The Detroit Three auto makers are insisting that lower wages for newly hired employees become a permanent fixture of agreements with the Canadian Auto Workers, a stance that's creating a roadblock in negotiations on a new contract.
The union has proposed cutting wage rates for newly hired employees and stretching out the period during which they progress to the full wage rate, but Chrysler Group LLC, Ford Motor Co. and General Motors Co. are balking.
"They don't ever want to get to the top rate," said one high-ranking union official.
The union is standing firm against the creation of a permanent tier of lower-paid workers. The CAW insists its proposal that newly hired employees start at less than 70 per cent of the current rate of about $24 an hour and progress to the full wage rate of $34 an hour over 10 years will keep the three companies competitive.
Unless that impasse is solved in negotiations this weekend ahead of a strike deadline of Monday at 11:59 p.m., the union will halt work at all three companies in its first strike against any of the Detroit Three companies since 1996.
Another key issue is investment by the companies in their Canadian plants. But as of Friday, no investments had been promised.
"If you were to ask me today: 'Are we going to have a strike?' the answer is yes," CAW president Ken Lewenza said Friday.
The issue of establishing a permanent group of lower-paid workers presents Mr. Lewenza and the union leadership with a difficult choice – the prospect of going out on strike over what could be considered largely a philosophical issue that has no financial impact on the existing 20,000 unionized employees at the three firms.
Auto industry analyst Dennis DesRosiers said these kinds of choices make Mr. Lewenza's job one of the most difficult in Canada. "He rests inside a tightening vise, all-too familiar with the mutually opposed goals of his membership and his bargaining opponents," Mr. DesRosiers, president of DesRosiers Automotive Consultants Inc., said in a note to clients this week.
For the companies, the choice is whether to stick to their demand – which would help reduce hourly wage costs to the same level as their U.S. plants – even though it would not benefit them immediately because at least two of them won't be hiring many new employees in the short term.
The typical attrition rate of about 3 per cent a year would help reduce the number of older and more highly paid workers, but Ford already has 1,200 workers on layoff in Canada and GM will eliminate more than 2,000 jobs in Oshawa, Ont., by next summer. Chrysler is likely the closest to being in a hiring position.
The possibility of a strike perturbs federal Finance Minister Jim Flaherty, who urged the two sides to reach a deal.
"This is very worrisome, because this is a sector that is massively important, not just for Ontario, but for other regions of the country," Mr. Flaherty said in an interview. "This is not the time to have these kinds of disputes because of the seriousness of the global economic situation."
The auto industry has been one of the few bright spots in the Canadian manufacturing sector, Moody's Analytics Inc. said in a report Friday. "The resurgence of the [Detroit] Three has helped drive a sharp acceleration in Ontario manufacturing, more than offsetting the slowing pace of shipments from Quebec and British Columbia," the firm said.
"Even a one-week walkout could jeopardize Canada's increasingly listless growth," it said, trimming 0.25 percentage points from economic growth in September.