Canadian Auto Workers (CAW) union president Buzz Hargrove has about a year to figure how to make the ‘Detroit Three’ operations in Canada more competitive while increasing wages and winning new investment for Canadian plants, writes just-auto’s local correspondent.
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That’s the stark reality Hargrove faces in the wake of the landmark deal between his brothers, the United Auto Workers (UAW) union in the United States, and General Motors.
GM has unloaded $US51bn worth of retiree health costs from its books and transferred them into the hands of the UAW, albeit with a cash payment estimated to be about $36bn.
In that single stroke, GM has slashed its hourly labour costs by about $18, analysts estimate, to about $55 an hour. Wage and benefit costs in Canada at the Detroit Three’s plants here amount to about $C70 an hour.
The deal may begin the hollowing out of GM, Chrysler and Ford facilities in Canada, industry analyst Dennis DesRosiers, president of DesRosiers Automotive Consultants, said in the wake of the UAW deal that ended a two-day strike.
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By GlobalDataSeven Detroit Three assembly plants in the Ontario auto belt employ about 25,000 CAW members.
But Hargrove said he has no interest in the wage freeze and two-tier pay system for new employees that the UAW agreed to at GM plants in the US – and that will now become the standard at Ford and Chrysler operations there as well.
“Our productivity and our commitment means our members, I think, are entitled to improved wages when we go to the bargaining table next year,” Hargrove told just-auto.
Canada’s government-financed health care has been a major competitive advantage that has helped Hargrove land billions of dollars in investment from Chrysler, Ford and GM in the past decade.
He disputes the notion that GM unloading its retiree health-care burden has made the auto maker’s US operations more efficient, pointing out that it will still have to finance a health care bill for its active employees – and that means Canada will hold on to an edge.
CAW economist Jim Stanford’s analysis maintains that GM is saving just $US7 on its average hourly labour cost by shifting retiree medical care into the trust fund, considerably less than industry analysts.
Even with that lower estimate of savings in the UAW deal, however, hourly wages and benefits at Canadian plants would still be higher than those in US factories.
The higher productivity of Canadian workers compared with their US counterparts – confirmed annually in such studies as the Harbour Report – also gives the CAW an advantage, Hargrove said.
But he agrees with analysts who note that another pillar that has supported investment in Canada has come crashing down in recent weeks. That’s the rise of the Canadian dollar to parity with the US greenback.
“When we’re at par with the US, we do have some things in our agreement over and above what the Americans have,” he acknowledged. Among those are richer pensions and extra time off the job called special paid absences, which has been shortened to the unfortunate nickname ‘SPA days’.
He has been hammering away at the Canadian government to tackle the issue of imported vehicles from Asia and Europe taking market share from Chrysler, Ford and GM.
But he’s getting little traction on the issue, in part because GM is importing B-segment cars from South Korea and Chrysler’s deal with China’s Chery means it will be importing similar-sized vehicles into the United States and Canada.
