OTTAWA (Reuters) - Chrysler LLC warned on Wednesday it might close its plants in Canada unless it got sufficient labor concessions, as well as government aid and resolution of a tax dispute.
“Failure to satisfactorily resolve these three factors -- the labor costs, government assistance and of course the transfer tax -- will place our Canadian manufacturing operations at a significant disadvantage relative to our manufacturing operations in North America and may very well impair our ability to continue to produce in Canada,” Chrysler President and Vice Chairman Tom LaSorda said.
He told reporters after his testimony to the House of Commons finance committee that his direct tone was needed to lay out the facts in a serious situation.
“Bottom line, we needed to be very, very clear, and ambiguity doesn’t help the process. These are the things that Chrysler needs,” he said. “I thought when I came up here today the Canadian government wanted to hear what are the true facts.”
The biggest sticking point appeared to be the cost of labor. He said Chrysler’s labor costs in Canada, all inclusive, were C$75 ($58) an hour, C$20 an hour more than at Canadian transplants such as Toyota and Honda.
He said the labor cost gap was being eliminated in the United States but remained high in Canada, and he said the Canadian Auto Workers agreement reached with General Motors Corp over the weekend would not eliminate even half of Chrysler’s labor cost gap.
“The current agreement with GM is unacceptable and we have to break the pattern,” LaSorda said.
Some analysts have calculated the agreement with GM as yielding C$6 or C$7 in cost savings.
Complicating Chrysler’s situation is a dispute over back taxes related to transfer pricing, with Canada saying it should have paid more Canadian taxes and less in U.S. taxes for the period 1996-99.
LaSorda said Chrysler was asking that no further deposits be required of it until the tax authorities render a final decision but recognized that the government itself could not intervene in that dispute.
On the government aid front, he said Chrysler Canada was seeking $2.3 billion in aid from Canada, representing a quarter of the $9 billion being requested of the United States, and he said the request it made of Canada was denominated in U.S. dollars but the Canadian government had made clear it would be in Canadian dollars -- meaning around C$2.3 billion or $1.8 billion U.S.
Chrysler has 9,400 direct employees in Canada, including its financial operations. Another 25,900 work at Chrysler dealerships. Including suppliers and retirees, it said 100,000 Canadians depended directly or indirectly on Chrysler Canada.
The Canadian operations make half a million vehicles a year, selling 230,000 in the Canadian market. In 2007 it became the highest seller of vehicles in Canada.
Reporting by Randall Palmer; Editing by Andre Grenon, Bernard Orr