Total labour costs at Detroit Three plants in Canada have fallen to levels below those at the companies’ U.S. factories, a sign the falling value of the Canadian dollar is helping improve this country’s competitive position in the auto sector.Peter Power/The Globe and Mail
Total labour costs at Detroit Three plants in Canada have fallen to levels below those at the companies' U.S. factories, a sign the falling value of the Canadian dollar is helping improve this country's competitive position in the auto sector.
All-in labour costs – which include wages, benefits and pension costs – at the Canadian plants operated by the companies average $60 an hour, putting them below $48 (U.S.) with the dollar trading at 79 cents, said Jim Stanford, economist for Unifor, which represents hourly workers at FCA Canada (formerly Chrysler Canada Inc.), Ford Motor Co. of Canada Ltd. and General Motors of Canada Ltd.
At less than $48, hourly labour costs at the Canadian plants are also lower than Honda Motor Co. Ltd. and Toyota Motor Corp. factories in the United States, according to data compiled by the Center for Automotive Research (CAR), an industry think-tank based in Ann Arbor, Mich.
While the currency advantage helps, the changing work force at General Motors Co. plants in Oshawa, Ont., will be an even bigger advantage than the dollar, Unifor officials said Monday as they released a report that examined the impact a closing of GM's two Oshawa plants would have on the federal and Ontario economies.
"The decline in the dollar is almost icing on the cake," Mr. Stanford told a news conference.
The report, released at the Ontario legislature, comes as Unifor lobbies the Ontario and federal governments to help save the Oshawa plants, one of which is scheduled to close next year. The other plant has no new vehicles allocated to it and the vehicles made there are scheduled to be shifted elsewhere or end production during the next few years.
GM Canada President Stephen Carlisle has said no decision on new vehicles will be made until 2016.
About two-thirds of unionized workers at the Oshawa plants are eligible to retire under the provisions of the Unifor contract with GM, Unifor president Jerry Dias said.
"This will save General Motors billions," Mr. Dias said.
If those workers retire, they can be replaced by newly hired employees who start at $20.50 (Canadian) an hour and whose wages won't rise to the full seniority level of $34 an hour until they have been there 10 years.
They also participate in a hybrid pension plan that combines defined contributions by GM with defined benefits to employees instead of the more costly plan for employees with more seniority, which is 100-per-cent defined benefit.
At current levels the currency advantage Canadian plants have over U.S. plants also makes newly hired Canadian workers less costly than so-called tier two workers at U.S. factories, Mr. Stanford said.
The all-in labour costs for lower-tier workers at U.S. Detroit Three factories are about $42 (U.S.) an hour, CAR estimates.
Costs for newly hired workers at Canadian plants are about $30 (Canadian), Mr. Stanford said.
Mr. Dias said he expects the cost gap to grow in Canada's favour during talks between the Detroit Three and the United Auto Workers this year as the UAW looks to eliminate the lower tier of pay and regain increases in hourly wage rates, which have been frozen.
The report on GM Oshawa, prepared by the Centre for Spatial Economics, said closing the two plants would result in the immediate elimination of 4,100 jobs, the loss of more than 30,000 jobs over the medium term and a revenue hit of about $1-billion to the Ontario and federal governments.
The report "underscores what we know and that is that our auto plant – just like any auto plant – is very important, with its supply chain, both for economic importance and to governments," GM Canada vice-president of corporate affairs David Paterson said.