Canadian Workers Settle with GM, Chrysler - But Could Deal Backfire?

May 16, 2008
The good news for members of the Canadian Auto Workers union is that they’ve wrapped up contract talks with the Big Three. Tentative settlements with General Motors and Chrysler will go to members for a ratification vote over the next few days. The potentially bad news is that while the CAW has largely preserved workers’ wages and benefits, it may have priced itself into a serious fix.

With the Canadian dollar as strong as its been in decades, automakers can no longer expect an immediate bargain by building their products north of the border and will likely look at the new settlements as motivation to shift production away from the Great White North, industry analysts are warning.

CAW president Buzz Hargrove had a simple plan for this year’s national contract talks: “Get in and get out,” preferably as quickly as possible. The union surprised everyone when, on April 28, it announced an agreement with Ford Motor Co., four months before the current contract was to expire. It took less than three weeks more to hammer things out with Chrysler and GM.

Conventional wisdom anticipated a tough round of talks, in light of the large concessions made by the CAW’s American counterpart, the United Autoworkers Union, last year. But somehow, CAW negotiators were able to stave off the sort of givebacks – including a first-ever, two-tier wage structure, that the UAW had accepted.

The Canadians didn’t, however, block the Big Three’s plans to close several plants, including GM’s transmission plant, in Windsor, Ontario. And observers wonder whether that will be just the first blow to the 30,000-member CAW.

Not all that long ago, when the Canadian dollar was worth barely 60 cents against the American greenback, factories like the big Chrysler assembly line, in Brampton, Ontario, seemed particularly secure. It also helped that Canada had a national health care program, while in the U.S., the automakers were absorbing fast-rising medical costs.

But along with the two-tier wage system, the UAW last year approved a plan to help curb medical costs. And now, with the Canadian and American dollars effectively at par – but with general taxes and other costs higher on the snowy side of the border – the case for Canadian production is diminishing, especially if labor costs further tilt the equation.

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