TORONTO (Bloomberg) — Canada demanded that General Motors Corp. and Chrysler LLC reduce labour and capital costs at their Canadian units before receiving federal and provincial loans worth C$4 billion ($3.2 billion).

"Labour costs need to be competitive and capital costs need to be brought in line with their competitors," Industry Minister Tony Clement said yesterday in a speech in Toronto.

GM and Chrysler's Canadian units have until February 20 to show how they plan to reorganise for their "long-term viability" as a condition of the loans, the federal government and the province of Ontario said last month. The Canadian aid offer came a day after the US agreed to lend the two automakers $17.4 billion to stave off bankruptcy.

The minister told reporters after his speech that he finds it "surprising" Chrysler and GM are still reviewing the terms of the loans before deciding whether to accept the funds. Chrysler, in line to get C$1 billion, is still studying details the company received on January 8, Chrysler Canada President Reid Bigland said in an interview on January 14.

Still, high wages and benefits are not the root of the problems plaguing automakers, according to Canadian Auto Workers union president Ken Lewenza. "It's the credit crunch and the global financial crisis," Lewenza told business news channel BNN.

The CAW represents 27,800 active GM, Chrysler and Ford Motor Co. workers in Canada. Lewenza denied reports that he is scheduled to meet with Chrysler and GM later this week to discuss ways to cut costs.

The US automakers, which make more vehicles in Ontario than they do in Michigan, already employ 40 percent fewer workers in Canada than a 2002 peak of 46,400. Their US payrolls also have dropped 40 percent to 239,341 over the same period.