Canadian Auto Workers hold talks with GM, await Chrysler

Tue Sep 18, 2012 6:06pm EDT
 
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By Susan Taylor

TORONTO (Reuters) - The Canadian Auto Workers union said on Tuesday that it had held constructive talks with senior negotiators at General Motors, and it was awaiting a response from Fiat SpA's Chrysler Group LLC on the framework deal it forged on Monday.

The two automakers were crunching numbers in a tentative agreement the union reached with Ford Motor Co on Monday. CAW represents about 20,000 workers at the Canadian units of the Detroit's Big Three.

"We had a very constructive discussion with the leadership of the GM team ... and I'm feeling pretty good about the end result," said CAW National President Ken Lewenza. "I can't say that about Chrysler today because I haven't talked to Al Iacobelli directly."

Iacobelli, Chrysler's vice president of employee relations, and Cathy Clegg, GM vice president of labor relations, have joined negotiations at a downtown Toronto hotel, along with other senior management teams, Lewenza said.

At a midday meeting, the union and GM discussed the framework agreement in detail, and Lewenza said he was now waiting for a formal proposal from the company.

While Lewenza said he was optimistic about reaching a deal with GM, he could not predict the timing.

"Being optimistic and seeing it on paper is another thing," he said.

The CAW has said it would keep negotiating with GM and Chrysler as long as progress seemed to be in sight. If talks become deadlocked, however, the union was still threatening to call its first Canadian auto strike since 1996.

Despite a strike threat by the union, experts said it was unlikely that GM or Chrysler would risk a strike.

"The savings, in the difference between what they want and what's out there, may not be sufficient to warrant a strike, especially in the case of Chrysler," said Art Schwartz, a labor consultant and former GM labor negotiator based in Ann Arbor, Michigan.

The automakers have said that Canada is the most expensive place in the world to make vehicles and costs must come down to match those of the United Auto Workers in the United States. The stronger Canadian dollar is partly to blame.

The industry has demanded that the CAW make concessions similar to those already in place south of border. The union has said that at the top of list was a permanent two-tier wage scale, which it has been adamant about rejecting.

FORD DEAL

In the Ford talks, the CAW prevailed on that pivotal issue.

Under the tentative four-year deal, new hires will start at a lower hourly rate than under the previous contract and take longer to reach the top level of the pay scale. But they will continue to reach parity eventually - in contrast with their U.S. counterparts.

"Membership has a great contract. This improves competitiveness for Ford," said Ford Chief Executive Alan Mulally in New York.

The deal calls for new workers to earn about C$20 (US$20.53) an hour, down from the current pay of about C$24. It will take 10 years to reach the peak pay of C$34, compared with six years under the previous contract.

UAW workers at Detroit's Big Three earn an average of $28 an hour, the CAW said.

Ford also promised to create more than 600 jobs. The union softened its demands on cost-of-living increases, and wages for existing workers will remain frozen for the first three years. Workers will get a cost of living adjustment in the fourth year.

The agreement provides lump sum bonuses of C$3,000 in the first year and C$2,000 in each of the next three years.

For new hires, the union also accepted a hybrid pension plan that mixes defined benefits and defined contributions. Current members are spared any changes to their pension plan or eligibility rules.

It was still unclear how much the tentative Ford deal would lower the automaker's costs.

Under previous contracts, the CAW's total average labor cost is about $60 an hour, including benefits, versus $58 for U.S. workers at Ford, $56 for GM and about $52 at Chrysler, according to the Center for Automotive Research.

HIGH STAKES

The union waited until Sunday to choose Ford as the lead company in contract talks, saying it was the most receptive to a CAW proposal to cut labor costs.

Pattern bargaining is a long-standing strategy in auto talks, meant to ensure that no company has a labor cost advantage over the others, the CAW said.

"The CAW is going to stick to its guns on a pattern agreement. He (Lewenza) expects them to accept this contract with only, at the most, maybe a couple of minor tweaks at the very edges of it," Schwartz said, pointing out that the industry's options were limited in the short run.

"Both parties can always threaten to move out of Canada in the long run. Short term they can't do anything."

Sergio Marchionne, CEO of Chrysler and its parent Fiat, has threatened to do just that, saying the company has "other plants, other options." Moving operations is a complex, time-consuming and expensive matter.

"If he asked my advice I would tell him to accept the deal. There is no point in going on strike because ultimately they are going to be stuck with this deal anyhow," said Tony Faria, a University of Windsor professor and auto industry expert.

About 26 percent of Chrysler's North American production comes from Canada, versus 21 percent at GM and 9 percent at Ford, UBS said in a report.

Production from Chrysler's Windsor, Ontario, plant, the sole source of minivans in North America, and its Brampton, Ontario, plant, which assembles sedans, accounts for 15 percent to 20 percent of all Chrysler sales, Faria said. "They can't afford to have production of these products go down.

($1=0.97 Canadian)

(Reporting By Susan Taylor; Additional Reporting by Ernest Scheyder in New York; Editing by Peter Galloway)

 
The Ford Motor Company's emblem is pictured at the company's factory in Almussafes near Valencia September 5, 2012. REUTERS/Heino Kalis