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Buzz Hargrove has won labour peace with Ford Motor Co. of Canada Ltd. in a deal that will create deeper and longer-lasting wage discounts for new workers, but the head of the Canadian Auto Workers insists he has not caved in to industry demands for a two-tiered deal.
The deal is a surprisingly quick settlement in what were expected to be protracted and contentious talks with the Detroit Three auto makers, which were seeking to slash costs dramatically amid a North American restructuring and a soaring currency that has eroded the competitiveness of Canadian-based operations.
The agreement will keep employment costs level, Mr. Hargrove said and thus not increase Canada's disadvantage – a stark contrast to deals the companies reached with the United Auto Workers in the United States last year that are estimated to have trimmed hourly labour bills by between $20 (U.S.) and $25. That means General Motors Corp. and Chrysler LLC could have trouble swallowing the new deal because they gave the union a long list of demands to cut the average Canadian hourly labour bill to the $48 range from its current $78.
Ford did win relief on health care costs, a cut in the costs of time off the job, a three-year freeze on base wages and a temporary halt to cost-of-living adjustments (COLA).
Ford's assembly plant near St. Thomas, Ont., which was scheduled to be closed in 2010, will be kept open another year
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But Mr. Hargrove had earlier drawn a line in the sand on two-tiered wages and industry observers and even some union officials had expected this year's set of talks to focus in on that issue.
“Two-tiered is where you have a permanent underclass of workers that never gets to the top level,” Mr. Hargrove told reporters as he outlined an unprecedented early deal with Ford – almost five months before the labour agreement was scheduled to expire in September.
Hourly wages for newly hired CAW employees will be 70 per cent of the wages other workers receive for the first three years they work. That's a step closer to two-tiered wages than the current CAW contract under which new employees get 85 per cent of full pay for two years, then the same wages as everyone else.
“In three years everybody gets full wages, full COLA, full time off the job and they're in the pension plan – different than the two-tier group in the U.S. – and they get health care benefits in Canada if they survive long enough to retire,” he said.
From the outset, Ford's negotiators said they respected the union's position that the U.S. two-tiered wage system was a deal breaker, he said.
Mr. Hargrove said he fully expects GM and Chrysler to match the pattern established at Ford, even though GM has stated publicly that it needs to eliminate or at least substantially reduce a $30-an-hour cost disadvantage the company faces when compared with U.S. plants operated by Japan-based auto makers. Labour costs are about $78 an hour in Canada when all items such as benefits, pensions and health care are included.
“Ford analyzed this thing and said $30 is a nice thing to argue about and to point out in terms of our relationship to the non-union plants in the southern United States, but they knew it was not realistic.”
The CAW still needs to reach agreement with Ford on local issues covering employees in Oakville, Ont., St. Thomas, Ont. and Windsor, Ont., before the deal can be ratified and negotiations begin with either GM or Chrysler.
The early deal was prompted in part by the success of two Ford crossover vehicles being assembled in Oakville and plans for a third to be launched at that plant this spring. Ford's Edge and Lincoln MKX are two vehicles that are doing well.
The deal is a “brilliant piece of pattern bargaining,” said Sean McAlinden, chief economist and vice-president of research of the Center for Automotive Research in Ann Arbor, Mich. “Ford couldn't let Oakville go down even a week – so why not whipsaw Chrysler and GM by settling early and forcing them to either take the same contract or a strike?”
The agreement freezes hourly wages and workers will lose 40 hours of vacation pay, but they will also receive a $2,200 (Canadian) productivity and quality bonus and $3,500 cash payment in January, 2009, in return for giving up the vacation pay.
But even as the CAW leader was happy to hammer out an early deal with Ford, he got sideswiped by more bad news from GM, which announced it is laying off 900 workers at its pickup truck plant in Oshawa, Ont., and reducing production to one shift from two.
