March 31, 2009 / 10:05 PM / 8 years ago

Canadian auto union won't reopen GM contract

<p>A General Motors logo is seen at a car dealership in Toronto December 12, 2008.Mike Cassese</p>

TORONTO (Reuters) - The Canadian Auto Workers union said on Tuesday it will not reopen its recent concession agreement with General Motors of Canada, but it would be willing to look at alternative measures to help reduce the burden of the company's so called "legacy costs".

The union's statement comes a day after the Canadian and U.S. governments rejected viability plans presented by GM and Chrysler, with Ottawa suggesting that General Motors and the CAW should reopen recent bargaining talks.

The CAW and GM reach a new contract agreement on March 11, aimed at cutting the struggling automaker's costs and making it eligible for long-term government aid.

The deal took nearly C$1 billion ($790 million) in legacy, or retiree, costs permanently off GM's books through the elimination of inflation-based retiree benefit increases, transferring active employee bonuses to cover retiree healthcare costs, as well as other measures, the company said.

GM said those lower costs would come on top of savings of more than C$7 an hour on its active labor costs.

In saying it would not revisit contract negotiations with General Motors, the CAW pointed out the deal was reached ahead of a March 31 deadline that had been imposed by Canada and the United States for GM and Chrysler to present their viability plans, needed to qualify for long-term government aid.

"The UAW didn't get their deals done by March 31. Chrysler didn't get a deal done with Fiat by March 31. They didn't get deals with their bond holders by March 31. I don't think they got final deals with their dealerships by March 31," said Jim Stanford, the CAW's economist.

"We got a deal done before March 31 and then on March 30, they say, sorry, you've got to do it again. So it becomes a farce after a while and we've not heard any specific arguments about what is wrong with the deal."

Canada and the province of Ontario followed U.S. President Barack Obama's lead on Monday in saying that GM and Chrysler did not go far enough in outlining viability plans, including a U.S. demand that Fiat and Chrysler forge a merger deal.

However, Ottawa and Ontario did extend short-term bridge loans to help the companies while they restructure.

Tony Clement, Canada's minister of industry, said after Monday's announcement that Ottawa was "expecting GM and the CAW to continue their discussions, particularly on the issue of legacy costs where it has become apparent there wasn't as much progress as we would have liked to have seen."

Clement was not immediately available for comment on Tuesday, nor was GM Canada.

Richard Cooper, executive director, Canada, J.D. Power and Associates, said he doubts that GM knows what's wrong with the contract agreement either.

However, he said that the refusal of the CAW to consider reopening bargaining was short-sighted.

"If they are not prepared to do that, then are they prepared to lose jobs?"

The union -- which has been trying to reach a similar contract agreement with Chrysler -- has said it is willing to sit down with the federal and provincial governments, and the companies, to look at forming a "Voluntary Employee Benefit Association" to cover retiree costs, like the one the United Auto Workers union has reached with automakers in the United States.

The VEBA works like a pension plan, but is applied toward retiree health benefits.

In the United States, the idea is that the auto companies will contribute tax deductible payments to the VEBA, which are then invested. The money earned, which is not taxed, can be used to cover healthcare costs.

"Something like a VEBA might clarify and limit the amount of expense that the companies would expect with these sort of things (retiree healthcare costs)," Stanford said.

He said Canada has no tax facility that would allow a VEBA-type arrangement, so governments would have to be at the negotiating table to make it happen.

Cooper said that while the VEBA idea looks good on paper, there have been difficulties in the United States regarding the initial lump sum payment to the plan, as cash is hard to come by for automakers on the verge of bankruptcy.

"It's clear that the governments on both sides of the border are becoming much more active in the whole process," he said. "I'm not sure that's a positive thing in that it's ... moving the goal posts and everybody feels less certain."

($1=$1.26 Canadian)

Reporting by John McCrank; editing by Rob Wilson

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