CAW, Ford reach tentative deal that freezes base wages, adds 600 jobs

Four-year pact provides C$3,000 bonus, lump sum payouts; Talks with GM, Chrysler extended
CAW, Ford reach tentative deal that freezes base wages, adds 600 jobs
Four-year pact provides C$3,000 bonus, lump sum payouts; Talks with GM, Chrysler extended

Automotive News | September 17, 2012 – 1:04 pm EST
UPDATED: 9/17/12 10:19 pm ET

TORONTO — The Canadian Auto Workers said it reached a tentative labor agreement that covers wages and benefits for 4,500 Ford Motor Co. workers and averts a strike at the Ford Edge assembly plant.

CAW President Ken Lewenza said the four-year deal would provide no base wage adjustments but hourly employees will receive C$2,000 lump sum payments in the last three years of the contract.

Upon ratification, eligible employees will receive a C$3,000 ratification bonus.

In return, the union said about 600 jobs will be created at Ford’s Canadian operations — a key objective of the CAW during talks with Detroit 3 automakers this year.

“It’s a damn good deal in these economic times,” Lewenza said.

Workers will hold ratification votes this weekend, CAW officials said.

The union said many of the 600 new jobs will be added at Ford’s Oakville assembly plant in Ontario, where the Ford Edge and Flex as well as the Lincoln MKT and MKX are assembled.

Ford’s laid off workers in Canada will have an opportunity to fill any openings, CAW officials said.

However, the union said it wasn’t able to secure new or future products for Ford’s plants.

The proposed deal also extends the number of years that new hires will work at lower pay before earning top-tier wages. Cost-of-living adjustments will be suspended again until June 2016, the union said.

“We believe it meets the objective of our union, our membership and of Ford Motor Co.,” Lewenza said. “There’s still some work that has to be done with local issues.”

The union said Sunday it was concentrating on negotiations with Ford as it looked to reach a deal that will set the outlines for agreements with General Motors and Chrysler Group.

GM, Chrysler talks continue

The CAW agreed to extend contract talks with GM and Chrysler Group indefinitely, and will give 24 hours notice before any strike.

CAW Chief Economist Jim Stanford said both companies are willing to negotiate around the pattern set by Ford’s tentative agreement.

“Both companies must keep working towards the pattern settlement, and both companies have indicated in writing to our leadership that they are prepared to do that,” said Stanford.

The union — representing about 18,000 Detroit 3 workers — hopes to avoid its first strike against a U.S.-based automaker in 16 years.

All three companies faced an 11:59 pm ET strike deadline Monday.

The union said there will be no change in pension plans under the proposed Ford deal.

“We weren’t able to achieve cost of living improvements with our retirees,” Lewenza said. “We wanted retirees to share in recent success of the companies, but that too wasn’t possible.”

Ford relented on demands related to pensions, health care and permanently lower wages for new hires, Lewenza said in an earlier interview.

Ford declined to comment on the agreement until it is ratified. The CAW talks come a year after the union’s U.S. counterpart agreed to give up base wage increases in a bid to lower labor costs and secure new jobs and products.

Ford in July called Canadian labor costs the most expensive it faces in the world.

Canada’s decline

The negotiations cover eight auto assembly and engine plants in Ontario, where output has declined due to a rising Canadian dollar and a shift in work to the United States and Mexico.

GM plans to shut its consolidated assembly line in Oshawa, Ontario, in June 2013, which will eliminate 2,000 jobs, the CAW said in June.

The company plans to shift production of its Chevrolet Equinox SUV from the plant to Tennessee, where most workers will be paid less than $17 an hour. Oshawa is also where GM makes the new Cadillac XTS full-size luxury sedan.

Detroit automakers have built about 18 percent of their North American light-vehicle output in Canada this year through August.

Ford operates two engine plants in the Windsor region and the assembly plant in Oakville, near Toronto.

The company’s Canadian payroll is smaller than the 8,000 workers each for GM and Chrysler.

Ford has “the smallest footprint in Canada and the least to lose by an unfavorable agreement,” said Tony Faria, co-director of the Office of Automotive and Vehicle Research at the University of Windsor, Ontario.

Ford “was the first to cave in during the 2008 CAW negotiations,” Faria said.

Concessions key

While carmakers seek to cut expenses, unions are refusing to go beyond concessions in the 2009 deal that were part of government-backed bankruptcies of GM and Chrysler.

CAW leaders say that their members’ contribution to the companies’ turnarounds must be recognized, and that they remain opposed to the so-called “two-tier” system wages negotiated in the United States.

The province’s car industry has shrunk by about a third since 2000, eliminating about 50,000 jobs, according to CAW estimates.

Ford closed an assembly plant in St. Thomas, Ontario, last year that built the Ford Crown Victoria and Lincoln Town Car. GM was the last automaker to be hit by a strike in Canada, in 1996.

That walkout lasted 20 days, paralyzing the company’s Canadian operations and forcing layoffs at other North American plants.

“Nobody wins in a strike,” said Van Conway, CEO of the Conway MacKenzie Inc. restructuring firm in Birmingham, Mich. “If the automakers make a strategic decision in the long run to exit Canada because they don’t want this to happen again, that would be the worst thing that could happen to the CAW.”

Car production in Canada has been hamstrung by an increase of about 60 percent in the Canadian dollar against its U.S. counterpart in the past 10 years that has made the country’s auto factories, all of which are in Ontario, less competitive globally.

Unemployment rate

The CAW in April proposed a national auto policy that included a call for the government to intervene to lower the value of the currency and to negotiate “manufacturing footprint commitments” with automakers.

“Ontario’s unemployment rate is above the national average now, and one of the big reasons is that the auto industry hasn’t come back to its full potential of before the financial crisis,” said Hosen Marjaee, a senior managing director at Manulife Asset Management in Toronto.

Canada, which ranked as the world’s fourth-largest car producer in 1999, has slipped out of the top 10, the union said.

The current negotiations have seen the Detroit 3 make “unprecedented” demands, according to the CAW. Those include cuts in benefits, the elimination of an annual cost-of- living adjustment and the transfer of all workers to a defined-contribution retirement plan.

GM, Ford and Chrysler also refuse to commit to new Canadian factory investments, the CAW said in a Sept. 10 leaflet.

‘Key problem’

With the UAW “having negotiated freezes for a while, if that doesn’t happen in the Canadian context, or something similar, then that gap begins to widen with the U.S. and Mexico,” said Carlos Gomes, an economist at Bank of Nova Scotia in Toronto. “The key problem is not where we stand now, but if similar types of cost controls aren’t put in place then that gap will widen.”

Wages account for about 6 percent of the cost of making a car on average, according to data from the Center for Automotive Research in Ann Arbor, Mich.

Ford pays $79 an hour for wages and benefits to its hourly workers in the country, Lauren More, a spokeswoman for the company, said last month.

That labor rate is the highest Ford faces worldwide and compares with $64 an hour in the U.S., she said. The CAW disputes Ford’s estimates, saying much of the gap relates to former employees.

Without those so-called legacy costs, union labor runs a little more than C$62 an hour, compared with about C$60 for UAW members, Jim Stanford, the union’s economist, said earlier this year.

‘Philosophical problem’

Carmakers “are determined to make sure autoworkers in the future are not paid what autoworkers have historically made in the industry,” Lewenza said yesterday.

Companies want “to make sure a new autoworker never gets to the top rate. That’s a philosophical problem.”

Ontario has a lot riding on the outcome of the labor talks.

Factories in Canada’s most populous province produced 1.42 million motor vehicles in the first seven months of 2012, almost 20 percent more than in the same period a year ago, Bank of Nova Scotia said in an Aug. 14 report.

The province accounts for about 16 percent of North American auto output, counting production by Toyota and Honda.

“Anything that holds back economic growth and employment is a serious concern,” said Manulife’s Marjaee. “Ontario cannot afford to have more people unemployed or on strike and less revenue coming in.”

Canada and Ontario spent a combined C$10.6 billion to acquire minority stakes in GM in 2009 when the Detroit-based automaker reorganized under bankruptcy protection with aid from the U.S. and Canadian governments.

‘Different world’

Although Canadian car sales are on the rise, GM, Ford and Chrysler have been losing ground to Asian competitors such as Toyota Motor Corp. Cars made in Ontario include Chrysler minivans, the Chevrolet Camaro and the Lincoln MKT.

Car and light-truck sales in Canada climbed 6.7 percent in the first eight months of the year, according to data compiled by DesRosiers Automotive Consultants Inc.

Sales advanced 6.4 percent in August compared with the same month a year earlier.

Together, the three U.S.-based automakers controlled about 45 percent of the Canadian market through the end of August, down from about 48 percent a year earlier, DesRosiers data show.

“It’s a different world now,” said Conway at Conway MacKenzie. “You’re no longer in an environment where North American car companies have 70 percent of the market. These car companies went to hell and back in 2008 and 2009, and they are going to be less tolerant on requests that are outdated.”

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