The Canadian Auto Workers union should not expect struggling Big Three automakers to dole out rich wage gains when the trio sit down for labour talks this summer, DaimlerChrysler AG is warning, according to the National Post newspaper.
Go deeper with GlobalData
Though DC may be suffering less than Ford or General Motors – both saw their credit ratings slashed to junk status recently – the German-US automaker reportedly said it must slow labour costs or be run over by Japanese competitors.
“[We’re] improving on every competitive aspect of [our] business from product quality to productivity,” DC spokesman Stuart Schorr, told the National Post, adding: “Unfortunately, labour costs are still growing.”
Observers reportedly said the restructured and profitable company, riding on strong sales of its Chrysler 300C sedan, may be the union’s target for September negotiations.
In a delicate game repeated every few years, the union picks the company it believes will agree to the best labour pact, setting a pattern for talks with the other two automakers, the newspaper noted.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataThe National Post said that, during the last round of negotiations in 2002, the North American-based car makers agreed to labour cost increases of 6% annually over three years.
That figure, which includes wages and pension gains, must be cut to about 2% a year this time around, Schorr reportedly said.
The National Post said labour rates at US plants run by Japan-based rivals are about $US8.81 less per hour than their Canadian counterparts, according to DaimlerChrysler figures.
The paper said Canadian auto workers earn more than $30 an hour and enjoy more paid time off than non-union employees at foreign-based rivals, a difference that means it costs almost $US900 more to build a sedan at Canadian plants than some rivals’ US facilities, the data suggests.
More than 80% of Canadian-made vehicles are shipped to the key US market, the report noted.
“We must craft an agreement that slows down the growth of these costs,” Schorr told the National Post, which noted that the warning comes as North American automakers continue to lose market share to Japanese and European competitors.
The paper said the trio have each closed a Canadian auto plant in the past few years and since 1990, the Big Three’s market share has shrunk to 57.8% from 71% – all of it lost to offshore rivals.
An industry observer told the National Post that North American auto plants can build 3.7 million more vehicles than are being consumed, meaning new Big Three plants are unlikely.
Buzz Hargrove, president of the Canadian autoworkers’ union, told the paper that DaimlerChrysler has twice backed out of promises to build more assembly operations in this country and recently criticised a trading regime that allows Japan to sell cars in North America while adding relatively few plants in Canada – Toyota is considering a second Canadian assembly operation and Honda has one Ontario plant.
Labour costs are not the Big Three’s key problem, Hargrove told the National Post, adding that automakers should trim generous consumer incentives that cost upwards of $3,000 per vehicle.
“These are not problems that can be blamed on Canadian auto workers,” he reportedly said.
