Thursday, March 12, 2009

The Death of the Detroit Three in Canada

I think something needs to be pointed out regarding the bailout of the auto sector in Canada.

As I understand it General Motors Canada and the CAW reached an agreement over the weekend that has since been ratified by the union members. The major points of the deal are as follows:

The contract freezes wages until 2012 and suspends cost-of-living adjustments for both wages and pensions. It also reduces paid time off by 40 hours a year, scraps an annual $1,700 bonus and cuts company contributions to union-sponsored programs by a third.

Under the agreement, active workers and retired members under 65 will also contribute $30 a month to their health and other non-wage benefits, while retired members over 65 will contribute $15.

Analysts have variously described the deal as "trivial" and a "wet noodle," and many say it fails to address GM Canada's pension issues.

GM has warned the cost of its pension plan will balloon as the ratio of active to retired workers is expected to grow to five to one by next year once its previously announced plant closures are completed.

However Lewenza challenged the union's critics to provide credible economic evidence that even deeper labour concessions would make any meaningful difference to the future of the auto industry.

So let me critique the finer points...A wage and pension freeze...One week less bonus from a dying company...dying members pony up 15-30 bucks a month towards pension costs....Wow!

That should do it! But wait...Chrysler begs to differ:

Mr. LaSorda said Chrysler's Canadian labour costs are $75 (Canadian) an hour per worker – including wages and benefits for both active workers and retirees – and need to be cut by $20 an hour to be competitive with American and foreign car makers in the United States.

He said a cost-cutting agreement that the CAW struck with General Motors of Canada Ltd. – which GM's workers approved last night with 87 per cent in favour – is not sufficient for Chrysler.

The CAW typically negotiates a deal with one of the Detroit-based companies, and then reaches similar agreements with the others, a process known as pattern bargaining.

“The current agreement with GM is unacceptable to us, and we have to break the pattern.” Mr. LaSorda said.

There seems to be a notable dissonance betwixt GM, Chrysler and the CAW
I wondered about this and the obvious answer is that this is a set up.

Pattern bargaining is apparently dead and I suggest the easy peasy GM-CAW deal is a precursor to the Detroit three ceasing operations in Canada.

I hope it turns out differently, but I doubt it.


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