The Detroit Three auto makers want to slice their Canadian wage and benefit costs from $77 (U.S.) an hour closer to the $49 faced by their Japan-based rivals in the U.S., the Canadian Auto Workers union says.
CAW president Buzz Hargrove said yesterday that the union will consider ways to reduce costs, but won't agree to lower wages for newly hired employees, won't surrender time off the job and can't make up for what the rise in the value of the Canadian dollar has done to the country's competitiveness in the North American auto industry.
"We're committed to get at the costs," Mr. Hargrove told reporters. "We're committed to improving our productivity and quality."
He made his comments after meeting with investors on Bay Street in Toronto yesterday and before a similar gathering in New York today in what amounts to an unofficial kickoff of a crucial set of negotiations.
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The talks will begin formally this summer, but they come after Chrysler LLC, Ford Motor Co. and General Motors Corp. have reported billions of dollars in losses and are facing their worst sales market in a decade in the U.S. amid a housing crisis, soaring gasoline prices and a potential recession.
"This is probably the most difficult set of negotiations we've ever experienced," Mr. Hargrove said.
In early meetings, the companies have focused on the $49 average wage and benefit costs for Japan-based auto makers in the United States, but not the plants Honda Motor Co. Ltd. and Toyota Motor Corp., operate in Canada, CAW economist Jim Stanford said.
"There's transplants down the road here. They're more expensive than the transplants in the U.S.," he said.
Both Mr. Hargrove and Mr. Stanford disputed the idea that the Detroit companies have substantially trimmed the hourly wage and benefit costs at their U.S. operations because of an agreement reached with the United Auto Workers that allows them to pay newly hired employees $14 an hour - about half the basic wage of existing employees.
"The question is can we get over this challenge and can we bargain in an atmosphere that's not tainted by misinformation," Mr. Hargrove said.
But the U.S. is becoming a low-cost jurisdiction, said industry analyst Michael Robinet, vice-president of global vehicle forecasts for consulting firm CSM Worldwide Inc. in Northville, Mich. Mr. Robinet pointed to Fiat SpA chief executive officer Sergio Marchionne, who was quoted in the Financial Times yesterday as saying Fiat wants to team up with a U.S. auto maker to assemble Alfa Romeo vehicles in the United States.
That decision is related to the slump in the value of the U.S. dollar against the euro, but Mr. Robinet noted that "the UAW has pulled a couple of levers that the CAW is unwilling to pull." The most contentious of those levers appears to be the two-tiered wage system, which Mr. Hargrove said would create a strike if the auto makers insist on such a system in Canada.
The union acknowledged that the surge in the value of the Canadian dollar against the U.S. greenback has wiped out what was once a large competitive advantage for the Canadian operations of the Detroit Three.
When the dollar trades at 78 cents for example, wages at Canadian assembly plants are about $25.29 an hour. But at par, they're the equivalent of $32.50 an hour, which puts Canada at a disadvantage versus U.S. wages of $29.25 an hour. Benefits and other costs increase the average hourly labour costs to about $77 in both countries.
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