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GM Canada says labor accord will save C$1 billion, close cost gap

GM Canada says labor accord will save C$1 billion, close cost gap

Automotive News | March 24, 2009 – 12:15 am EST


TORONTO (Reuters) — General Motors of Canada will save nearly C$1 billion ($819.1 million) on future labor costs as a result of union concessions it won earlier in March, the company said in a letter obtained by Reuters.

The deal with the Canadian Auto Workers union also closes the "per hour" active worker cost gap to the company’s non-union competition in the United States based on current exchange rates, GM said. The letter, from GM Canada President Arturo Elias, was sent to a Canadian parliamentary sub-committee looking at the automotive industry and dated March 20.

The company was "able to achieve unprecedented reductions to our legacy costs including the permanent removal of pension indexation (or cost of living) increases, freezing pension benefit rates at today’s level, freezing other escalators such as dental expenditures, and, the introduction of new monthly cash contributions for health care," Elias said in the letter.

"These changes will reduce GM Canada’s future obligations by close to $1 billion (Canadian) and represent a significant shared sacrifice by GM Canada’s active and retired hourly workers."

He said some of the concessions on the active labor costs include extended wage freezes, new monthly contributions from workers for health care, new drug and dental fees, the elimination of 40 hours of paid time off each year, the reduction or elimination of special bonuses or payments, and further cuts to various legal and family care benefits.

The deal was ratified by GM Canada’s 10,000 unionized workers on March 11, and is contingent upon the company receiving emergency loans from the governments of Canada and the province of Ontario.

On top of the union concessions, Elias said the company’s executives have taken a 10 percent salary cut. There will be no bonuses, and all salaried employees are taking big cuts in benefits.

Elias said under the company’s restructuring plan, it would sustain 17 to 20 percent of its North American production in Canada.

He said new investments in the country would include six new vehicle launches, including the first hybrid cars produced by any automaker in Canada.

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