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And then there were two?

What Chrysler’s departure would mean for the Canadian auto industry


 

090313_chryslerChrysler’s threat this week to close its plants in Canada if it doesn’t win big union concessions is one of the most dramatic moves yet in the ongoing auto industry meltdown. In the words of one auto union official, it was like adding gasoline to a fire.

Chrysler president Tom LaSorda said the company needs to lower its labour costs by about 25 per cent, to $55 an hour from an estimated $75 an hour. He also said the company needs US$2.3 billion in government money if it’s to keep building cars in Canada.

On the surface, LaSorda’s demands appeared to be the kind of posturing that’s expected in such critical negotiations. Chrysler’s fate, after all, is hanging in the balance. But industry analysts say the threat is very real—the company could shift Canadian production to plants in the U.S. in a matter of months. And while the auto industry would likely survive such a move, the impacts would be severe and cause painful disruptions right through the entire industry.Chrysler directly employs almost 10,000 people in Canada. When you add in parts suppliers, dealerships and distribution centres, the number could be as high as 40,000 people, says Tony Faria, an auto industry expert with the University of Windsor. A Chrysler pull-out would likely force some parts companies to close entirely, he adds. Since suppliers usually sell parts to more than one auto maker, it would throw a wrench into this highly integrated supply chain, sending other car makers scrambling to find parts, and possibly bringing production lines to a grinding halt.

The impact would be most painful in places like Windsor, where 4,000 people are employed at Chrysler’s minivan plant.  Those jobs could not be replaced. “Windsor would be devastated for a long period of time,” says Faria. It could “turn into another Flint,” he adds, referring to the hard-hit auto town north of Detroit. The same would be true in Brampton, where 3,000 people are employed at a Chrysler plant.

But in the long run, Chrysler’s departure might not be the worst thing to happen to an industry that has desperately been trying to downsize and rebuild market share. “Some would build the argument that it would help G.M. and Ford,” says industry analyst Dennis DesRosiers. Pulling out of Canada would be a public relations nightmare for Chrysler, obliterating its market share here, adds DesRosiers. He’s already heard from one dealer who’s had hundreds of orders canceled just based on Chrysler’s threats. Over time, “other car companies could pick up the slack left behind by Chrysler,” notes Faria.

Chrysler’s threat caught many in the industry by surprise. Not only would shutting operations in Canada be a drastic move, it would be a costly endeavour. Its Windsor plant, for instance, is highly rated, and was deemed a better mini-van plant than the one in St. Louis, MO, that Chrysler decided to close last year. The U.S. plant would have to be reopened if Chrysler moved out of Windsor. Shifting those production lines would also cost it time and millions of dollars.

But that won’t stop Chrysler from following through on its threats. “You can be highly critical of how they delivered the message,” says DesRosiers, “but the message is absolutely, 100 per cent real.”


 

And then there were two?

  1. In the words of one auto union official, it was like adding gasoline to a fire.
    Interesting choice of words, when in reality the Big Three are burning money right now and we can’t seem to shovel money at the blaze fast enough.
    Quote from above:
    And while the auto industry would likely survive such a move[Chrysler pulling out of Canada], the impacts would be severe and cause painful disruptions right through the entire industry.
    Because it would be better to keep tens of thousands of people employed building stuff nobody’s buying? The entire industry is not in trouble if Chrysler closes shop. The entire industry is in trouble, and that might make Chrysler smart enough to close shop. Unless we are dumb enough to throw money away at it.

  2. Although at first blush the threat kinda made me shudder, it may actually be a catalyst to improve Ontarios auto industry at a faster pace and hopefully mitigate further bailouts in the province to GM and Ford. We lose the (in my estimation) lowest quality manufacturer , and the Chrysler brand would take its biggest blow – speeding their demise I have felt was coming for the last few years. With them losing out on the productivity of their Ontario plants, beneifts of parts suppliers here, access to the market and in time the benefits our government will inevitably get back to doling out ( research grants, loans, innovation funds and the like) we will speed up the slow death of Chrysler. Not to mention the catastrophic hit their already weak image would take as a company of strength that can honour warranties and carry out research for high quality designs. This news of Chrysler leaving would be big across North America, and the mild hurrays of protectionist America’s would quickly fade to private thoughts of never buying from a weak Chrylser. Also, the bargaining position of the automakers would be strengthened as the unions would know and never forget the loss of 10,000+ jobs down the road when GM hopefully keeps optimising its business plan, but more signifiantly we will reduce competition for the more viable car makers out there. I like competition as much as the next guy but in this market with way too many makes and models, we can spare Chrysler and their threats to bail out their incompetent butts or else. The auto industry correction would be a little quicker and although still painful, like removing a bandage – we just need to get over with it as fast as we can.

    Its too bad for the many thousands that will be greatly “disrupted” by job loss- to say the least, but I think Chrylser is in a desperate situation and will carry through with thier threats if we dont cough up. I say let them go die their death a little speedier in Missouri. And let us concentrate on GM and Ford who seem a smidge smarter, save our money while necessarily waking up peoples eyes to the need to retrain and refocus on the jobs Canada will need to create in the 21st century. Theres not enough room for a “big” 3 anymore, only a terrible 2.

  3. Do not throw money at the auto industry. They creared their own problems.
    They build throw away cars, sort of built in obsolences at high prices.
    Let them reorganize, improve the quality to the point where they can compete with foreign made cars.
    Labor will accept the terms what these companies pay to their workers. If they dont, let them find some other line of work.

  4. Is it just me or is it completely absurd that auto workers get paid $75/hour?
    Nurses and don’t get paid that much, especially not in provinces other than Alberta or Ontario!! And they save lives and you know, make our teeth nicer.

    Personally I don’t see how someone with often no university of even college education can be making that much money when well-educated people and who contribute a lot more to society make that much money! And they want OUR tax dollars to bail them out? I would rather give money to students!

    • That would be $34 an hour for Chrysler assemblers. $75 is the industrial version of an urban myth. The reason that a lot of people quit these “$75” jobs is that the repetitive nature of the work tends to destroy the body and the mind.

    • Auto workers DON’T get paid 75.00 bucks an hour! Not even close to that. Has anyone ever stopped and thought maybe it is time that the big CEO’s of the big three automakers should take a pay cut??? What do they really do? Sit and demand and throw threats around that they will crush city’s in Ontario leaving 9200 people out of a job? When you think of it, it is not just 9200 people out of a job it is doubled that or tripled that number when you stop and think how many families are affected with the closures. These men and woman earn a living doing a boring job that is physically demanding, and mentally draining, they do the same thing over and over again for 8 hours a day. I am surprised more people on the line don’t go postal!

      • Actually, they do make 75.00 bucks an hour. That’s total compension, including benefits and pension contributions from the company (workers contribute nothing toward pension.) I was an autowoker for 13 years before being let go. that was a year and a half ago. Nothing I did, either working in the foundry or on the assembly line was too much for me to handle with that paycheque. Heck, the work I do now is pretty much the same but half the wage. I moved to another province to find work. I think too many autoworkers are afraid to leave to find work. They hang on to the fantasy that it will get better soon. They are being fattened for the day of slaughter. The union should be up front with them. Lewenza is tough talking now, but he’ll change his tune in a couple of weeks. Just watch.

  5. McGuinty is waiting on a pitch and won’t swing at the Tommy LaSorda fastball. The fact that he can’t see it is another issue.

    American business should leave Ontario. Do they not read the Toronto Star? Do they not realize that the Ontario education system is anti-choice? Do they not realize that Canadian anti-Americanism has reached vile levels? Do they not realize that the N.D.P. wants protectionist walls and a physical wall bigger and higher than the Berlin wall, in order to separate our two nations. Do they not realize that union Sid Ryan is trying his best to incite an Israeli/Palistinian conflict in downtown Toronto?

    Chrysler should give the CAW, Jack Layton, Linda McQuaig, Haroon Siddiqui, Sid Ryan exactly what they deserve.

  6. These foreign companies need to be kicked out of the country. GM is trying to extort 7 billion out of us to maintain 7 thousand jobs. (Do the math, that’s 1 million per job)

    And Chrysler is so arrogant to think that their statements amount to threats rather then pleas for mercy.

    Let them go. They are no longer Too Big to Fail. They are too big to save. Toyota and Nissan, amongst others, are more then capable of building quality cars for Canadians. They are no more or less foreign then GM, Ford, & Chrysler.

  7. It is not as simple as saying let an industry fail. Most of the country hears about how much auto workers get paid, and they are envious. Rightfully so. As Nancy stated it is a physically demanding job, tedious, repetative. Not all of the jobs are as hard as others. Most of the issues lie with ergonomics. Doing the same unnatural motion hundreds of times. Mental stress is a huge issue. 1000,s of bored people all in the same place and things can get very nasty. People will say suck it up, I will say try it first , it takes a toll on your humanity. So for most ,the conditions for one reason or another are barely tolerable. Where am I going with this you may wonder. AUTO WORKERS ARE PAID TO BE BORED AND MISERABLE AND TO SHUT UP ABOUT IT. Plain and simple the job sucks at any wage, to get off line you will see the nicest person turn into a backstabbing, butt-kisser. He/She aren’t bad people they are probably trying to save their marriage by getting a promotion and better hours or straight days. Just like any other job. Society up until recently demanded 16-17 million cars a year be built for them to devour. It takes a lot of people to make those cars. Done more efficiently less people would be required, still it is a very distasteful job so you have to pay people more to do it. How much , why whatever the market will bear of course same as everything else. You are the dumbasses spending a hundred thousand on an SUV. So there you have it a bit of insight into autoworking. Letting seven thousand jobs just disappear, lets look at that. different studies state the average auto working position supports between 7-10 peripheral jobs. I don’t trust studies so lets low-ball it to 5 jobs. Well asp thats now 35000 jobs Gone Forever. Some of those jobs will be at parts plants. As you have all heard the parts industry is all integrated. So if one supplier goes under because only two or one other clients will not be profitable, more jobs lost. This affects the whole industry causing delays and downtime at plants. Now some of the other suppliers who are hurting, are now told that lines will be shut down due to this supplier, so we do not need your product for a while. They go under. Big ripple effect, goes on and on. Canada has never demanded enough Canadianism in our vehicle industry. Who cares about Canadian content. How about a Canadian car. The car is the most technologically advanced mass produced item on the planet. So far it is the pinnacle of our industrial achievement. For what we do in this country we might as well make very expensive toaster ovens. We don`t design, we produce thats it. Same catagory as Mexico, or Turkey. For the short term something must be done to stem the bloodloss from this industry, Because it has the potential to seriously harm the economy (as we are seeing. as we will see). If Canada wants to be in the car game, then we should be more than a country cousin. As it stands we will pay blackmail money to another country`s industrial behemoth, to save Canadian jobs because we now have no choice. If all the auto workers lost their high paying, community supporting jobs what would happpen.There are probably, 35-40 thousand direct jobs. So X5= a medium city in Canada, just disappeared from the workforce. Most of them are the main income so a couple of hundred thousand families are now messed up. They are broke and not buying the product your company makes or sells. I no longer work in the auto industry.

  8. Toyota and Honda make the same money and benefits and pensions as the CAW workers. Even the CEO of Toyota Canada made note of that and I heard it on CTV power play with Tom Clark this week. In the States some Toyota plants have 24 hour daycare and onsite pharmacies. The only difference is the BIG 3 have more legacy costs because the company has been in Canada 100 years and has an older work force. Toyota hardly has any retirees. But Honda is retiring about 100 a month now, so eventually they could have a problem too. The public needs to be aware of this, because they are only getting half the story and lots of myths about the Auto Industry.

  9. Who gives anyone the right to describe LaSorda’s statement as a threat. ? Since when is a fact a threat?

  10. Lewenza’s statement isn’t a threat anyway. Lewenza didn’t give any specific “carrot” measures in his “threat” (i.e. he didn’t guarantee that for a benefit cut of $20 per hour and 3 billion from the feds, he’d keep production levels the same in Canada

    I believe this means that he doesn’t intend to keep production in Canada anyway; the company has to become a lot more compact and lean to survive. And that means re-trenching to the U.S., instead of dealing with two countries with two different but similar accounting systems, tax structures, labour regulations, etc.

    So Chrysler’s statement about asking for $20 an hour from the union and $3 bil from the feds isn’t about keeping Chrysler in Canada, it’s about keeping the market share in Canada. When the s**t goes down and Chrysler leaves Canada, Lasorda will be able to say: “See, it’s those greedy union pigs and the cheapskates in Ottawa and Queen’s Park who didn’t pony up. It’s not our fault!”

  11. Good Riddance! let the bums go, I’d rather spend the money on well fare then keep propping up bad business.

  12. Never mind union concessions, the Stock Research Portal says – Canadian governments will loan money to Chrysler only “if Chrysler Canada’s parent company gives ironclad guarantees that Canadian assembly plants going forward will remain open and continue to produce the same share of Chrysler vehicles that the Chrysler Canada assembly plants historically have produced.” Via Stock Research Portal (http://www.stockresearchportal.com/)

  13. i have been a dodge owner for many years if they poll out of canada i would not buy chyslers cars any more

  14. Auto works don’t make that much take home. What the $75 dollars an hour means is the cost for benefits, vacations, overtime, loa’s etc – those amount to about $75 an hour. So I agree, they could lower some of their benefits, but without really drastically changing their hourly wage. If you think cars cost a lot now, imagine them being made in another country! When Canadians have to buy a car where parts are shipped in from out of the country, they would become a luxury for the rich! The best way to help our economy is to make sure the jobs stay in Canada. And maybe they should get rid of LaSorda and hire someone that will work for half the wage. All management should be lowering their wage the same percentage they lower workers wages, or even more. You can run a company on far less management with no bonuses, but the company needs workers first, or they have no company. Support the Canadian auto industry or you will pay far more for an automobile….I’ve never been able to afford a brand new car…but it will never be if my choices include high shipping costs, cheap labour standards (causing poor operation standards for that new vehicle) and extra taxing. One last comment – government should stop the practice of multiple taxing on used items, including cars – we pay taxes each time it is purchased even though used. The tax has already been paid by the first purchaser. That would save consumers (encouraging buying) and support “recycling” which helps the environment. Go green, clean and Canadian.

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