The stage is being set for a fight between the Canadian Auto Workers union and the Detroit Three auto makers over how employees are paid at their Canadian plants, after workers at General Motors factories in the U.S. agreed to a new contract that gives profit sharing and bonuses instead of wage increases.
The deal between GM and the United Auto Workers over the weekend increases the pressure on the CAW to agree to a similar arrangement in 2012 during negotiations with the auto makers.
The CAW, whose members made significant concessions during the 2008-09 auto crisis that tipped two major auto makers into bankruptcy protection, wants to win annual wage increases. But the companies want worker pay more closely tied to profits.
An attempt to reconcile those diverging viewpoints will come to a head a year from now.
The auto companies "are absolutely talking to us about a bonus structure versus wage increases," CAW president Ken Lewenza said Monday as details emerged of the new, four-year U.S. contract.
"I just met with [GM chairman Dan]Akerson a couple of weeks ago and he said 'We're not going to raise the cost of doing business; we're not going to raise our fixed costs.'"
Similar comments have been made publicly by Chrysler Group LLC chairman Sergio Marchionne and echoed earlier this year by General Motors of Canada Ltd. president Kevin Williams.
The comments by the executives – and Mr. Lewenza's stance, which is opposing the switch to a profit-based system of hourly compensation – point to tough negotiations a year from now when CAW agreements with Chrysler, GM and Ford Motor Co. of Canada Ltd. expire.
And as the two sides prepare to draw lines in the sand, the cost advantage that Canadian auto plants enjoyed for decades over those in the United States has already been dealt a double blow, by the rise in the value of the Canadian dollar and the shift in U.S. health-care costs to a trust managed by the UAW.
By some measures, Canada is now the highest-cost country in the world in which to assemble vehicles.
"I see bargaining [being]tough anyway, but … they're going to come at us fairly strong about [how]wage increases are behind us forever and those kinds of issues," Mr. Lewenza said.
The key elements of the UAW deal include a $5,000 (U.S.) signing bonus for workers and a change in the profit-sharing formula that bases profit-sharing payments on the results of GM North America, not just its U.S. operations, several media reports said Monday. Full details are scheduled to be released Tuesday.
"The GM settlement will place extra pressure on the CAW to agree to profit sharing, but I also think that the CAW will want very much to show how their settlement differs from that of the UAW," said Gary Chaison, a professor of industry relations at Clark University in Worcester, Mass., who follows auto negotiations closely.
Hourly labour costs – including wages, vacations, health care, pensions and other benefits, but excluding profit sharing and bonuses – are about $57 at the Detroit Three's U.S. plants, $60 at Canadian plants and less than $40 at the Volkswagen AG factory in Chattanooga, Tenn., the newest North American assembly plant.
The CAW was created in 1985 in part because the then-Canadian unit of the UAW objected to the Detroit leadership's decision to agree to lump-sum bonuses instead of wage increases in the early 1980s when the industry was emerging from recession.
Since the divorce, the unions have diverged in another area. The UAW agreed to a two-tiered wage structure that pays newly hired employees $14 an hour. The percentage of employees getting paid at that rate differs by company.
The CAW agreed that hourly wages for new employees will be 70 per cent of pay for longer-term workers, but their pay and benefits rise to 100 per cent of those paid to longer-term workers after three years.