News

AUTO INDUSTRY REPORTER

Unionized auto workers will begin making a direct contribution to their own pensions in Canada for the first time, in a historic agreement with Chrysler Canada Inc. that was approved yesterday and will be extended to cover the other two Detroit auto makers.

Meanwhile, in the United States, Chrysler LLC cleared another major obstacle to its survival last night when it reached a tentative deal for concessions with the United Auto Workers union.

The troubled auto maker is just days from a Thursday U.S. government deadline to gain concessions from its unions and debt-holders and form an alliance with Italy's Fiat Group SpA or face almost certain liquidation. The UAW deal is seen as a key piece to Chrysler's plan and it's noteworthy that the UAW said Fiat was involved in the deal.

Newly hired Canadian workers will contribute $1 for every hour worked or about $1,700 a year, a change that comes after the subject of pensions for members of the Canadian Auto Workers, and who pays for them, became a hot-button topic among Canadians and a toxic issue for politicians during the debate about whether taxpayers' money should be used to keep Chrysler and General Motors of Canada Ltd. from collapsing.

Angry constituents complained to politicians in Ottawa and Toronto after GM said in a restructuring plan submitted to the federal and Ontario governments in February that it was being crippled by pension payments.

"We heard what people said, but I don't go by that," CAW president Ken Lewenza said in an interview yesterday after ratification meetings with workers from Chrysler's Brampton, Ont., and Windsor, Ont., assembly plants. "It's really how do we send a message to the companies that we recognize the [pension] challenges going forward?"

He noted that newly hired members of the United Auto Workers at Detroit Three plants in the United States will have no pensions, so the CAW needed to act to maintain Canada's competitive position.

The direct costs of pensions for existing employees will still be carried by the companies and the union argues that in previous rounds of bargaining, workers could have won higher wage increases or improvements in benefits but agreed instead to pension payments by the companies.

All three companies are retrenching in Canada, so they're not likely to be hiring new employees for some time. But the principle of auto workers paying directly for their own pensions is now established.

The pension move is just one of several major concessions the CAW made in the first agreement to take away hard-won benefits since the union agreed in the early 1980s to cut wages by about $1.15 an hour to help keep Chrysler from plunging into bankruptcy.

"Sacrifices have to be made because we have a cannon at our head," Mr. Lewenza told Brampton plant workers and retirees.

Other changes - which will apply to all three companies in Canada - include a freeze on wages and cost-of-living pension increases until 2012; an end to company coverage of semi-private hospital rooms; increases in health-care co-payments; and an increase in the amount of time it takes newly hired workers to reach full wages.

The concessions will cut Chrysler's labour costs by about $240-million annually.

That meets the demand set by Ottawa and Ontario that the company cut its labour costs to $57 an hour from $76 to match those of Toyota Motor Manufacturing Canada.

Chrysler has received $750-million of a planned $1-billion loan from the two governments and its parent company is in negotiations with Italian auto maker Fiat SpA on a strategic alliance. The Canadian and U.S. governments require the company to have a Fiat deal in place by Thursday.