The Canadian Auto Workers union has chosen General Motors of Canada Ltd., as its target company to set the pattern for a new labour agreement with the Big Three automakers. The choice of GM – which is in much better shape financially and in the North American marketplace than its rivals DaimlerChrysler Canada Inc. and Ford Motor Co. of Canada Ltd – means the union has picked the company with which it has the fewest contentious issues to settle.

The GM talks are likely to be simply a warm-up round for negotiations with Ford -where the union is fuming about the planned closing of a pickup truck plant next year – and to a lesser extent DaimlerChrysler, where a commercial van plant is on the endangered list.

Few, including CAW president Buzz Hargrove, expect a strike at GM, which has about 19,000 CAW members at three assembly plants, an engine plant, a transmission operation and scattered other component facilities.

The union picked a company ‘’where we believe can get the best agreement for our members and their families with the least amount of sacrifice,’’ Mr. Hargrove told a news conference in Toronto, where he made the announcement.

No strike?

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GM’s top negotiator Al Green expressed confidence that a deal can be reached without a strike, although he noted that it would not be an easy process.

Industry analysts also expect the GM talks to go relatively smoothly.

‘’Despite the dramatic rhetoric … we think a major strike is unlikely before all three auto makers sign a pattern agreement,’’ said John Casesa, a leading industry analyst for Merrill Lynch & Co. Inc. in New York.

If they’re wrong, however, the union does have some leverage to force a quick end to a strike. A factory in Oshawa, Ont., is a key source of hugely profitable pickup trucks and another is the sole source for the Impala, one GM’s hottest-selling car lines in North America.

Transmissions and engines from component plants in Ontario feed into other General Motors Corp. assembly plants in the United States, including the factory in Kentucky that assembles the Corvette sports car.

GM’s improving performance

The talks occur against a backdrop of improving news for GM, the world’s largest automaker especially when compared with its long-time rivals, Ford and DaimlerChrysler.

GM has stopped—at least temporarily—a decades-long erosion in its market share in both the United States and Canada. It has announced new investments at U.S. and Canadian plants and job-creation plans at a key car assembly factory in Oshawa, Ont, although comes after closing its muscle car plant in Quebec just last week.

GM will want to keep that market momentum going without a work stoppage, as well as fashioning an agreement that its key rivals will be less able to afford.

GM announced earlier this week that it has upgraded its profit forecasts for the third quarter and all of 20002, based on the strong North American market and its own improving performance.

While the market is buoyant, it is much less robust than in 1999 when the CAW’s three-year agreement that on Sept. 17 was crafted.

That year, the Big Three could sell virtually every vehicle they made and were happy to settle quickly with the CAW and the United Auto Workers in the United States by offering massive wage increases, generous pension improvements, healthy signing bonuses and contracts that prevented permanent plant closings.

Market health fragile

This time around, the market’s health is seen as fragile and although GM has put the brakes on its market share erosion, it is still facing intense competitive pressure from offshore-based companies such as BMW  in the luxury market, Honda and Toyota in the middle of the market and Hyundai in the small car market. All of those companies are expanding their product offerings.

The same is true of Ford, which has been battered by market share losses to GM because of its larger rival’s lead in offering interest-free loans, as well as suffering at the hands of Europe and Asia-based competitors. The no. 2 U.S. auto maker is in the worst shape of the Big Three.

The move to close its pickup truck plant in Oakville, Ont., is the most difficult issue in the talks at all three companies, partly because Ford insists that it can’t be reversed and the CAW is determined to do just that.

‘’The question is, how do Ford and the CAW get what they both want [out of the talks],’’ said Felix Pilorusso, an auto industry analyst and consultant based in Toronto. ‘I have no good answers.’’

Pressure could mount for Ford over Oakville

Mr. Hargrove thinks the most pressure will be placed on Ford if an agreement is signed with GM first on wages and benefits. That would force Ford’s negotiators to focus on the key issue of the plant closing, he said.

   ‘’We came to the conclusion we were better positioned to go in with the
pattern and isolate the issue of the Oakville truck plant,’’ he said.

The union actually has its strongest leverage against Ford because of a huge engine complex in Windsor—just across the border from Detroit—that ships power plants for such key vehicles as Ford’s Expedition and Lincoln Navigator sport utility vehicles, plus some U.S. pickup truck plants.

The union is saying little at this point about DaimlerChrysler Canada and its prospects there. But it also faces a difficult issue there with the potential closing of the commercial van plant.

DaimlerChrysler has told the union that it has no new product for the operation, although it has not given notice yet that it plans to shut the facility.