CAW to submit counter labor proposal to GM
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TORONTO (Reuters) -- The Canadian Auto Workers will submit a counter proposal to General Motors later today as the two sides try to reach a labor deal patterned after one reached with Ford Motor Co. earlier in the week, union president Ken Lewenza told The Windsor Star.
“There are tough issues that have to be resolved around work ownership of skilled trades and employment security language,” Lewenza told the paper.
The union received a new GM contract offer late Tuesday night that fell short of the CAW’s expectations on how to deal with about 2,000 autoworkers affected by the automaker’s plan to close a consolidated production line at an Oshawa, Ontario, vehicle assembly plant.
“We’re trying to find mechanisms to minimize the pain on our members,” Lewenza told the Windsor Star. “That begins with restructuring benefits.”
Chrysler Group and GM spent most of Tuesday crunching the numbers in the tentative labor agreement reached by the CAW and Ford on Monday, a deal the union sees as a template for contracts with the other two automakers.
If talks become deadlocked, however, the union is still threatening to call its first Canadian auto strike since 1996.
While GM has given the union a verbal agreement on the Ford pattern, the two sides won’t address a broad economic package until bargaining issues at the sub-committee level are settled, Lewenza told the paper.
Major talks with Chrysler have been placed on hold pending the GM negotiations, Lewenza said.
Experts said it was unlikely that GM and Chrysler would reject the Ford deal and risk a strike. Among their products built in Canada are the Chevrolet Equinox and Impala and Chrysler and Dodge minivans.
"The savings, in the difference between what they want and what's out there, may not be sufficient to warrant a strike, especially in the case of Chrysler," said Art Schwartz, a labor consultant and former GM labor negotiator based in Ann Arbor, Mich.
CAW officials, while optimistic, were not ruling out any possible scenario.
"Until we get into some meaningful dialogue on the economics - that's the key hurdle obviously - there's still a gulf until we know where the companies are at and what they're thinking and what kind of response that they're prepared to give," CAW National-Secretary Peter Kennedy said Tuesday.
"The important thing from my vantage point is we're still in the hotel, we're still talking, we've got a tentative agreement to model the other ones after, and our members are still at work."
The automakers say Canada is the most expensive place in the world to make vehicles and costs must come down to match those of the United Auto Workers in the United States. The stronger Canadian dollar is partly to blame.
To compensate, the industry has demanded that the CAW make concessions already in place south of border. The union said that at the top of list was a permanent two-tier wage scale, which it has been adamant in rejecting.
Ford deal
In the Ford talks, the CAW prevailed on that pivotal issue.
Under the tentative four-year deal, new hires will start at a lower hourly rate than under the previous contract and take longer to reach the top level of the pay scale. But they will continue to reach parity eventually -- in contrast with their U.S. counterparts.
The deal calls for new workers to earn about C$20 ($20.53) an hour, down from the current pay of about C$24. It will take 10 years to reach the peak pay of C$34, compared with six years under the previous contract.
UAW workers at the Detroit Three earn an average of $28 an hour, the CAW says.
Ford also promised to create more than 600 jobs, but the union softened its demands on cost-of-living increases, and wages for existing workers will remain frozen for the first three years. Workers will get a cost of living adjustment in the fourth year.
Instead, the agreement provides lump sum bonuses of C$3,000 in the first year and C$2,000 in each of the next three years.
For new hires, the union also accepted a hybrid pension plan that mixes defined benefits and defined contributions. Current members are spared any changes to their pension plan or eligibility rules.
It was still unclear how much the tentative Ford deal would lower the automaker's costs.
Under previous contracts, the CAW's total average labor cost is about $60 an hour, including benefits, versus $58 for U.S. workers at Ford, $56 for GM and about $52 at Chrysler, according to the Center for Automotive Research.
High stakes
The union waited until Sunday to choose Ford as the lead company in contract talks, saying it was the most receptive to a CAW proposal to cut labor costs.
Pattern bargaining is a long-standing strategy in auto talks, meant to ensure that no company has a labor cost advantage over the others, the CAW says.
"The CAW is going to stick to its guns on a pattern agreement. He (Lewenza) expects them to accept this contract with only, at the most, maybe a couple of minor tweaks at the very edges of it," Schwartz said, pointing out that the industry's options were limited in the short run.
"Both parties can always threaten to move out of Canada in the long run. Short term they can't do anything."
Sergio Marchionne, CEO of both Chrysler and its parent Fiat, has threatened to do just that, saying the company has "other plants, other options." But moving operations is a complex, time-consuming and expensive matter.
"If he asked my advice I would tell him to accept the deal. There is no point in going on strike because ultimately they are going to be stuck with this deal anyhow," said Tony Faria, a University of Windsor professor and auto industry expert.
About 26 percent of Chrysler's North American production comes from Canada, versus 21 percent at GM and 9 percent at Ford, UBS said in a report.
Production from Chrysler's Windsor, Ontario plant, the sole source of minivans in North America, and its Brampton, Ontario, plant, which assembles sedans, accounts for 15 to 20 percent of all Chrysler sales, Faria said. "They can't afford to have production of these products go down.
Shift in production
GM and Ford have moved to reduce operations in Canada during the past year.
Ford last year closed its St. Thomas, Ontario, factory that made the Ford Crown Victoria and Lincoln Town Car sedans.
GM said that it plans to shut its consolidated assembly line in Oshawa, Ontario, in June 2013, which will eliminate 2,000 jobs. The company plans to shift production of the Chevrolet Equinox crossover from the line to Tennessee, where most workers will be paid less than $16 an hour.
The consolidated line in Oshawa is also used to build the Chevrolet Impala, which will be redesigned next year and built at GM's Detroit-Hamtramck plant in Michigan.
GM has not indicated if the 2014 Impala will continue to be assembled in Canada.
Oshawa is also where GM makes the new Cadillac XTS full-sized luxury sedan, as well as the Camaro and Buick Regal.
GM has about 6,200 CAW-represented workers in Ontario.
Chrysler has about 8,000 production workers at Ontario vehicle-assembly plants in Brampton, near Toronto, and Windsor, outside of Detroit. The Brampton site builds the Chrysler 300, Dodge Charger and Dodge Challenger, and Windsor is home to Chrysler's minivan output.
Profit record
Last year GM set a full-year profit record and Ford earned more than in any year since 1998.
This year both companies' first-half net income was cut in half as continued strength in North America failed to offset economic turmoil in Europe.
Chrysler, which was bought by Italian car-maker Fiat SpA in 2009, saw its revenue increase 8 fold in the first half from a year ago, even as its European parent declared a loss.
Canada will probably lose new-vehicle assembly work to lower-cost Mexico through the next decade, according to industry researcher R.L. Polk & Co.
Canada's share of North American car and light-truck assembly may slip to 12.6 percent in 2017 and 12.1 percent in 2022, from 15.8 percent this year, Polk said in a July 9 report on its website.
GM was the last carmaker to be hit by a strike in Canada, in 1996.
That walkout lasted 20 days, paralyzing the company's Canadian operations and forcing layoffs at other North American plants.
Canada, which ranked as the world's fourth-largest car producer in 1999, has slipped out of the top 10, the union said.
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