Bloomberg News

Ford Said to Try to Narrow Canada-U.S. Union-Labor Gap

July 18, 2012

Ford Motor Co. (F:US), entering contract talks with the Canadian Auto Workers union, will try to close a $15 an hour all-in labor cost gap versus what the company pays its U.S. workers, according to a senior company official.

Ford pays $79 an hour for wages and benefits to its hourly workers in the country, said the official, who asked not to be identified because negotiations with the union are private. That labor rate is the highest Ford faces worldwide and compares with $64 an hour in the U.S., the person said. Ford has about 4,500 hourly workers at three vehicle and engine-making plants in Canada, Kerri Stoakley, a spokeswoman, said in an e-mail.

Ford, General Motors Co. and Chrysler Group LLC will begin negotiations with the CAW next month after reaching accords last year with the United Auto Workers that included profit-sharing checks instead of raises or cost-of-living pay increases. Ford’s agreement helped pave the way for the company to resume paying a dividend and reclaim investment-grade credit ratings.

Canada’s auto industry has been confronted by a 52 percent increase in the Canadian dollar against its U.S. counterpart in the past 10 years that has made the nation’s factories less competitive globally. The CAW proposed a national auto policy in April that included a call for the government to intervene to lower the value of its currency and to negotiate “manufacturing footprint commitments” with automakers.

Labor costs calculated by Ford include base wages worth $34 an hour in Canada, compared with $28 an hour for senior workers in the U.S., as well as pensions, some retiree provisions and other benefits, the person said yesterday.

CAW Disputes

The CAW disputes Ford’s estimates, saying much of the gap relates to former employees. Without those so-called legacy costs, union labor runs a little more than C$62 ($61.23) an hour, compared with about C$60 for UAW members, according to Jim Stanford, the union’s economist.

“This claim that we are completely out of the ballpark on costs is absolutely wrong,” he said yesterday in a telephone interview. “Ford is making great money in Canada. They are the sales leader in Canada.”

Canada will probably lose new-vehicle assembly work to lower-cost Mexico through the next decade, according to industry researcher R.L. Polk & Co. The country’s share of North American car and light-truck assembly may slip to 12.6 percent in 2017 and 12.1 percent in 2022, from 15.8 percent this year, Polk said in a July 9 report on its website.

Strong Currency

“Many Canadian automotive plants in operation were constructed at a time when exchange rates made Canada a lower- cost alternative to the U.S.,” said Anthony Pratt, an analyst at Southfield, Michigan-based Polk. “Now that the Canadian dollar value is nearly on par with the U.S. dollar, Canadian labor costs are relatively high.”

The CAW, based in Toronto, has resisted the givebacks that the Detroit-based UAW union has provided. The UAW agreed in 2007 to a two-tier wage system with U.S. automakers that paid new workers about half the hourly rate of senior laborers. The union negotiated raises for those new members last year.

Ken Lewenza, president of the CAW, last year called such a system “divisive” and said he won’t support a similar arrangement in Canada.

Ford retrenched last year to one assembly plant in Canada, the Oakville, Ontario, factory that makes the Ford Edge and Flex and Lincoln MKX and MKT. The company in September closed its St. Thomas, Ontario, facility that made the Ford Crown Victoria police cruiser and Lincoln Town Car sedan.

While the automaker’s website also lists 1,540 employees at two casting factories, the one in Windsor ended operations five years ago.

GM Closure

GM said June 1 that it plans to shut its consolidated assembly line in Oshawa, Ontario, in June 2013, which will lead to the loss of 2,000 jobs, according to the CAW.

The CAW’s Lewenza called GM’s decision to close its consolidated line in Oshawa “ill thought-out” and “a betrayal of the tremendous work and sacrifices by our members that went into keeping General Motors afloat in 2008-2009, when the company was on the verge of bankruptcy.”

Canada and Ontario provided a combined C$13.7 billion to the rescues of GM and Chrysler and retained ownership stakes in both companies to protect an estimated 52,000 jobs, according to the country’s 2012 budget plan. Canada holds about 140 million shares, or 9 percent (GM:US), of GM’s common stock. The country exited its Chrysler investment in July 2011.

Pressure Mounting

“While labor peace is important for the automakers given the current uptick in sales, the pressure is mounting for the CAW to accept some concessions in order to prevent further closures,” the Conference Board of Canada said in a report issued June 27.

Car and light-truck sales in Canada climbed 7.1 percent in the first six months of the year, according to data compiled by DesRosiers Automotive Consultants Inc. Dealers in Canada sold about 864,900 vehicles from January through June, up from about 807,800 in the same period a year earlier.

Industry sales in the U.S., Canada’s biggest export market, are on pace to rise by at least 10 percent for three straight years for the first time since 1973, according to researcher Autodata Corp. Deliveries climbed 15 percent to 7.27 million this year through June, said Autodata, which is based in Woodcliff Lake, New Jersey.

Oshawa’s Loss

GM will move production of its Chevrolet Equinox sport- utility vehicle from its Oshawa plant to a former Saturn plant in Spring Hill, Tennessee, which is set to reopen later this year. The automaker reopened the Spring Hill factory after the UAW agreed to staff the plant with workers making wages of about $14 an hour, less than half the wage paid at the Oshawa plant, according to the Conference Board of Canada.

GM said Dec. 16 it will continue to assemble its Chevrolet Impala sedan at its Oshawa, Ontario, complex, investing C$68 million and securing 350 jobs. The automaker announced in May that Impala output would be added to its Detroit-Hamtramck plant, which also produces the Chevrolet Volt plug-in hybrid car, next year.

To contact the reporters on this story: Craig Trudell in Southfield, Michigan at ctrudell1@bloomberg.net; Frederic Tomesco in Montreal at tomesco@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net


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    (General Motors Co)
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