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CAW’s Lewenza to the Detroit 3: No wage cuts

CAW’s Lewenza to the Detroit 3: No wage cuts
Labor experts say Canadian union has little leverage as talks get under way
Nick Bunkley — Follow Nick on
Automotive News | August 20, 2012 – 12:01 am EST

Even as they earn billions of dollars in North America, the Detroit 3 say high labor costs make their Canadian operations uncompetitive. General Motors CEO Dan Akerson has called Canada “the most expensive place to build a car in the world right now.”

But, as contract talks start, the Canadian Auto Workers union says its members sacrificed to help their employers survive the recession and should be rewarded.

“We’re not going backwards,” CAW President Ken Lewenza told Automotive News. “I don’t see us making any concessions in any areas except controlling some costs going forward.”

Lewenza says both sides need to be creative as they seek a labor agreement that encourages continued investment north of the border yet appeases some 21,000 workers who feel they are owed some of the huge profits they helped to make possible. He says the CAW wants to help the carmakers find ways to make their plants less expensive and more efficient, but not out of workers’ pockets.

Lewenza also says the union will not support two-tier wages or profit sharing in lieu of higher base wages — major pieces of the UAW contracts ratified last year.

Talks are slated to begin in earnest next week. The CAW’s current contracts, signed in 2008 and rewritten a year later as sales plunged and GM and Chrysler stumbled toward bankruptcy, expire Sept. 17.

Despite Lewenza’s hard line, labor experts say the union has little leverage to resist all of the companies’ demands. Even if the workers threaten to strike, few of the vehicles and engines produced in Canada are big enough sellers to create a critical disruption very quickly. They say the long-term implications of doing so could outweigh any immediate gains.

“Their position is weaker and more precarious than ever before,” said Anil Verma, a professor of industrial relations at the University of Toronto’s Rotman School of Management. “The bigger question that looms over these talks is: In 10 years, will there be any auto assembly done in Canada for the Big 3?”

These will be the first CAW talks since 1999 during which all three Detroit automakers are profitable. North America has been at the center of their recovery, generating pretax earnings of $3.7 billion for GM and $4.1 billion for Ford Motor Co. in the first half of this year. Chrysler Group likely earned about $773 million in North America in that period; it reported a global profit of $909 million but no regional breakdown, and the UAW says 85 percent of Chrysler’s profits come from North America.

Since the CAW ratified its last contract, Canada’s auto industry has swung from $1.5 billion Canadian in losses to an expected profit of $1.5 billion this year, according to the Conference Board of Canada, an independent research group.

At the same time, though, the value of the Canadian dollar — the “loonie” — has surged 28 percent, from 79 U.S. cents in March 2009, when the current contract was ratified, to $1.01 last week.

“It’s not just wages that are paid in loonies, but anything that the companies spend in Canada is in loonies,” said Kristin Dziczek, director of the labor and industry group at the Center for Automotive Research in Ann Arbor, Mich. “So everything is more expensive now.”

Parity between the two currencies means CAW members now cost their employers about $61 an hour, including benefits, or $2.50 to $10 more than their UAW counterparts, Dziczek said. Ford pegs the wage gap bigger, saying its hourly per-worker cost in Canada is $79.

“I don’t know that we’re going to totally wipe out the whole difference in one fell swoop,” Dziczek said. “But if they chip away at it some, I think that will be considered a success.”

But Lewenza said CAW members will not accept a deal that reduces the gap to any degree. He said the union is willing to take a strong stand if necessary. Whereas UAW members at GM and Chrysler were barred from striking last year under conditions tied to those companies’ U.S. government loans, the CAW has no such prohibition.

Jobs could move
“The last thing that we want to do is strike the employer at a time when people are starting to feel good about the industry,” Lewenza said. “But if the companies are overzealous in their proposals and don’t recognize the sacrifices we’ve made in the past, we’re going to have problems.”

Canada has considerably fewer auto workers than the United States. But cutting labor costs in Canada would improve automakers’ margins and help them build momentum in their post-recession recoveries, particularly as losses in Europe weigh on global profits for GM, Ford and Chrysler’s Italian parent, Fiat.

Failing to narrow the cost gap could lead the automakers to shift some work out of Canada, though GM and Chrysler are limited in their ability to do so until 2016, under the terms of Canadian bailout loans.

“You can always move work,” John Fleming, Ford’s global manufacturing chief, said Aug. 5. “Clearly if we can’t come up with a solution, there’s lots of options.”

Rejecting UAW’s approach
The CAW wants no part of the deals its counterparts in the United States have made in recent years. It is firmly against a two-tier wage system, and it wants wage increases rather than the one-time bonuses and profit-sharing checks that members of the UAW now get.

The companies prefer bonuses because base wages stay the same. The automakers also prefer profit sharing so that costs are reduced when tougher times return.

Opposition to that type of approach is at the core of why the CAW split from the UAW three decades ago, so this round of talks may test its fundamental philosophy.

Lewenza said the companies have not even offered profit sharing yet as they focus on demanding wage cuts first.

“We’re not at all in favor of profit sharing, not at all,” Lewenza said. “And surely to God, we’re not taking a wage reduction.”

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