TORONTO – The Canadian Auto Workers union has reached a tentative labour agreement with General Motors of Canada Ltd. that calls for a freeze on wages and pensions as part of the automaker’s restructuring, the union said Sunday.
The deal came three days after the country’s biggest industrial union began talks with GM in a bid to help the automaker cut costs and remain competitive with U.S. plants to secure future car and parts assembly work in Canada.
The proposed agreement, which would run to September 2012, suspends quarterly cost-of-living adjustments for wages and scraps annual increases to pensions, among other things.
“These changes represent a major sacrifice by our active members and retirees,” said CAW President Ken Lewenza.
“They will reduce active hourly labour costs by several dollars per hour, reinforcing Canada’s investment advantage relative to U.S. facilities.”
The automaker called the agreement “a positive further step” in its restructuring plan, which it submitted to Ottawa and the Ontario government Feb. 20.
“We compliment the CAW for their leadership to share sacrifices in these extremely challenging economic times,” the company said in a statement.
Along with urging consumers to start buying vehicles again, the union used the announcement to call on governments to confirm financial-assistance packages for the industry.
“Pick up the phone this afternoon, call your MP, tell them that we did our part as one of the stakeholders in the industry,” Lewenza said.
“They should be expediting a resolve to the terms and conditions of the loan (so) we can get the black cloud hanging over the heads of auto workers and the Canadian economy moving forward.”
About 10,000 union members who work at GM plants across Ontario will hold ratification votes Tuesday and Wednesday.
The CAW entered the talks with the automaker’s Detroit-parent facing the very real prospect of having to seek bankruptcy protection in the United States and Canada.
The move reflects the dire straits of the North American auto industry, which is going through its worst period since the Great Depression.
Sales have plunged, plants closed and massive layoffs have been implemented amid a global recession, changing consumer trends, and a credit crunch that makes financing a car purchase tougher.
GM Canada is eligible for loans of up to $3 billion under a government aid package. It submitted a restructuring plan last month.
The Canadian and Ontario governments have attached conditions to the money, including that the companies get their labour costs down.
The union had said it was willing to help the company cut costs.
The CAW will now try to negotiate similar deals with Chrysler Canada and Ford Canada.
GM and Chrysler have until March 31 to finalize restructuring plans to get access to Canadian government financial aid.
Ford, which is much shape than its rivals, has not asked for government assistance.
Last week, GM Canada’s parent, General Motors Corp. (NYSE:GM) reported that auditors had raised “substantial doubt” about its ability to survive.
Also, Chrysler said it would eliminate the third shift at its minivan plant in Windsor, Ont., costing 1,200 jobs – the last auto-assembly plant in Canada to employ a third shift.
U.S. Steel, which counts the auto industry among its most important customers, also announced last week it was shutting down its Hamilton operations and most of its Lake Erie Steel operations, costing 1,500 jobs.
GM’s unionized members work at an assembly complex in Oshawa, Ont., the company’s Canadian headquarters, and parts plants in St. Catharines and Windsor in southern Ontario.
The company’s average blue-collar employee makes $34 an hour.
There is widespread disagreement about the true hourly cost of a CAW employee to the Detroit Three automakers.
Some analysts argue their all-in cost, including benefits, wages and pensions, is substantially higher than their counterparts in the U.S., while the CAW says it’s lower, particularly when the productivity of Canadian plants and the exchange rate are factored in.
Last spring, the union signed a three-year deal with the Detroit Three carmakers in Canada, which imposed a wage freeze that provided GM, Ford and Chrysler $900 million in concessions.
GM Canada has said it was in discussions with the federal and Ontario governments and the CAW about setting up a health-care plan similar to a union-owned and directed system for GM workers in the United States.
On Feb. 17, GM submitted a restructuring plan to the U.S. Treasury Department that included laying off 47,000 workers worldwide by the end of the year.
About 4,000 cuts will be in Canada over the next year – 2,600 at a truck plant in Oshawa that will shut down this spring, and about 1,400 when a transmission plant in Windsor closes next year.
The company, which has fallen to third place in Canadian auto sales after decades as leader, has cut about half its workforce over the last four years.
Going into the GM talks, Lewenza said it was impossible to guarantee jobs in the current climate but wanted the automaker to maintain its proportional manufacturing footprint in Canada – about 20 per cent of its U.S. manufacturing capacity.