November 7, 2016 / 11:12 PM / a year ago

Canada auto deals secure plants for now, longer-term uncertain

MONTREAL (Reuters) - Concessions by Canada’s main auto union in their latest contract talks should help halt a years-long erosion in Canada’s share of North American auto production, but the longer-term fate of some plants is still uncertain, industry watchers said on Monday.

Ford and Lincoln vehicles are parked outside the Oakville Assembly Plant, as workers with UNIFOR attended a ratification vote nearby, in Oakville, Ontario, Canada November 6, 2016. REUTERS/Chris Helgren

The union, Unifor, took a hard line on some issues with its own members on salary and pensions to secure critical new investment in contract talks that ended Sunday, winning about C$1.6 billion ($1.2 billion) in commitments from General Motors Co (GM.N), Fiat Chrysler Automobiles (FCHA.MI) and Ford Motor Co (F.N).

“It’s certainly kept Canada in the game,” U.S. labor analyst Arthur Schwartz said. “But are they going to fight again in four years?”

Canada’s auto sector has been under long-term pressure as major automakers shifted their investment spending to lower-cost jurisdictions like Mexico and southern U.S. states.

Given industry pressures, the outcome of the talks was a best-case scenario, said Flavio Volpe, president of the Toronto-based Automotive Parts Manufacturers’ Association.

The union, negotiating on behalf of 23,500 autoworkers, made concessions for new hires in all three contracts by allowing defined-benefit pensions and a 10-year wage progression that was particularly unpopular with some Ford workers.

But while Ford’s C$700 million investment secures the production of engines for popular pickup trucks, industry analysts said there is no guarantee the commitments by GM and Fiat Chrysler will keep all of their Canadian plants open beyond the life of the contract.

“Of the three, the best one that came out was Ford,” said Joe McCabe, AutoForecast Solutions Chief Executive, by phone on Monday. “GM and Chrysler sort of put them (plants) on life support.”

Unifor managed to keep at-risk plants open and secured additional investment in facilities like Fiat Chrysler’s paint shop in Brampton and GM’s Oshawa assembly plant.

But Fiat Chrysler’s $325 million paint shop investment does not come with specific new product, and GM’s commitment will lead to final assembly at Oshawa of Silverado pickup trucks shipped from Indiana.

Unifor President Jerry Dias said in an interview that GM and Fiat Chrysler would not invest hundreds of millions of dollars in plants now only to close them in 2020. Unifor is now pressing GM to invest in a body shop for Oshawa that would guarantee the plant’s survival by allowing it to produce the Silverado.

“If we had a body shop we wouldn’t need to truck them in,” he said.

Reporting By Allison Lampert; Editing by Bernard Orr

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