GM closure of Oshawa plant signals tough labour talks to come

GM Canada’s decision to go ahead with a plant closing in Oshawa signals tough talks lie ahead for the Canadian Auto Workers as the union heads into bargaining with all three big U.S. auto makers this year, experts predict.

Despite a rapid recovery in vehicles sales south of the border – where most of Canada’s auto exports end up – the CAW will be under the gun to match lower costs in the U.S., experts said.

“I don’t envy their job at all,” said Kristin Dziczek, a labour expert with the non-profit Center for Automotive Research in Ann Arbor, Mich.

With the Canadian dollar at or above par with the U.S., the auto makers will also be looking for incentives from government to keep production in Canada, Dziczek predicted.

“We are going to see some really interesting negotiations in Canada. They’re extremely important to the future of the auto industry in Ontario. The companies are going to have to have contracts they’re happy with or we will see no Detroit Three investment in Canada period,” said Tony Faria, an auto industry expert with the University of Windsor.

GM Canada confirmed Friday it will wind down one of its last two lines in Oshawa, starting as early as this fall. The line employs 2,000 people, nearly half the company’s Oshawa workforce, though it’s too early to say how many will be affected.

“Some employees may elect to retire and others will be on indefinite layoff,” the auto maker said in a statement. As well, some production will move to the remaining Flex line.

The announcement, though widely anticipated, drew swift and sharp responses from politicians and union leaders.

“These are thousands of jobs we are talking about and it’s going to be devastating,” said federal opposition leader Thomas Mulcair, who called on Ottawa to intervene.

The federal minister of transport, infrastructure and communities rejected that.

“That’s private business, it’s always difficult for families,” said Denis Lebel, Minister of Transport, Infrastructure and Communities after speaking to delegates at the Federation of Canadian Municipalities. “We supported very well the automobile industry in the past and we will continue to do so but we can’t manage the companies instead of the managers of the companies.”

Canadian and Ontario taxpayers provided $10.5 billion in 2009 in a historic bailout of the auto industry, which was on the verge of collapse following the U.S. financial crisis a year earlier. Including concessions from workers, the Canadian rescue package came to $14.4 billion.

Ontario Premier Dalton McGuinty said he was disappointed but the bad news was “not unexpected,” noting the plant had originally been scheduled to close in 2008.

He said the government would work with GM “if there is any way at all possible” to extend the plant’s lifespan.

He also expressed optimism about the industry’s future, noting job growth and “billions of dollars” in new investments by auto makers.

“I think the longer term prospects are still very promising,” McGuinty, adding the average age of the car in the United States is more than 11 years, indicating there’s pent-up replacement demand.

The union representing the Canadian workers said Friday’s announcement will complicate upcoming collective bargaining for new contracts with GM, Ford and Chrysler. The contracts expire Sept. 17.

Calling the decision “short-sighted” and a “betrayal” of concessions the workers gave during the financial crisis in 2009, CAW national president Ken Lewenza said the union would be pressing GM for new product commitments for the plant.

“We made sacrifices. We’re part of the turnaround. Now these companies are going to make incredible profits,” Lewenza said in a telephone interview.

While wage costs may be slightly higher in Canada, Lewenza said the company also earns more profit from its sales in Canada because of the higher dollar.

The U.S. auto industry has started to recover, and in some plants is at capacity, raising the prospect it may re-open shut plants at some point in future.

But the question is where?

After receiving huge U.S. taxpayer bailouts, auto executives are sensitive to expectations they turn a profit, said Dave Cole, chairman emeritus of the Center for Automotive Research. “GM in particular would like to get rid of the stigma of being Government Motors,” Cole said.

Last year, the CAW’s counterpart in the U.S., the United Auto Workers agreed to link pay raises to company performance. Instead of fixed wage increases, the union accepted signing bonuses and profit-sharing incentives, concessions the CAW has unequivocally rejected.

Windsor university’s Faria predicts the Detroit Three will be looking for the same deal in Canada.

Oshawa’s consolidated line, considered by the GM to be outmoded, builds the current model Chevrolet Impala, an Oshawa mainstay and one of the most popular family cars in the U.S. The same plant handles overflow work on the popular Chevy Equinox crossover.

Since last August, GM has announced two new investments in the newer Flex line in Oshawa. However, it has also announced plans to move some production to the U.S.

Production of the new Chevy Impala, for example, will be shared with the Detroit-Hamtramck plant, while some Equinox production will move for the first tie outside Canada to a re-opened U.S. plant.

GM’s Canadian workforce has shrunk by half since 2005 to 10,000 people in the wake of its U.S. bankruptcy filing two years ago.

Original Article
Source: the star
Author: Dana Flavelle