April 18, 2008 / 5:55 PM / in 10 years

GM Canada seeks big cuts to labor costs: source

TORONTO (Reuters) - General Motors of Canada (GM.N) will be seeking big changes to labor practices when it starts contract talks with its main union later this year, according to an industry source with access to a company document.

<p>A General Motors employee inspects Chevrolet Impalas on the production line in Oshawa, Canada August 21, 2006. REUTERS/J.P. Moczulski</p>

The source, who asked not to be identified, said the automaker is seeking to eliminate what it says is a $30-an-hour labor cost disadvantage versus non-unionized U.S. plants operated by Japanese-based competitors,

Possible changes include the establishment of a two-tier wage system like that recently introduced in GM’s U.S. plants, as well as the use of more temporary workers, less paid time off, and an end to retiree health benefits and cost of living protection for workers and pensioners.

GM Canada did not return calls seeking comment.

The Canadian Auto Workers union, which represents around 15,000 GM Canada workers, has said it will not allow a two-tier wage system like the one the United Auto Workers in the United States agreed to last year, and it would strike if pressed on the issue. Under the two-tier plan, new employees are hired at wages that are about half the regular union rates.

“We’ve already told General Motors that we don’t agree with their numbers, but we’re also not going to be pitted against the transplants,” CAW President Buzz Hargrove said, referring to the Japanese plants in the United States.

“We don’t represent the transplants and we’re not going to compete with them in terms of their cost structure,” Hargrove said.

GM’s tough position comes as it and the rest of the Big Three Detroit-based automakers -- Chrysler and Ford Motor Co (F.N) -- prepare for contract talks with the CAW in July. The union’s current contract expires September 17.

The strong Canadian dollar has made imported parts from the United States cheaper, but has made Canadian wage rates less competitive. Labor costs make up around 7 or 8 percent of the cost of manufacturing a car.

Hargrove acknowledged that Canadian labor costs are higher than those in unionized Big Three plants in the United States. But he said stronger productivity in Canada narrows the gap.

The CAW says it has a strike fund of $70 million, enough to cover a six-month walkout at GM.

The last CAW strike at a Big Three plant was in 1996 at GM, and it lasted three months.

GM Canada operates a car plant and a truck plant in Oshawa, Ontario, an engine and transmission plant in St. Catharines, Ontario, and a transmission plant in Windsor, Ontario.

Reporting by John McCrank; editing by Rob Wilson

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