CAW President Ken Lewenza mantains it's the "very best agreement possible, imposing the minimum possible sacrifice on our members and their families, despite incredibly tough times."

Late Friday night the Canadian Auto Workers union announced that it had reached a tentative agreement with Chrysler LLC to bring labor costs in line with competitors as required by the Canadian and U.S. governments to continue taxpayer loans.

CAW President Ken Lewenza said, “CAW members supported their union right through this process, rather than allowing themselves to be intimidated by crude threats. That has allowed us to bargain the very best agreement possible, imposing the minimum possible sacrifice on our members and their families, despite the incredibly tough times.” 

Base wages and pensions remain as before. It was not immediately clear what the cost cuts amount to. In March, the CAW  reached an agreement with General Motors that cut costs an estimated C$7 per hour. Chrysler Canada said it needed a C$19 an hour reduction to be competitive.

Misleading and self-serving statistics are often cited in debates about the North American auto industry. Canadian autoworkers do not “earn” C$70 (~$58 U.S.) or more per hour, as has been widely asserted in news reports. Production workers in CAW-represented auto plants start work at C$24 per hour, growing to C$34 per hour at full seniority. The cost of current pension, health, and other benefits adds less than C$10 per hour to that, on the basis of a normal working year. Compensation for autoworkers is less than C$45 ($37 U.S.) per hour.

Chrysler and the Auto Task Force are still negotiating with the United Auto Workers Union in the U.S., Fiat, and secured debt holders over further concessions needed to prevent bankruptcy. All three pieces need to come together before May 1, according to the Obama administration, or the loss-making company will be placed in receivership. 

In an explicit endorsement of the anticipated Fiat alliance, the agreement contains unspecified operational changes that will further “enhance productivity” and include the adoption of the “World Class Manufacturing” operating system that is used by Fiat in its global production operations.

The CAW said, “The agreement will result in over $240 million per year in annual cost savings for Chrysler’s Canadian operations, as a result of a combination of benefit reductions, compensation changes, and increased productivity through operational improvements.”  

Canada’s largest private sector union noted that members perform 2.5 million hours of work per year for Chrysler Canada, and it is already the company’s most productive union in the world. The union says the agreement meets the benchmark established for the negotiations by the federal and Ontario governments as a condition of their continuing support for the two companies. 

The agreement includes all of the cost-saving provisions originally included in the contract negotiated with General Motors Canada in early March. The CAW leadership had previously, and vociferously, rejected those changes. 

While the membership vote is expected to endorse significant, even drastic, changes to the contract, affirmation of the deal won’t be reached until sometime late Sunday night after the locals conclude voting. 

Among other provisions, the new contract sees:

– The elimination of semi-private hospital coverage.
– The elimination of a one-time $3,500 vacation buyout negotiated in 2008.
– The elimination of clawback reimbursement through the SUB program.
– The elimination of employee car purchase and tuition rebate programs.
– An increase in the waiting period for sickness & accident benefits.
– A reduction in the maximum dispensing fee for prescriptions.

Finally, the agreement also contains unspecified measures aimed at providing retiree pension and health benefits (so-called “legacy costs”) in a more cost-efficient manner.  The pension contribution timetable is adjusted in line with provisions announced by the Ontario government in its 2009 budget, and the CAW and Chrysler have agreed to establish a Canadian Health Care Trust (HCT). Details of  how the Trust will work, it’s similar to the Voluntary Employee Beneficiary Association in the U.S., remain to be worked out.