High Canadian labor costs have led GM to move production of the Chevrolet Equinox from Oshawa, Ontario to Spring Hill, TN.
Negotiations between Detroit’s three automaker and the Canadian Auto Workers Union have gotten underway in Toronto. And with the CAW’s contract with the automakers expiring in mid-September there could be trouble ahead.
The talks are expected to be difficult because the rising value of the Canadian dollar has made General Motors, Ford Motor Co. and Chrysler plants more expensive to operate – leading the makers to hint they’ll press for new concessions. But CAW leaders are clearly reluctant to depart from the traditional contract elements, such as an annual wage increase, in favor of profit sharing, which the American car makers are expected to demand.
Ken Lewenza, CAW president, also has indicated he is dissatisfied with the Canadian government failure to come to the aid of the country’s auto industry. Other industrial nations, including the United States, have found ways to help their auto industry, he noted in an opinion piece he wrote for a Canadian newspaper. Canada has done little since participating in the auto bailout in 2009.
Lewenza disputed the claim Canada is now the most expensive place in the world to make a vehicle, arguing, “We are a couple of bucks higher than our competitors in the United States and consistently on par with other automobile manufacturers like the Germans, the Japanese and others.”
Lewenza said the Canadian dollar, which has gained significant value since the financial crisis that engulfed European and U.S. banks in 2008, was a problem. However, GM and Ford are earning record profit margins on their North American business and that Chrysler in now profitable, he also emphasized.
The productivity of their plants in Canada has been a plus for all three automakers, “Yet they have the nerve to say Canada is a terrible place to invest,” he said during a press conference in Toronto.
Stacey Allerton, Ford’s lead negotiator and vice president of human resources, said labor costs are significantly higher in Canada than in any other jurisdiction in which Ford operates. Allerton said the total labor cost in Canada is $79 an hour, compared to $64 an hour in the U.S. and $48 in Germany.
Dan Akerson, GM’s chief executive officer, also had discussed the relative high cost of labor in Canada during the company’s annual meeting in June.
“Canada is the most expensive place to build a car in the world right now,” Akerson said during a news conference held before the company’s annual meeting in Detroit. Chrysler chief executive officer Sergio Marchionne also has said labor costs in Canada, where the company has two key assembly plants, are too high.
“We have to run a business here and the union understands that better than at any time in its history,” Akerson said.
Akerson, however, denied at the time GM was moving forward to close one of its assembly lines at its big assembly complex in Oshawa, Ont. outside of Toronto. The shutdown of the line had been part of GM’s restructuring plans since at 2008, he noted.
“Everything’s in the mix. They’re an important part of our manufacturing footprint in North America, in the globe, and we’d like to keep it that way,” Akerson said.
Although Canadian plants are expensive, they are “very high quality, very high productivity and the workers are very dedicated employees,” Akerson told reporters ahead of GM’s annual shareholders meeting in Detroit. “They know they have a cost differential,” but the question is whether the CAW will be willing to address that issue.
GM announced on June 1 that it expects to shut down one of two assembly lines at the Oshawa plant by June 1, 2013.
The line was originally slated to cease production in 2008, but the operation was extended due to market demand for the Chevrolet Impala and the Chevrolet Equinox crossover, which have been assembled in Oshawa, GM officials said.
GM is switching assembly of Equinox crossovers from Oshawa to its former Saturn plant in Spring Hill, Tennessee. The idled Spring Hill plant is reopening because the United Auto Workers agreed to allow GM to hire a large number of workers for the plant at wages of about US$14 an hour and minimal benefits. That compares with a typical hourly rate of about $31.09 at Oshawa – a figure that does not include benefits.