TORonTO – The Canadian Auto Workers unio says it has a tentative four-year deal with Ford, hours ahead of a strike deadline, but analysts say that may not be a good sign for the industry.
CAW president Ken Lewenza said the unio will ask Chrysler and GM to accept the deal as a pattern settlement.
The agreement will see 800 laid off Ford employees get back to work, partially through the creation of 600 new jobs at its Canadian operations.
There are no base wage increases during life of agreement, which lasts until Sept 2016, but each employee will receive a $2,000 lump sum payment which will cover cost of living increases.
“We said to the companies we understand you cant raise fixed costs, said Lewenza.
Contracts at the three big automakers expire at one minute before midnight tonight and the unio has previously said its prepared to strike then if necessary.
The CAW had been focusing its energy on Ford over the past few days, and Lewenza had suggested Ford wasnt dead set against a unio proposal to lower wages for new hires but allow them to reach full pay over time.
Chrysler responded to the move by saying they were “very concerned that Ford isnt in the best position to lead negotiations because it has reduced its footprint in Canada in recent years.
Ford has the least to lose from an unfavourable contract, so reaching a deal with them first could be bad news for the other automakers, said auto analyst Tony Faria.
Ford might have agreed to the deal because with about four percent of their global assembly in Canada – versus about nine percent for GM and about 20 percent for Chrysler – its easier on them just to avoid a strike, he said.
“It does not bode well for the future of the auto industry in Canada whatsoever, said Faria, a University of Windsor professor.
“We need to have a deal that gets CAW labour costs more in line with the labour costs at (United Auto Workers) plants in the U.S. Thats the only way were going to see future investment and job creation among the Detroit companies in Canada.
The automakers are looking to pare labour costs in Canada, which they say are higher than in the United States.
Ford has said hourly wages for CAW assemblers are around $34 an hour, while assemblers in the U.S. are paid about $28 per hour. The company said all-in labour costs, which include pensions and health care, are approximately $79 per hour in Canada, versus $64 per hour in the U.S.
An agreement with Ford could cause GM and Chrysler to re-evaluate their presence in Canada, said auto industry analyst Dennis DesRosiers.
“If it suits both GM and Chrysler they will accept (the Ford deal) and move on. If it doesnt they also will accept it, but that calls in to question wher they want to be in Canada in the medium-to-long term, he said.
“Not that they would move a plant today, but these plants all have relatively short lifespans and I dont think any of them would pull back on closing a plant in Canada.
The big three are making it clear that they will shift production to wher labour costs are lower, Faria said.
“The companies are already showing their hands, he said.
“Ford closed their St. Thomas, Ont., plant last year. At the same time they were investing in plants in the U.S., adding third shifts and adding jobs.
General Motors is shutting down its consolidated plant in Oshawa, Ont., next year, a move that will eliminate 2,000 direct jobs. Meanwhile, it is restarting production at the former Saturn assembly plant in Spring Hill, Tenn.
The strong Canadian dollar is also eroding competitiveness.
ontario has seen the U.S.-based car makers cut thousands of jobs in the last decade as their parent companies restructured in the United States.
Premier Dalton McGuinty said Monday hes confident that everyone involved knows whats at stake.
“With respect to any agreement that we might have entered into with our auto sector partners we have every confidence that they will honour those agreements, McGuinty said.
During the financial crisis, the federal and ontario governments helped bailout Chrysler and GM with a rescue package that totalled about $13 billion, with the majority – $10.5 billion – going to GM.
Lewenza has said the unio would ignore its 11:59 p.m. ET deadline if a breakthrough was close.
“If we see light at the end of the tunnel then were going to keep working until it shines on an agreement, he said.
But he said if that tunnel ends with a brick wall then the CAW will put its nearly 21,000 members on strike at one or all of the automakers plants.
“That is the last tool in the bargaining toolbox, he said.
The automakers entered the bargaining round seeking a permanent wage reduction for fresh employees, similar to a deal the companies reached in the U.S.
But the CAW has been adamant it will never agree to a pay structure that creates “two tiers of employees.
The last CAW strike was in 1996, against General Motors.
