CAW Reaches Contract Agreement with GM and Chrysler

The Canadian Auto Workers (CAW) union has reached tentative agreements with both Chrysler and General Motors (GM), according to numerous reports yesterday. Both companies participated in separate marathon sessions throughout the night to reach agreements early in the day, with GM announcing its contract first. Details are still incomplete about many of the specific economic items in the new tentative agreements, but both are thought to largely follow along the lines of the Ford agreement reached last week (see Canada: 29 April 2008: Ford and CAW Agree to Framework for New Three-Year Contract). All automakers will reportedly freeze wages at current levels for the duration of the contract instead of the reduction in wages that many had sought, while workers will see marked increases in out-of-pocket costs for supplemental healthcare and prescription drug benefits.

Both Chrysler and GM provided significant concessions to the union as well. As part of the new agreement, GM will reportedly:

• Maintain a second shift at its Oshawa (Ontario) plant, instituting rotating layoffs instead of eliminating 900 jobs from the plant.
• Add a second rear-wheel-drive sedan model to the Camaro coupé at Oshawa.
• Provide buyout packages for 1,200 workers slated to lose their jobs when GM closes its Windsor (Ontario) transmission plant in 2010.
• Consider Oshawa Truck as the lead plant for producing GM's next-generation full-size pick-up trucks in 2011.

Chrysler will reportedly:

• Maintain three shifts at its Windsor minivan plant, concentrating production there, contingent upon demand for the products.
• Produce the next-generation rear-wheel-drive Chrysler 300 sedan at the Brampton (Ontario) plant, using two shifts.
• Keep a 350-person Toronto-area casting plant open until 2011 that had been targeted for closure, while also looking for a buyer or joint venture partner for the facility.

"We've stemmed the tide of layoffs hopefully," CAW president Buzz Hargrove told reporters after striking the first deal with GM, as reported by the Globe and Mail. "These are trying and challenging times," he added.

Outlook and Implications

The outcome of the contract negotiations between the CAW and the Detroit Three automakers is fascinating, and indeed completely different from what all analysts had expected. Instead of a contentious summer of strikes and negotiations, a relatively calm couple of weeks of talks has resulted in a new contract that can be called an almost unqualified victory for the union. One of the biggest rules of contract negotiations from a union standpoint is never give up what you have already achieved; Buzz Hargrove and the CAW can confidently state that they have secured the wages and benefits of the union for the next three years, the duration of the new contract. The automakers appear to have capitulated on a widespread scale; instead of the transformational approach that GM was expecting, known from the releases it had made prior to the negotiations in which it said that it was seeking wage and benefit reductions to make the CAW competitive with the best-practice Japanese plants in the United States, all three automakers instead rolled over and largely preserved the status quo. While the workers may see increasing costs due to a lack of a cost-of-living increase, higher out of pocket expenses for prescription drugs, and a reduced paid holiday allowance, the contract that has been tentatively agreed to with the Detroit Three will largely preserve the union as it is today for the next three years.

But looking closer at the contract and the plans that the Detroit Three have going forward for the next three years, the deal that the CAW has struck with the automakers looks ominously short-sighted on the union's part. When the contract comes up for renewal in 2011, the North American auto market and U.S. manufacturing are likely to look dramatically different. The North American market is shifting towards smaller, more fuel-efficient cars and trucks; those are products the Detroit Three do not make in Canada. With the latest contract, all of the Detroit Three have committed to continuing to make their big, rear-wheel-drive, V8-powered vehicles in Canada until 2011. Ford agreed to keep the St Thomas plant open an extra year to make the Town Car, Crown Victoria, and Grand Marquis. GM will continue to pump out big V8 pick-ups and rear-drive sedans and coupés from Oshawa. Chrysler will produce its next 300 at Brampton. But due to corporate average fuel economy (CAFE) standards and more importantly, changing consumer tastes, the volumes for these vehicles are likely to continue to keep decreasing from now until 2011, and many of them are likely endangered species beyond that.

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