The United Auto Workers can expect the Big Three automakers to demand job cuts and offer meagre wage increases in its next contract based on the outcome of union talks in Canada, according to the Associated Press (AP).

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“I don’t think there’s anyone in the UAW that’s going to admit it, but I think clearly the writing is on the wall that something has to give in 2007, if not before that time,” Erich Merkle, senior auto analyst with the consulting firm IRN Inc., told the news agency.


AP noted that the Canadian Auto Workers wrapped up negotiations with the Big Three late on Tuesday, narrowly averting a strike against General Motors. Workers have ratified contracts with Ford and DaimlerChrysler AG, and are scheduled to vote soon on the contract with GM. The UAW’s four-year contract with the Big Three expires September 15, 2007, and formal negotiations are scheduled to begin in July of that year, the report added


The Associated Press said CAW agreed to three-year contracts with GM, Ford and DaimlerChrysler that will cut around 3,500 workers, mostly through attrition, and more than 8.5% of the CAW’s current work force at the Big Three.


The CAW reportedly agreed to wage increases of roughly 1.5% in the first year, followed by 1% gains in each of the next two years, down from increases of 2% per year in its last contract – it also agreed to a pension increase of just $6.80 per month over the life of the contract for retired auto workers.

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Sean McAlinden, of the Centre for Automotive Research, told the Associated Press that the pension increase is one of the smallest he’s ever seen, but that CAW president Buzz Hargrove had little choice. Because of declining North American market share, GM and Ford need to cut their plant capacity by as much as 20%, McAlinden reportedly said, so Hargrove tried to minimise cuts in Canada by agreeing to lower benefits.


Merkle agreed that the UAW could end up bearing the brunt of the job cuts the automakers are seeking, and added that whatever the UAW decides to do about auto supplier Delphi Corp. will be a good indication of its position when the contract talks begin, the Associated Press said. AP noted that Delphi, GM’s former parts division, is threatening to declare bankruptcy by October 17 if GM and the UAW don’t agree to concessions that would allow it to cut its high labour and benefit costs.