Canadian Auto Workers Union Setting Themselves Up For Extinction

This week marks the beginning of serious negotiations between the Canadian Autoworkers Union (CAW) and the domestic* manufacturers Ford, GM, and Chrysler-Fiat. Unlike the UAW, which agreed to a series of concessions during the automotive bail-out, the CAW has been able to maintain roughly the same type of rules that the UAW used to have prior to 2009. Specifically:

• CAW workers are all paid the same wage; UAW workers are on a two wage tier system where newer workers make less than older workers
• CAW workers do not have any profit sharing; UAW workers rely upon profit sharing bonuses

These two mechanisms – two tier wages and profit sharing – are essential to the success of the UAW and the automakers they work for. Yet for some reason, the Canadian autoworkers don’t feel that they need to follow the same set of rules that the American autoworkers follow. If the CAW doesn’t concede, the risk is that automakers will simply abandon Canadian production in the next decade or so…and the CAW will cease to exist.

*I say “domestic” only because that’s what these manufacturers are commonly known as. In truth, they build a substantial portion of their vehicles, powertrains, etc. in Mexico.

Canada Most Expensive Place to Build a Car In the World

GM CEO Dan Akerson was recently quoted as saying that Canada is “the most expensive place to build a car in the world right now,” and here’s why.

1. The CAW never agreed to the concessions that the UAW agreed to in 2009, which means that the average Canadian autoworker earns more per hour than the average American autoworker.
2. The Canadian dollar (known as the loonie) is stronger than ever compared to the US dollar. In years past, the loonie traded at $0.75-$0.80 on the US dollar, meaning that Canadian workers cost as much as 20% less than US workers. Today, however, the Canadian dollar and the US dollar are about even.

The bottom line here is that Canadian autoworkers cost $61 to $79 per hour, depending on what math you choose to believe. US autoworkers cost $50 – $58 per hour, and most auto manufacturers want to hold that cost. NOTE: Toyota’s autoworkers in the USA cost $55-$57 an hour.

Unions Illustrate the Danger of a Mob Mentality

While the exact cost figures given above are open to debate and interpretation, it doesn’t take a rocket scientist to figure out that CAW members earn more than UAW members…CAW workers never agreed to cuts that the UAW had to accept to prop up GM and Chrysler.

Yet somehow, CAW workers refuse to accept the fact that they’re not cost competitive. CAW leader Ken Lewenza has said that he won’t make any cost concessions – he’s been quoted as saying “We’re not at all open to profit sharing…and surely to God, we’re not taking a wage reduction.” While this is admittedly a bit of posturing, it’s unlikely Lewenza is able to convince CAW members to make concessions. After all, GM, Ford, and Chrysler-Fiat are all profitable – workers believe that these companies can afford to pay them. As a result, workers are unlikely to approve any agreement that includes concessions.

Of course, there’s a difference between being able to afford something and choosing to afford something. Ford can “afford” to pay CAW workers a higher wage, but they may choose not to. Ford (and GM and Chrysler-Fiat) can simply close their plants in Canada and move those production jobs to the USA…and the CAW really can’t do anything to stop them. In years past, CAW and UAW workers have threatened strikes to try and prevent plant closures, but that won’t work this time around. None of the vehicles or components built in Canada by Ford, GM, or Chrysler-Fiat are critical – the CAW can strike for months without dramatically hurting these manufacturers.

Thus, the CAW is between a rock and a hard place. Members see automakers as greedy corporations who “owe” them wages. Automakers see Canada as an expensive place to do business. If the CAW isn’t careful, they’re going to negotiate themselves right out of a job.