Contract talks between Ford and the Canadian Auto Workers (CAW) union will try to close a US$15 an hour labour cost gap compared with what the company pays its US workers, a senior company official has said.

Ford pays $79 an hour for wages and benefits to its hourly workers in the country, the anonymous official told Bloomberg News. That is the highest Ford faces worldwide and compares with $64 an hour in the US, the person said. Ford has about 4,500 hourly workers at three vehicle and engine-making plants in Canada, a spokeswoman told the news agency.

Ford, General Motors and Chrysler begin negotiations with the CAW next month after reaching accords last year with the United Auto Workers that included profit-sharing payments instead of raises or cost-of-living pay increases. Ford’s agreement helped pave the way for the company to resume paying a dividend and reclaim investment-grade credit ratings.

Bloomberg noted that Canada’s auto industry has been confronted by a 52% increase in the Canadian dollar against its US counterpart in the past 10 years that has made the nation’s factories less competitive globally. The CAW proposed a national auto policy in April that included a call for the government to intervene to lower the value of its currency and to negotiate “manufacturing footprint commitments” with automakers.

Labor costs calculated by Ford include base wages worth $34 an hour in Canada, compared with $28 an hour for senior workers in the US, as well as pensions, some retiree provisions and other benefits, Bloomberg's source said.

But the CAW disputes Ford’s estimates, saying much of the gap relates to former employees. Without those so-called legacy costs, union labour costs a little more than C$62 ($61.23) an hour, compared with about C$60 for UAW members, union economist Jim Stanford told Bloomberg.

“This claim that we are completely out of the ballpark on costs is absolutely wrong,” he said. “Ford is making great money in Canada. They are the sales leader in Canada.”

Bloomberg cited an RL Polk report that said Canada would probably lose new vehicle assembly work to lower cost Mexico through the next decade. The country’s share of North American car and light-truck assembly may slip to 12.6% in 2017 and 12.1% in 2022, from 15.8% this year, Polk said.

“Many Canadian automotive plants in operation were constructed at a time when exchange rates made Canada a lower-cost alternative to the US,” said Anthony Pratt, an analyst at Southfield, Michigan-based Polk. “Now that the Canadian dollar value is nearly on par with the US dollar, Canadian labour costs are relatively high.”

The CAW, based in Toronto, has resisted the givebacks that the Detroit-based UAW union has provided. The UAW agreed in 2007 to a two-tier wage system with US automakers that paid new workers about half the hourly rate of senior labourers. The union negotiated raises for those new members last year.

Ken Lewenza, president of the CAW, last year called such a system “divisive” and said he won’t support a similar arrangement in Canada.

Bloomberg noted that Ford retrenched last year to one assembly plant in Canada, the Oakville, Ontario, factory that makes the Ford Edge and Flex and Lincoln MKX and MKT. The company in September closed its St. Thomas, Ontario, facility that made the Ford Crown Victoria police cruiser and Lincoln Town Car sedan.

A casting factory in Windsor ended operations five years ago.

Meanwhile, GM said on 1 June it plans to shut its consolidated assembly line in Oshawa, Ontario, in June 2013, which will lead to the loss of 2,000 jobs, the CAW told Bloomberg.

“While labour peace is important for the automakers given the current uptick in sales, the pressure is mounting for the CAW to accept some concessions in order to prevent further closures,” the Conference Board of Canada said in a report issued 27 June.

GM is moving production of its Chevrolet Equinox SUV from Oshawa plant to a former Saturn plant in Spring Hill, Tennessee, which is set to reopen later this year. The automaker reopened the Spring Hill factory after the UAW agreed to staff the plant with workers making wages of about $14 an hour, less than half the wage paid at the Oshawa plant, according to the Conference Board of Canada.

Bloomberg noted that GM said on 16 December it will continue to assemble the redesigned Chevrolet Impala sedan at Oshawa, investing C$68 million and securing 350 jobs, but announced in May Impala output would be added to its Detroit-Hamtramck plant, which also produces the Chevrolet Volt plug-in hybrid car, next year.

This would be the first time the perennial large Chevy sedan has been built south of the border since 2000, just-auto understands.