CAW Chief Ken Lewenza
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Labour costs are set to drop for the Detroit Three in Canada after a deal between the Canadian Auto Workers and General Motors of Canada Ltd. that meets a critical demand from governments weighing a loan of up to $7-billion to the auto maker.
The deal will trim GM’s hourly wage and benefit costs by about $7 an hour to $63, sources said on Sunday, and union officials argued that it meets the federal and Ontario governments’ condition that the auto makers in Canada become more competitive with offshore-based companies in return for receiving loans.
Union officials said they fended off cuts that GM was seeking in other areas, such as cutting base wages and reducing retirement incentives of $100,000 offered to production workers at the company’s Oshawa Truck and Windsor Transmission plants, which are scheduled to be closed this spring and next year respectively.
If GM had stuck to that demand “it would have been a war,” said one source involved in the talks.
The agreement is a piece of GM Canada’s restructuring plan as it seeks government help, but the fate of the auto maker is intertwined with that of its parent company, which is existing on life support from the U.S. government and seeking even more money than the $13.4-billion (U.S.) it has already received.
U.S. President Barack Obama’s auto team will spend Monday in Detroit. The field trip wraps up nearly three weeks of fact gathering by the team since GM and Chrysler LLC submitted their rescue plans to the Treasury Department in the hopes of winning billions more in government loans.
Sunday’s concessions in Canada affect both active workers and retirees, including a new co-payment both groups will make to contribute to health care and other benefit costs.
“It is a cultural shift for our organization,” the union’s economist, Jim Stanford, acknowledged.
The agreement comes amid desperate times for the auto industry throughout North America.
All companies have throttled back auto production drastically amid a severe collapse in sales that has sent the U.S. market to lows not seen since the recession of the early 1980s.
“General Motors indicated to us that we have maintained our Canadian advantage for future investment,” CAW president Ken Lewenza said on Sunday as he outlined the terms of the deal, which are contingent on governments providing financial assistance and GM confirming commitments on new products to be made at plants in Oshawa, Ont., and St. Catharines, Ont.
The union has made its contribution to the sacrifice the governments have demanded of all stakeholders, so now Ottawa and Ontario must come through with the loans, Mr. Lewenza told reporters at a downtown Toronto hotel. “There is no joy on our side of the bargaining table,” he said. “We didn’t want to do this. But the alternatives are much worse.”
Among those alternatives, he said, are a bankruptcy protection filing by General Motors Corp. that would also pull down its Canadian operations.
The agreement “will bring the company’s labour costs to much more competitive levels and help ensure the company’s long-term viability,” GM said in a statement.
The agreement with GM is a blueprint the union will take to Chrysler Canada Inc. and Ford Motor Co. of Canada Ltd., both of which have said their labour costs are uncompetitive. Chrysler is seeking a bailout from Ottawa and Ontario while Ford is not but expects the union to offer it the same concessions in what is known as pattern bargaining where basic wages and benefits are the same at all three companies.
Neither Mr. Lewenza nor other union officials would put a dollar figure on how much GM will save as a result of the CAW concessions. They called the savings substantial and said they will reduce costs by “several dollars” an hour.
Sources close to the talks said the changes amount to a $7-an-hour reduction, which trims hourly wage and benefit costs for GM’s 10,000 active workers to about $63 an hour. That means when the Canadian dollar is trading at 80 cents (U.S.), hourly labour costs in Canada could be about $50.
Canadian GM workers put in about 20 million hours on the job in 2007, so a rough calculation of a reduction of $7 (Canadian) an hour would produce a savings of $140-million a year. But because of production cuts and the closing of plants, the actual number would be lower.
The union argues that the higher productivity of CAW plants gives the companies an advantage worth another $6 an hour over U.S. plants.
The average wage figure at the Detroit Three’s U.S. factories was about $60 (U.S.) an hour before concessions that the United Auto Workers union has agreed to give to Ford Motor Co.
GM and Chrysler LLC have received $13.4-billion and $4-billion respectively from the U.S. government. GM says it needs as much as $16.6-billion more to weather the storm and Chrysler wants another $5-billion.
Chrysler Canada Inc. has asked Ottawa and Ontario for about $2.5-billion (Canadian).
The desperate situation at GM was underlined last week when the company’s auditors warned that its future as a going concern is in substantial doubt.
Ratification meetings for the CAW deal are set for Tuesday and Wednesday. After that, the union will began talks with Chrysler or Ford – which has not asked for a bailout from Washington either – with the GM agreement serving as the template.
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Full article: http://business.theglobeandmail.com/servlet/story/RTGAM.20090308.wrautos09/BNStory/Business
