Times have changed CAW-Detroit 3 talks
Earlier this year, after workers had rejected demands for sweeping concessions at a Caterpillar locomotive factory in London, Ontario, and ultimately gone on strike, the company acted swiftly and decisively and closed the plant.
The work was moved to nonunion plants in the United States and South America, and a bright light was cast on the business model for manufacturing in Canada.
The Canadian Auto Workers union, which gets down to negotiations next week with the Detroit 3, should remember the Caterpillar lesson. The new contracts will play a key role in determining where the Detroit 3 make future investments.
Collectively, the Detroit 3 are at a high point for profitability in North America. But the landscape has changed north of the border.
Three short years ago, when contracts in Canada were renegotiated following the bailout of General Motors and Chrysler, the Canadian dollar was worth about 79 U.S. cents. Last week it traded for slightly more than one U.S. dollar. That has eliminated the traditional cost advantage.
Canada has become one of the most expensive places for the Detroit 3 to build cars, and under the North American Free Trade Agreement the U.S. automakers no longer need Canada.
The proof is in the numbers. Last year, the Detroit 3 built almost 1.5 million light vehicles in Canada -- down from almost 2.4 million in 1999. When labor costs are unequal, it makes it more difficult to make the case for building cars in Canada.
Meanwhile, automakers from all regions are racing into Mexico, a low-cost, high-skilled labor market that has seen a surge in production the past two years.
In the 2009 GM and Chrysler bankruptcy crisis, the UAW was realistic in reshaping its contracts. Profit sharing and union concessions allowed the Detroit 3 to keep their fixed costs low while still rewarding employees for productivity and profitability.
CAW members who want a larger share of the billions of dollars their employers are earning in North America must understand that times have changed. The Detroit 3 are serious about moving production and making changes. Witness the shuttering of Ford Motor Co.'s factory in St. Thomas, Ontario, last September and GM's planned closing next year of an assembly line in Oshawa, Ontario.
CAW President Ken Lewenza said recently that the union has little control over exchange rate changes. But the union does control its ability to remain flexible and to resist a sense of entitlement.
The CAW wants its fair share. It should receive its share.
But new agreements must work for all stakeholders.