CAW Says Talks of Wage Concessions Already on Table

Canadian Auto Workers union President Ken Lewenza says his bargainers and General Motors are “miles apart” on a new labor contract after talking with the auto maker earlier today in the first of six weeks of labor negotiations with the Detroit Three.

“That’s to be expected,” Lewenza says in a press conference after the GM meeting. The CAW will have its first meetings on striking a new 3-year contract with Chrysler later today and Ford tomorrow.

Lewenza says GM brought an “incredible wish list” to the first meeting, but his union did exactly the same and thinks within the next couple of weeks the two sides will narrow their demands and the CAW will single out an auto maker to hammer out a pattern agreement.

At the same time, the proposals submitted by GM call for reduced hourly compensation, which last month Lewenza characterized as a non-starter to the talks. The current contract between the CAW and Detroit expires Sept. 17.

“They raised generally the idea of a new wage system,” says Lewenza, who opposes the 2-tier pay scale the United Auto Workers union agreed to in 2007 when GM sought concessions from the UAW to build a small car in the U.S. profitably.

“There will be a significant rebellion at places with a 2-tier wage,” he says.

The CAW’s 24,000 Detroit Three employees agreed three years ago to such items as a wage freeze and elimination of holiday bonuses to help the auto makers recover.

The CAW’s 49,000 retirees gave up pension investments by GM and Chrysler and agreed to changes in benefit plans and the establishment of health-care trusts run by the union.

But Detroit Three auto makers still consider CAW labor costs the highest in the world. GM Chairman and CEO Dan Akerson recently called Canada the most expensive place to build vehicles, which would put it ahead of even Germany,where the auto maker is struggling to end decades-long unprofitability.

Chrysler CEO Sergio Marchionne has made similar assertions recently, and last week, Ford officials chimed in, as well.

“We need to work with (the CAW) around solutions that reduce the gap between Canadian workers and rest of globe,” said a Ford executive, speaking on background. “The all-in labor cost number, everything that comprises.”

According to the Center for Automotive Research, an Ann Arbor, MI-based industry think tank, CAW labor costs average $60 an hour, compared with $58 for Ford’s UAW members in the U.S., $56 for UAW-GM workers and $52 for UAW-Chrysler employees.

But Sean McAlinden, executive vice president-research and chief economist at CAR, tells WardsAuto the figures fail to take into consideration legacy costs pushing the CAW average to $79.

Much blame has been heaped on the high Canadian dollar, which remains stronger than the greenback, making the region a less-attractive producer.

According to WardsAuto data, Canada ranked 11^th in the world in output last year, including heavy-duty vehicles, with 2.2 million units built. In 1994, a weaker loonie had it ranked as high as No.5 globally.

The CAW thinks the Canadian dollar is overvalued by 20%-25%, and Lewenza says his union has met “numerous times” with the federal government about rectifying that.

But even then, says CAW Chief Economist Jim Stanford, auto makers must look beyond CAW labor costs. He says union wages account for just 5% of the cost to assemble a vehicle, with the remaining 95% tied up in items such as materials, taxes and salaried compensation. Consider the high productivity levels in Canada, too, he offers.

“Canadian plants are the most productive,” Stanford says.

Lewenza rejects profit sharing as one alternative to lowering labor costs. Refusal to join the UAW on profit-sharing in 1985 led to a split between the groups.

“There are other ways” to lower labor costs, he says. The CAW’s stance on profit sharing comes at a time when GM and Ford are enjoying record income and Chrysler has returned to profitability more quickly than anticipated.

The CAW also seeks an updated benefits program, which Lewenza says has not been addressed since 2005, as well as the all-important new-product investments such as those the UAW won last year.

Lewenza, CAW president since 2008, expects the union and auto makers to pause their negotiations briefly next week as the CAW brings its 24,000 Detroit Three members together for an annual constitutional convention in Toronto.

But he adds, the sides already have been talking for about a month now, so contact will continue. “We’ve been shadow-boxing the last four weeks, now we are in the ring.”

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