The head of the Canadian Auto Workers union says it has made no progress in talks with the Big 3 automakers as the countdown continues to a strike.
“Here we are three-and-a-half weeks of intense meetings and the companies are taking the same position they did from day one,” CAW president Ken Lewenza said Friday afternoon during a break in marathon talks.
He said General Motors, Ford and Chrysler have dug in and are not backing down on their proposals to reduce fixed costs.
Demands include eliminating cost-of-living allowances, requiring employees to make contributions to the defined benefit pension and a new hire rate that never progresses to the top level.
Lewenza said the automakers have responded unfavourably to the union’s latest offer that proposed some concessions particularly in conditions for newly hired workers in a bid to win some guaranteed investments in Canada.
“Where we have shown some flexibility, they’ve been very, very stringent on their positions.”
He said the union isn’t going after GM and Ford’s record profits or Chrysler’s almost miracle turnaround.
“All we’re saying is that we want some modest improvements.”
The union is gearing up for a strike at 11:59 p.m. on Monday but Lewenza said the deadline can be extended if it sees progress in the final few days of talks.
“If it’s five to 12 on Sept. 17th and we see light at the end of the tunnel then we’ll just keep going until the deal is done. But there would have to be a mega-shift in responses from the companies for that to happen.”
Debt rating agency Moody’s said Friday that even a short strike could be “painful” and hurt the country’s weak economic growth for months to come.
“Even a one-week walkout could jeopardize Canada’s increasingly listless growth, shaving 0.25 percentage point from September GDP while disrupting North American supply chains and retail spending into the fourth quarter,” Moody’s Analytics senior economist Mark Hopkins.
Automakers are seeking to reduce labour costs because health-care costs are rising and the strong Canadian dollar is eroding competitiveness.
In June, General Motors announced it would shut down its consolidated plant in Oshawa, Ont., next year, a move that will eliminate 2,000 direct jobs. The planned closure comes as the big automaker restarts production at the former Saturn assembly plant in Spring Hill, Tenn.
Moody’s said the auto industry is one of “the few bright lights on the Canadian manufacturing landscape.”
Transportation equipment accounted for more than three-quarters of the growth in Canadian manufacturing in the 12 months through June. The resurgence of the Big 3 has helped drive a sharp acceleration in Ontario manufacturing, more than offsetting the slowing pace of shipments from Quebec and British Columbia, Hopkins wrote in a report.
“Improving auto sales in the U.S. have also been a key component of demand growth for Canada’s largest trading partner. Stalling this momentum, even temporarily, would be costly.”
Meanwhile, debt rating agency DBRS said it believes a strike won’t likely be long or have a significantly harmful effect on General Motors or Ford.
DBRS said the risk of a strike is “manageable” even though it will have some impact on the automakers’ U.S. operations because of the inter-relationship between the operations on both sides of the border.
“We don’t expect a prolonged strike and even if the strike were to commence, the impact on the company and consequently the effect on the rating is not that material,” managing director Kam Hon said during a conference call after it raised the ratings of the two companies.
The ratings agency upgraded the ratings of both General Motors and Ford to BBB (low) from BB (high) due to their improved profitability, strong financial positions and strengthening North American operations.
DBRS said the U.S. automakers are mainly profitable because of past concessions from hourly workers, but abandoning efforts to reduce the $15 per hour cost differential between the Canadian and U.S. operations would make them uncompetitive with offshore rivals, especially from Japan and Korea.
In a message to its members at Ford, GM and Chrysler, the CAW said it is determined to resist these demands and negotiate a fair settlement that reflects the best interest of our members.”
The union has warned that it may target more than one of the U.S. automakers if negotiations fall through.
University of Windsor professor Tony Faria said the impact of a strike would be much greater on Chrysler, which derives about a quarter of its production from Canada. All of its minivans are made in Windsor, along with several key sedans and vehicles.
“Chrysler is looking at razor thin profits. They’ve got good prospects for this year and next year but the only way their profits are actually going to materialize is they have to be producing vehicles,” he said in an interview.
Faria said Chrysler CEO Sergio Marchionne is a tough negotiator, but he can’t afford a shutdown.
“Chrysler is only now getting into a profitable situation so this is a bad, bad time for Chrysler to be shut down.”