Union urges Canada to adopt national automobile policies

Union urges Canada to adopt national automobile policies
Frederic Tomesco
and Colin McClelland
Automotive News | April 17, 2012 – 9:24 am EST

TORONTO (Bloomberg) — Canada should adopt a national auto policy and investigate the possibility of establishing a domestic car company to safeguard employment in the industry, the Canadian Auto Workers union said.

The nation should negotiate “manufacturing footprint commitments” with automakers and intervene to lower the value of its currency, the Toronto-based union said in a policy paper posted Monday on its Web site.

The call for government intervention comes as the CAW prepares for contract talks with General Motors Co., Ford Motor Co. and Fiat SpA’s Chrysler unit. Canada’s auto industry employs112,000 people who last year produced vehicles and parts valued at C$69 billion ($68.8 billion), according to union figures.

“Canada is one of the only auto-producing jurisdictions in the world that doesn’t have a formal national auto policy,” CAW President Ken Lewenza said at a news conference in Toronto. “This is a huge weakness.”

Canada’s car industry has shrunk by about one-third since 2000, eliminating about 50,000 jobs, according to CAW estimates.

Canada, which ranked as the world’s fourth-largest car producer in 1999, has slipped out of the top 10, the union said. The industry will be in a “precarious” situation in the next five to 10 years if the government fails to implement the suggestions, Lewenza said.

The union leader plans a series of “town hall” meetings in eight cities in Ontario, the country’s car-producing hub, during the next three weeks to promote the 10-point proposal.

‘Make some progress’

Lewenza said that in-depth talks with the U.S.-based carmakers haven’t started and that he doesn’t yet know which company the CAW will negotiate with first.

“I’m confident that we’re going to make some progress” in the talks, he said “Not significant progress; we’re going to make tiny steps forward.”

A 59 percent increase in the Canadian dollar against its U.S. counterpart in the past 10 years has made Canadian factories less competitive globally. The currency is “an enormous artificial cost penalty” amounting to C$3.7 billion a year on auto parts made in Canada, said Jim Stanford, the union’s economist.

Labor costs in Canada are about C$6 to C$7 an hour lower than in the U.S., when considering prices for houses that can be 138 percent higher and the same cars can cost 20 percent more in Canada, Stanford said. Also, Canadian compensation is weighted more toward wages and pensions, while in the U.S. a larger portion is for bonuses and health care, he said.

‘Cost penalty’

“We actually have a labor cost advantage in Canada but it’s an overvalued currency that has converted that to an apparent cost penalty,” Stanford said.

To counter that, Canada should slow the development of the Alberta oil sands and limit foreign investment in the energy industry, he said.

“It’s clear that the over-valuation of the dollar is tied to the oil industry,” he said. “Canada is not just an oil producer. But our currency is behaving as though we were.”

The government should keep its minority stake in GM and “utilize that share in a more proactive effort to ensure that Canada’s economic interests are respected in GM’s future business decisions,” the CAW said in the policy paper.

Through state-owned agencies such as Export Development Canada, the government should gradually acquire equity stakes in other carmakers that commit to maintaining factories in the country, the union said.

Canada acquired the GM stake in 2009 when the automaker reorganized under bankruptcy protection with aid from the U.S. and Canadian governments.

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