TORONTO -- General Motors of Canada Ltd. is seeking a "transformational" change in its operations by reducing paid time off, allowing temporary workers and eliminating strict work rules, moves that almost certainly put it on a collision course with its unions.
The changes are essential to slash a $30-an-hour labour cost disadvantage against U.S. plants operated by Japan-based competitors, the auto maker says.
Wages, benefits, pensions and other costs for one hour of labour at the Canadian plants operated by the Detroit Three amount to $77.75, says a company background paper on the coming talks with the Canadian Auto Workers union. The same costs with the Canadian dollar at par against the U.S. currency total $47.50 an hour for U.S. plants operated by Honda Motor Co. Ltd., Nissan Motor Co. Ltd. and Toyota Motor Corp.
"When you look at how uncompetitive we are, you can't say we'll do some things and $1 an hour will do," said GM Canada spokesman Stew Low. "The status quo just won't do."
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The background paper outlines what will be a difficult challenge for the CAW and the Canadian units of the Detroit Three in an automotive environment that has changed dramatically since the last round of negotiations in 2005. Since then, the Canadian dollar has hit par with the U.S. currency - contributing to annual losses at the Canadian unit of General Motors Corp. - and a landmark labour agreement in the United States appears to have slashed the three companies' costs in that country.
If GM sticks to the position hourly labour costs must be slashed by $30, they risk a monumental clash with the union, which has already drawn a line in the sand, saying the two-tiered wage structure adopted at U.S. sites won't be permitted at CAW plants.
"They can't get there," said CAW president Buzz Hargrove. "I've told [GM chairman] Rick Wagoner, I've told the head people at Ford and Chrysler - all of them - that there's absolutely no way in hell."
The union will not agree to wage cuts, reductions in health care benefits or lower pensions, Mr. Hargrove said, but he acknowledged that Canadian workers have more time off the job and "that would be one we would have to look at, given the circumstances we face."
Making the case for investment in the company's Canadian operations is already difficult given the dollar and the flat North American market, compared with strong growth in other markets such as China and Europe, said David Paterson, GM Canada's vice-president of corporate and environmental affairs.
Investment "becomes a lot harder to justify," Mr. Paterson said. "We're trying to invest right now. We've just laid out $3-billion worth of investments."
More than three-quarters of the $30 cost gap is generated by the labour costs for active employees, says the GM Canada paper, which argues that "we need to find a creative 'Made in Canada' solution to our cost challenges - and the solution must be transformational."
The paper notes that base wages and paid time off make up a significant slice of the gap, pointing out that CAW employees get 155 hours more time off annually than workers at the Japanese plants in the U.S.
CAW workers at GM Canada assembly plants get 46 minutes in breaks during an eight-hour shift, while U.S. workers at Toyota Motor Corp. plants get 30 minutes in breaks, the paper adds.
The GM officials also pointed to work rules, such as a ban on temporary workers. Such employees make up 10 to 15 per cent of the work forces at the Japanese plants, which gives them flexibility to adjust production quickly when the market changes.
Another area of concern is job responsibility. In some plants, a regular assembly line worker can change the welding tips on a robotic assembly arm, Mr. Low said. At GM's two Canadian assembly plants, that requires a skilled trades worker.
CAW economist Jim Stanford said GM Canada should compare hourly labour costs for active workers in Canada against those at Detroit Three U.S. plants represented by the United Auto Workers.
Such costs in Canada are $67 an hour and $60 in the United States, he said, and the $7 an hour difference is made up by the higher productivity of the company's Canadian operations.
GENERAL MOTORS (GM)
Close: $19.79 (U.S.), down 11¢
Sizing up the cost gap
WAGES AND BENEFITS
Detroit Three paid out $50-million in cost-of-living allowances last year
Japan-based companies pay performance bonuses
WORK BREAKS
ON THE ASSEMBLY LINE
Two 23-minute breaks during an eight-hour shift at GM Canada plants
Two 15-minute breaks and a five-minute meeting at Toyota operations
RETIREE PAYOUTS
Detroit Three have $7-billion in liabilities for post-employment benefits other than pensions
Offshore auto makers have a handful of U.S. retirees
TIME OFF THE JOB
Special paid absences - known as SPA days - contribute to 155 hours more time off the job for CAW workers
INDIRECT LABOUR
Some CAW plants have contracted out paint booth cleaning, lawn cutting, snow plowing and construction work, but many have not
Offshore companies subcontract such non-assembly line tasks to companies paying lower wages
Source: GM Canada
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