September 17, 2012 / 3:33 PM / in 5 years

CAW reaches Ford deal; GM, Chrysler still in talks

TORONTO (Reuters) - The Canadian Auto Workers union said on Monday it had reached a tentative four-year agreement with Ford Motor Co, a deal that sets the framework for negotiations with rival North American automakers hours ahead of a strike deadline.

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

The pressure is now mounting in the union’s talks with the other two Detroit car companies, Fiat SpA’s Chrysler Group LLC and General Motors Co, as their workers get set to walk off the job at midnight.

Those negotiations remain “miles apart,” said CAW President Ken Lewenza, who is pushing GM and Chrysler for a firm commitment that they can work within the framework of the Ford deal to avoid the first Canadian auto strike since 1996.

The union, which has some 20,000 members, had warned that without a tentative agreement before the strike deadline of 11:59 p.m. on Monday (0359 GMT, Tuesday), it could stop work at one or all three automakers.

The Ford deal, which will create about 600 jobs at the company’s Oakville, Ontario, plant, came after Ford recognized the CAW would not accept a permanent two-tier wage scale for new hires and veteran workers, Lewenza said.

“It’s a damned good deal in these economic times,” he said.

All three automakers - with Chrysler the most publicly outspoken - have argued adamantly that Canadian labor costs are the highest in the world and must drop to match those of the UAW in the United States, or future production and investment in Canada will be jeopardized.

The agreement will freeze wages for Ford’s 4,500 unionized workers, reflecting the stronger Canadian dollar’s impact on production costs, the CAW said at a press conference Monday afternoon.

It will also take longer than in the past for new hires to reach the highest end of the pay scale under the new agreement, with the “earn-in” period expanded to 10 years from six. They will also start at a lower wage, earning just 60 percent of the highest hourly rate, down from 70 percent previously.

New employees will also have a hybrid pension plan, a mix of a defined benefit and defined contribution plan, the union said. There is no change to the pension plan or eligibility rules for current members.

The agreement does not include any cost of living adjustment, something Lewenza had fought for in negotiations that began in mid-August. Instead it will provide a series of lump-sum bonuses.

Unlike GM and Chrysler, which received multi-billion dollar bailout packages in 2009 during the North American auto sector meltdown, Ford did not file for bankruptcy or ask for government funding.

“We believe that the tentative agreement offers unique to Canada solutions that will improve the competitiveness of the Canadian operations,” said Ford lead negotiator Stacey Allerton in a statement.

STICKING POINT

Labor costs have been the key sticking point in negotiations.

Lewenza said Ford agreed to take off the table a proposed two-tier wage scale -- such as that used by the Detroit Three and United Auto Workers for the past several years to bring labor costs closer to those of foreign automakers.

CAW workers at the Detroit Three earn an average of $34 in a base hourly wage, compared with an average $28 for UAW employees, the CAW says.

Including benefits such as pensions, health care and overtime pay, the CAW’s total average labor cost is about $60 an hour, according to the Center for Automotive Research in Ann Arbor, Michigan. That compares with $58 for U.S. workers at Ford, $56 for GM and about $52 at Chrysler.

The CAW, seeing that the automakers are again generating profits, wants some payback for the concessions its members made during the 2008-09 financial crisis.

The CAW is adamant that its new workers must over time reach the same pay scales as existing workers. In the United States, they do not.

It has proposed a lower starting wage as well as an extended “earn-in,” the time it takes new hires to reach the highest end of the pay scale, from the current six years to 10 years.

A strike at all three companies would result in lost production of about C$200 million ($206.2 million) a day at the companies and their suppliers, according to the CAW.

“As long as all of the companies understand the concept of pattern bargaining, they have the potential to get a deal done,” Lewenza said.

($1=$0.97 Canadian)

Writing by Andrea Hopkins; Editing by Frank McGurty; and Peter Galloway

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