, 2009 at 10:59 AM EST

Maple Leaf Foods Inc. says its $27-million settlement in a food-poisoning class-action lawsuit is heading to court for final approval, with victims receiving payments ranging from $750 to $125,000.

The company said Tuesday it would pay $125,000 to the estates of those who died from a listeriosis outbreak at a Toronto food-processing facility, adding that “additional substantial amounts” would be paid to immediate family members. Legal costs and other expenses will also be paid out of the settlement fund, the company said.

Twenty people died after developing listeriosis, a bacteria that poses a particular threat to the elderly, pregnant women and those with weakened immune systems. The outbreak, which triggered a massive food recall August, was tied back to deli meat from Maple Leaf’s Toronto plant. In all, some 668,000 kilograms of meat was called back.

The company said claims could be submitted online , and must be received before July 31.

Anyone who purchased meat between Jan. 1 and Aug. 31 are considered members of the class-action suit, but to receive cash a claimant would have to prove a link between the meat and their illness. Anyone who purchased the recalled meat, but didn’t eat it, does not qualify.

“To qualify for payment under the settlement, you must deliver supporting documentation to verify that you or the person you represent qualifies,” the company said. “The court requires statutory declarations that prove that the information provided on claim forms is accurate. Otherwise, the claims administrator cannot validate claims.”

Court dates are March 5 in Ontario, March 10 in Saskatchewan. A date hasn’t been set for Quebec. Anyone who objects to the settlement must register their disapproval by March 2, and would be expected to appear in court to voice their concerns.

The company released a compensation grid, showing how much money those who ate the meat may expect to receive:

– Someone who was ill for up to 48 hours would receive $750

– Up to a week receives $3,000

– Up to two weeks receives $5,500

– Up to a month receives $8,000

– If listeriosis led to a secondary infection that didn’t cause ongoing symptoms, such as meningitis or pneumonia, the settlement is $35,000

– If listeriosis caused sustained or permanent symptoms, the settlement is $75,000 plus $750 for each day of hospitalization

– If secondary complications affected the nervous system and caused “serious and permanent impairment of physical and/or mental function,” payment is $125,000 plus $750 for each day of hospitalization. A family member who was affected psychologically could receive $10,000.

– A death would lead to a $120,000 payment to the victim’s estate. A spouse would be eligible for an additional $35,000, while children could receive $30,000, parents could receive $20,000 and siblings or grandchildren could receive $5,000. Funeral expenses up to $13,500 would also be covered.

– Anyone who “sustained psychological injuries or trauma for up to 60 days” after eating tainted meat, without any injuries, could receive up to $4,000.

– Anyone who was at particular risk, such as pregnant women and the elderly, but did not become ill could receive up to $6,000 for psychological trauma that lasted up to 60 days.

– If psychological symptoms lasted more than 60 days, compensation is set at $13,500.

– Those in the vulnerable group who experienced psychological symptoms for more than 60 days could receive $17,500.

8 hours ago

TORONTO — The economic slump and a drop in consumer confidence caused house prices to dip during fourth quarter, according to the latest figures from Royal LePage.

It says the real estate market in Canada posted an overall decline in both unit sales and in prices during the fourth quarter of 2008.

Royal LePage says the average price of detached bungalows dipped by 4.8 per cent during the quarter to $319,640.

The average cost of a standard condo fell 5.2 per cent to $233,230 and the average for a standard two-storey home fell 6.3 per cent to $376,140.

Some cities with strong local economies, such as Regina and St. John’s, NL, posted double-digit year-over-year price appreciations, while larger cities such as Toronto, Edmonton, Calgary and Vancouver, recorded declining prices.

Royal LePage says 2009 should bring gradual improvements as low mortgage rates and government efforts to revive the economy begin to take hold