Analysis: Canada auto sector may shrink without labor concessions

Fri Sep 14, 2012 1:44pm EDT
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By Susan Taylor and Nicole Mordant

TORONTO/VANCOUVER (Reuters) - Canada's unionized autoworkers, perhaps the best rewarded in the world, may have a choice in the next few days: Give the Detroit Three automakers concessions in current talks over new contracts or watch some of their jobs head for the United States or Mexico.

Industry and labor experts are convinced that General Motors Co (GM.N: Quote), Fiat SpA's Chrysler FIA.MI, and Ford Motor Co (F.N: Quote) will move some production out of the country to reduce costs if their Canadian plants don't become more competitive.

Making vehicles in Canada has become a lot less attractive in recent years. The Canadian dollar has surged more than 50 percent against its U.S. counterpart over the past decade, and the financial crisis, which almost triggered a collapse of the industry in North America and led to a government bailout of GM and Chrysler, has resulted in curbs in U.S. labor costs.

The Detroit Three are expected to sell around 750,000 vehicles in Canada this year, slightly more than in 2011, against a forecast of some 6.6 million in the United States. About 40 percent of Canadian sales are produced in Canada. More than four-fifths of the Detroit Three's annual Canadian production of around 1.5 million vehicles is exported.

"They have a choice. They don't have to invest in Canada," Tony Faria, a University of Windsor professor and auto industry expert, said of the Detroit Three.

"They're making it as clear as they can make it that they're not going to do it if they don't get a favorable agreement."

Still, a shift in output is not a simple, swift or inexpensive process, particularly as the automakers face capacity constraints in the United States after shutting down around a dozen assembly plants between 2007 and 2009.

"In the short term, in the negotiations, the CAW understands that there is not much the car companies can do," said Michigan-based labor consultant Art Schwartz.   Continued...

Ford Motor Company President and Chief Executive Alan Mulally answers a reporter's question during a news conference at a hotel in Seoul August 31, 2012. REUTERS/Kim Hong-Ji