Analysis: Contracts buy Canada auto workers time, not expansion

Fri Sep 28, 2012 2:14pm EDT
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By Susan Taylor and Nicole Mordant

TORONTO/VANCOUVER (Reuters) - New Canadian labor contracts secured by the Detroit Three automakers this week are unlikely to lower costs enough to persuade the industry to make fresh investments in the country and reverse a decade-long contraction.

A strong Canadian dollar and cheaper labor elsewhere remain powerful forces discouraging Ford Motor Co (F.N: Quote), Fiat SpA's FIA.MI Chrysler Group LLC, and General Motors Co (GM.N: Quote) from making new commitments to assemble vehicles in Canada, industry experts say.

Unless there is an unexpected economic resurgence in North America, the best that the Canadian Auto Workers union can expect is for the industry to maintain current production levels over the next four years, auto analysts say. At the same time, the country will likely lose more market share to Mexico and the southern United States, where output is expected to rise.

"The sector in Canada is really suffering greatly. Not at the hands of the CAW, but at the hands of the loonie," said Kristin Dziczek, director of the labor and industry group at the Center for Automotive Research in Ann Arbor, Michigan, referring to the Canadian dollar by its colloquial name.

"No matter what the CAW did, lowered costs, kept things the same, a dollar in the U.S. goes a little farther than it does in Canada. And it's not just for wages, but also for that investment dollar," she said.

Her remarks came as the CAW wrapped up six weeks of tough negotiations with the Detroit Three, sealing a tentative agreement with hold-out Chrysler late Thursday. [ID:nL1E8KQ59O] Ford and GM workers have ratified their deals. Chrysler employees vote this weekend.

The Chrysler deal largely mirrors the four-year pacts reached last week with Ford and GM. The deals freeze wages for existing workers for three out of four years, and cut pay and pension benefits for new employees.

While the union pushed hard to secure new vehicle production for Canadian plants, the companies held back such promises.   Continued...