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(Reuters) - General Motors Co (GM.N), which said this month it would shut down an assembly line at an Ontario plant, still wants to keep production in Canada, its chief executive said on Tuesday.
But he cautioned that high manufacturing costs in Canada mean upcoming contract talks with the Canadian Auto Workers (CAW) union will be tough.
Canada is now the most expensive place in the world to assemble a motor vehicle, GM CEO Dan Akerson said, adding that the company's investments must make economic sense.
Asked if the planned closure next year of an assembly line employing about 2,000 workers at GM's Oshawa, Ontario, plant was a sign of what could happen if unionized Canadian workers take a hard line in contract negotiations, Akerson said:
"Everything's in the mix. They're an important part of our manufacturing footprint in North America, in the globe, and we'd like to keep it that way."
GM announced on June 1 that it expects to shut down one of two assembly lines at the Oshawa plant by June 1, 2013.
The line was originally slated to cease production in 2008, but the operation was extended due to market demand for the Chevrolet Impala and the Chevrolet Equinox crossover, which have been assembled in Oshawa, GM said.
The Globe and Mail newspaper has reported that GM will switch assembly of Equinox crossovers from Oshawa to GM's former Saturn plant in Spring Hill, Tennessee.
The idled Spring Hill plant is reopening because the United Auto Workers agreed to allow GM to hire a large number of workers for the plant at wages of about US$14 an hour and minimal benefits. That compares with a typical hourly rate of about C$32 ($31.09) at Oshawa, the paper said.
Although Canadian plants are expensive, they are "very high quality, very high productivity and the workers are very dedicated employees," Akerson told reporters ahead of GM's annual shareholders meeting in Detroit.
"They know they have a cost differential vis-a-vis the U.S. or Mexico in North America," he said.
The CAW, which represents more than 61,000 members in the auto industry, will negotiate for new labor agreements at GM, Chrysler FIA.MI and Ford Motor Co. (F.N) this summer.
The union, which says the Canadian auto sector has lost 46,000 jobs in the last decade, has released a blueprint to try to keep the industry competitive, which it presented recently to the country's main political parties.
CAW leaders are still reeling from Caterpillar Inc's (CAT.N) decision earlier this year to shut its locomotive plant in London, Ontario, after workers refused to accept a 50 percent cut in wages. About 450 workers lost their jobs. The next day, Caterpillar hosted a job fair in Muncie, Indiana.
Akerson said GM's investment in Canada must be economically viable.
"We don't have the luxury of a political dialogue. We have to run a business here. I think the union understands that probably better than any time in its history as does the company," he said.
"It's my sincere hope we come to an agreement, accepting both of us have different points of view at this stage."
Reporting By Deepa Seetharaman in Detroit; Writing by Nicole Mordant in Vancouver; Editing by Peter Galloway