DETROIT/TORONTO (Reuters) - The chief executive officer of Chrysler Group LLC, which is planning to invest more than $1 billion to modernize a Canadian minivan plant, said on Tuesday it could scrap the upgrade and move production and jobs elsewhere if government and labor officials fail to come through with financial incentives.
To keep production at the assembly plant, across the river from Detroit in Windsor, Ontario, Chrysler must get a deal to cut costs, Sergio Marchionne told reporters at the Detroit auto show.
Time is running short to find a solution, he also said, with the automaker “weeks away from making a final call.”
Chrysler executives were to meet on Wednesday with Canadian federal officials from Ottawa, Marchionne said, following his discussion on Monday with a group from Ontario’s government.
“It went well. They understand the issues,” he said of the Monday meeting. “It’s costs and a variety of things. We have to create the conditions for this to be a successful investment. It’s that simple.”
Marchionne, chief executive of both Chrysler and its parent, Fiat SpA FIA.MI, said the company could invest elsewhere if Canadian labor costs are not lowered to be more competitive with the United States.
Jerry Dias, the national president of the Unifor union, which represents workers at the Chrysler Windsor plant, argues that Canadian labor costs are lower than those in the United States, after Canada’s universal health care and weaker currency are factored into the equation.
“Our collective agreement is lower priced than the UAW agreement,” he said. “By every economic yardstick ... our costs are lower.”
Unifor, formed in last year’s merger of the Canadian Auto Workers and Communications, Energy and Paperworkers unions, says that its workers at the Detroit Three earn an average of $34 an hour, compared with $28 for UAW employees.
Marchionne, who attended college in Windsor and spent part of his youth in Toronto, said he remembers when the exchange rate was 67 Canadian cents to the U.S. dollar.
“Ninety-two (Canadian cents) may be right today (but) the minivan is coming into the market in 24 to 30 months,” he told reporters on Monday. Chrysler needs assurances that the economics of the deal work regardless of currency fluctuations.
Marchionne has suggested that Canadian workers act more like the UAW in keeping manufacturer labor costs down.
Wages aside, Dias said there is no question the next minivan will be built in Windsor, which has excelled in lean manufacturing and productivity measures.
“(Marchionne) knows that he’s got a good thing going on here in Windsor,” Dias said. The two men have not talked about the investment, he added.
Tony Faria, an auto industry expert and professor at the University of Windsor in Ontario, said that Marchionne is attempting to turn up the heat on Canadian governments to match generous administrations elsewhere.
“He thinks Canada should step up, because it’s become sort of a standard in the U.S. that states will come up with half the investment cost for a major new investment by the automakers and unquestionably ... Mexico has been incredibly aggressive,” Faria said.
Canada and Ontario pledged nearly C$143 million ($130.8 million) to Ford Motor Co (F.N) last September, as Ford said it would spend C$700 million to retool an existing Oakville, Ontario plant for next-generation production.
“I think our record on the auto industry has been one that would show we’ve placed it as a priority,” Canada’s junior finance minister Kevin Sorenson told Reuters.
Chrysler’s leverage, in its push for government funds, is somewhat limited, Faria said, because the automaker currently has no other North American plant where it can produce the minivans assembled in Windsor.
“It’s not as if Chrysler has an immediate option,” he said. “Chrysler has no other place to build their minivans, period.”
The first new minivan to be put to market will be a Chrysler, Marchionne said to reporters on Monday.
The Windsor plant produces Dodge Caravan and the Chrysler Town & Country minivans. ($1 = 1.0936 Canadian dollars)
Reporting by Bernie Woodall in Detroit, and Susan Taylor and Leah Schnurr in Toronto; editing by Matthew Lewis and Nick Zieminski