When Ford workers in Canada ratified their new contract over the weekend, it was proof that the industry's collective bargaining process still works, even in troubled times.
The Canadian Auto Workers pact with Ford also reinforced the adage that it's best to be the settlement target. When you go first you can tailor an agreement to fit your situation and needs, leaving your competitors to wrestle with the pattern.
Before the ink was dry on the agreement, General Motors officials complained that the Ford deal was too expensive, even though there was no increase in vacation days, wage increases were capped at 1.4 percent the first year and 0.9 percent in the second and third years of the agreement, and the union acquiesced to Ford's demand that it eliminate 1,100 jobs in Canada.
But there was another, more subtle effect: It puts pressure on the UAW to take some action in the United States.
The union situation is much different south of the border. Three years ago, the UAW and the Big 3 opted for four-year agreements instead of the historical three-year deals to avoid the need to bargain again so soon. In Canada, the CAW stuck with the three-year contract.
Unions don't like to reopen agreements in the middle, reasoning that a contract is a contract and both sides need to live with it until it's time to renegotiate. That's reasonable. But GM, which is staggering under health care costs that add more than $1,500 to the cost of a car, wants relief now, not next year.
The UAW hired investment bank Lazard Ltd. to look at GM's books and determine if GM really needs relief and if there are ways to cut costs without reopening the agreement. That study is just about done, which means it's crunch time.
UAW President Ron Gettelfinger is in a tough spot. If the UAW sticks to its guns and refuses to reopen the contract, it could make the union seem intransigent and unsympathetic. And GM might still arbitrarily whack some benefits, which would sour its working relationship with the union and make next year's negotiations ugly.
Now comes a wild card in the form of the CAW.
If the Canadian union finds a way to make life easier for GM, as it did for Ford, Canada then becomes a far more attractive place for any new job-creating investments.
Playing hardball can sting.
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