Ontario's finance minister is worried that if General Motors went bankrupt, it could lead to the collapse of the company's underfunded pension plan and cost Ontario taxpayers billions of dollars.

Before the markets started to seriously crash last month, GM Canada's two pension funds (for unionized and salaried workers) were $4.5 billion short. They are even worse shape now, although they are solvent on a "pay as you go" basis.

The shortfalls would become a problem only if the company went bankrupt and its plans had to be ended. GM pensioners would also obviously suffer if that happened.

"This is one reason why we believe that the continued operation of General Motors is important to the overall economy," Dwight Duncan told reporters at Queen's Park on Wednesday.

Duncan's warning followed on earlier gloomy news from Premier Dalton McGuinty, who said the province's auto sector is inevitably going to shrink in the coming months and years.

"I think we're going to end up with a smaller auto sector in the province of Ontario," he told reporters. "I think we're going to end up with fewer jobs than we have at present ... even if we work as well as we possibly can to put together some kind of support package.

"That's just the way the economy is working at present."

McGuinty supports helping the Big Three -- Detroit-based General Motors of Canada Ltd., Ford Motor Co. of Canada Ltd. and Chrysler LLC -- through the credit crisis and developing new products that people want to buy.

However, there is production overcapacity, he said.

Companies seek help

Representatives of the Big Three warned U.S. lawmakers on Tuesday that their failure as companies -- and there is talk one or more could go bankrupt -- would be catastrophic for the U.S. economy. However, a $25-billion aid plan appears stalled in Congress.

Federal Industry Minister Tony Clement, who spent the day in Detroit along with provincial Economic Development Minister Michael Bryant to gather information, said the Big Three are "optimistic" about maintaining a continent-wide industry despite the sharp dropoff in sales and the credit crisis.

He wouldn't divulge details about how bad things are for the automakers.

However, Jim Wagoner, CEO of General Motors Corp, told Congress on Wednesday that his company is burning through US$5 billion per month and is in urgent need of financial aid. He wouldn't say when the company might run out of money.

McGuinty said if one of the Big Three does collapse, the province has no Plan B.

"Not even going to think about that," he said. "What we're going to do is work as hard as we can to make something good come out of this."

CTV Toronto reported the auto companies are looking for up to $3 billion in assistance.

NDP Leader Howard Hampton agreed the collapse of a major automaker would be too horrible to contemplate, but said any aid arrangements must carry job guarantees and the development of next-generation, energy-efficient vehicles.

He blamed the Liberals for not securing such guarantees in previous deals to assist the industry.

"They don't have a Plan B, just as they didn't have a Plan A," Hampton said.

The federal Conservative government's throne speech hinted at aid for the auto industry.

"The Canadian manufacturing sector, particularly the automotive and aerospace industries, has been under increasing strain. Our government will provide further support for these industries," the speech promised Wednesday.

Auto sector crucial

In Ontario, the auto sector -- including parts companies and dealers --  contributes $28 billion per year to the provincial economy. McGuinty said auto plants are the mainstays of a dozen Ontario communities and account for a about 400,000 jobs.

Motor vehicles and parts account for about 36 per cent of the province's exports. The next biggest category is mechanical equipment, which is 10.6 per cent.

The United States takes 83.6 per cent of Ontario's overall exports.

McGuinty has repeatedly said the auto industry is too important for Ontario or the country to allow it to fail.

"I just think we need to be really sober when it comes to the auto sector challenges and the implications for Ontario and the Canadian economy as a whole," he said.

With its manufacturing sector reeling from a number of stresses in recent years, Ontario's government is already projected to table a $500-million deficit this year, and will receive a $347-million equalization payment next year, making it a "have not" province.

With a report from CTV Toronto's Paul Bliss and files from The Canadian Press