Manufacturing AUTOMATION

CAW says framework deals improve competitiveness of Canadian auto sector

September 28, 2012
By Ross Marowits

The Canadian Auto Workers union says the new collective agreements it has negotiated with the three big U.S. automakers will protect workers by improving the competitiveness of the Canadian manufacturing operations.

 CAW president Ken Lewenza says the tentative contracts reached over the past week with Ford, General Motors and Chrysler will better position their operations in Ontario to combat pressures such as the high value of the loonie.

Some auto sector analysts had expressed concern that the automakers might re-think their medium to long-term commitments to manufacturing vehicles in Canada after the pattern deal was reached with Ford.

But Scotiabank senior economist and automotive analyst Carlos Gomes said Thursday that the new contracts improve competitiveness, adding they will likely attract additional investment from existing producers.


“I think it makes us competitive going forward. But the reality still is that if you look at what’s happening in the industry, all of the new plants are going in primarily to Mexico or the U.S. south,” he said in an interview.

Lewenza said Thursday he would have liked to see long-term investment commitments by the automakers but he believes those decisions will be announced in the coming years as they prepare for updates towards the end of the decade.

The federal and Ontario governments need to adopt strategies that protect the Canadian auto sector by counteracting enticements offered by jurisdictions seeking to lure relocations, he added.

The deals reached with the Detroit Big Three allow the automakers to hire new employees at lower pay and benefit rates for a 10-year phase-in period, while keeping hourly wages for current employees steady over the life of the four-year contract.

Existing workers will instead receive $9,000 over four years in a ratification bonus and payments in lieu of cost-of-living increases.

New hires at Ford, GM and Chrysler factories in Canada will begin their careers at C$20 an hour, down from the C$24 starting wage under the previous deal, and take 10 years to reach peak pay levels of C$34 an hour instead of the six years.

New employees will also receive hybrid pension plans instead of pure defined benefit plans for current employees.

“In all three collective agreements, the new wage progression positions us much better than we were positioned before bargaining,” Lewenza said in an interview.

CAW members at Ford voted in favour of their agreement on the weekend by a margin of 82 per cent. General Motors workers ratified the deal by a margin of 73 per cent, the union announced Thursday. Chrysler workers will vote on Saturday and Sunday.

Lower starting wages should make the Big Three automakers more competitive with Honda and Toyota’s operations in Canada, Lewenza added.

The CAW leader said he expects the Japanese manufacturers will reduce their wages for new hires to keep them “in the ball park” with their North American rivals.

“The same way they responded up, they will respond on a weighted average.”

A leaked memo to employees from Honda in April said it pays virtually the same $35 per hour maximum hourly compensation as GM. Honda’s base wage is $30.90 per hour compared to $33.91 for GM. But bonuses erase the gap.

The main difference with the Big Three is that the Japanese automakers rely heavily on contract workers to adjust to demand and don’t have legacy retirement costs.

Honda declined to confirm its wage rates but said the total package, including bonuses “are very competitive with other plants in the Canadian automotive industry.”

Chrysler CEO Sergio Marchionne had wanted Canadian autoworkers to adopt the permanently lower wage scales adopted last year by their counterparts in the United States under contracts negotiated by the United Auto Workers union.

In the U.S., new workers start at US$15.50 per hour and can rise to US$19.28 per hour compared with the US$28 per hour top rate paid to existing employees.

But Lewenza said the CAW insisted on a 10-year salary grid for new, younger workers.

“That generation will do what I had to do –fight for wages, even fight to improve the wage progression once we get the bargaining strength to do that,” he said.

“So I don’t see it as a sacrifice at all. In fact, I see it as being flexible and creative to win investment, to win new jobs.”

Lewenza described negotiations as very challenging as they initially strayed from past practice. He called Ford’s move to set the pattern for other contracts a “real turning point” to avoid a strike.

The union could have stubbornly refused to alter new hire wage rates and the existing six-year grid, but instead chose to make changes to perhaps entice investment even though the automakers have done little hiring in the last decade, he added.

Consequently, he said the agreements negotiated with Detroit’s automakers should pave the way for future investment despite not containing any guarantees after 2016.

The agreement preserves three shifts at Chrysler’s minivan plant in Windsor, Ont., and two shifts at the assembly plant in Brampton. Ford and GM agreed to create 600 and 1,750 jobs respectively.

— The Canadian Press

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