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The Canadian government said Monday restructuring plans submitted by the Canadian units of Chrysler LLC (C.XX) and General Motors Corp. (GM) don't go far enough, and gave the companies another 30 and 60 days, respectively, to put forward new proposals, the same as the U.S. government.

Chrysler Canada has to submit new plans by the end of April, and GM Canada (GMC.YY) by the end of May. The government said the companies aren't viable based on the plans they have already submitted, and suggested that the underlying sales assumptions they used are too optimistic.

GM Canada has asked for C$6.5-C$7.5 billion in aid from the Canadian government, in proportion to the company's 20% share of total production in the U.S. and Canada. Chrysler Canada has asked for C$4 billion, in proportion to its 25% share of production in North America.

The Canadian and Ontario governments in December promised the companies a total of C$4 billion of interim loans to tide them over while they work out restructuring plans.

The first C$250 million of a C$1 billion loan to Chrysler Canada will flow Monday. Another C$500 million will flow in early April and the final C$250 million May 1.

The government is still working out details of a C$3 billion loan to GM Canada and hopes to finalize it soon.

The loans are callable if the companies' restructuring plans don't meet with government approval.

The government said Chrysler can't survive as a standalone company and needs to strike a workable alliance with Italy's Fiat (F.MI), which is key to securing more aid.

The government won't seek changes to the executive lineup at the Canadian companies. The U.S. Administration ousted GM Chief Executive Rick Wagoner over the weekend.

At a news conference, Tony Clement, Canada's minister of industry, said the government faced a "stark" choice - forward loans committed to GM and Chrysler back in December or risk that payrolls wouldn't be met. Clement said "now was the time" to announce the loans even though the government is disappointed with progress on their restructuring plans.

He added that he wants Canadians to know that the auto companies are getting a little more time to come up with viable plans because that's better than the alternative of a "disorderly" bankruptcy that could have happened "in a number of days."

Clement said that the last few months have made it apparent that the downturn in the auto sector isn't just a "blip," and that a fundamental restructuring must take place. He said the companies won't be the same at the end of the process - production will be smaller, jobs will be lost - but they'll be in an excellent position to "tackle 21st century car needs" of consumers.

He also referenced U.S. President Obama, who said all parts of the auto sector have to share more pain in the short run. Clement said he expects the Canadian Auto Workers union to continue negotiations with Chrysler, particularly on the issue of pension "legacy" costs, an area in which the government hasn't seen enough progress.

-Nirmala Menon, Dow Jones Newswires; 613-237-0668; nirmala.menon@dowjones.com

(Andy Georgiades contributed to this article.)

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