We all have painful memories of the 2008-09 financial crisis. The auto industry was on the brink of collapse but Canadian autoworkers did their part, and then some, to help the automakers survive and recover. Now all three – GM, Ford, and Chrysler – are profitable, especially their North American divisions. They’re also doing very well in Canada: both in manufacturing and retail sales.
The Canadian Auto Workers (CAW) union expects an incredibly difficult round of bargaining with the three companies. My core message to them is simple: Workers made sacrifices to help the automakers survive. They deserve to share in the benefits of the recovery.
Production costs do appear to be much higher than they were, but that’s solely attributable to an over-valued dollar (driven 25% above its fair value by oil prices and financial speculators). And Canadian autoworkers are not the “most expensive in the world,” as auto executives and spin-doctors claim, although they appear to be because of the financial markets and federal government policies that have reinforced Canada’s evolution into a petro-exporter, while downplaying manufacturing. In fact, real compensation (relative to Canadian consumer prices) is now lower. Moreover, real costs (again, relative to domestic prices) are lower than those in the US and other advanced auto-exporting countries (including Japan and Germany). And CAW labour costs are just 5% of the total cost of an automobile.
Even with an overvalued dollar, all-in active hourly costs are not much higher than those in the US. Across the three companies, autoworkers average less than 5% more. That’s not a significant gap – especially considering Canadian plants, on average, are more productive.
It’s worth noting that when the loonie was low in the 1990s and all-in labour costs were up to $20 per hour lower than in the US, not a single Big Three plant was relocated to Canada. Our real compensation still tracked the UAW rate, even though the loonie made us appear to be much cheaper.
On the retail side, companies are helped by the strong loonie. They charge Canadians more for the same products – even cars made in Canada. Yet they have the nerve to complain Canadian workers are “more expensive” even as they claim this premium from consumers.
Canada is a good place for auto companies to invest. Productivity, infrastructure, the quality of the workforce and public health care all help to offset the strong currency. But the companies also have a responsibility to maintain their manufacturing footprints here and to give something back to the country that’s contributing so much to their profits.
Yet the three companies are threatening the future job security of CAW members, unless their demands for more concessions are accepted. How will the union deal with this issue during the 2012 contract talks?
Canada needs a strong auto policy to protect the industry: the union can’t defend the whole sector at the bargaining table single-handed. It’s not possible, based on past rounds of bargaining, to win iron-clad guarantees of new investment. Only governments can do that, which is why the CAW launched a major auto policy campaign in the spring featuring a 50-page policy paper, “Rethinking Canada’s Auto Industry” with its 10-point program for strengthening the industry well into the future.
Notably, the CAW wants the government to extend its manufacturing footprint agreements with GM and Chrysler. These agreements were crucial to maintain Canada’s share of North American production through the crisis, but they expire at the end of 2016. We also think the government should negotiate similar provisions with other OEMs (including Ford).
The CAW will be walking a tightrope at the bargaining table. We’ll find a way for Canadian workers to share in the companies’ success, and we’ll do whatever we can to secure future investments and job security. The level of the dollar and overall cost issues will be relevant factors in the bargaining process. But there’s no possibility these very profitable companies will get more concessions from the workers who have already given so much to help them survive.
Ken Lewenza is the president of the Canadian Auto Workers Union, which represents 225,000 workers across the country in 17 different sectors of the economy. Download Re-thinking Canada’s Auto Industry at www.rethinktheeconomy.ca.