Auto bailout demands tie union’s hands

Public opinion gives government leverage with conditions: Lawyer
By Shannon Klie
|Canadian HR Reporter|Last Updated: 02/05/2009

The federal government’s demands that General Motors and Chrysler slash labour costs in Canada to levels that match the United States in order to access a $4-billion bailout fund will affect the Canadian Auto Workers’ (CAW) ability to negotiate with employers, says the union’s president.

“We see this as an attack on the labour movement, an opportunity for them to weaken our ability to defend the interests of our members,” said Ken Lewenza.

Ottawa and Ontario announced the bailout in December after the automakers said they would most likely go bankrupt without government help. But before the automakers see a penny of the bailout money, they’ll have to submit a plan to slash labour costs, first to match the costs of unionized autoworkers south of the border and eventually those of Japanese car makers operating in North America, said federal Industry Minister Tony Clement. And they only have until Feb. 20 to do so.

To bring compensation in line with that of Japanese automakers, Canadian unionized autoworkers could see wage and benefits cuts of $15 to $20 per hour, or roughly a 25-per-cent reduction, according to some analysts.

While these demands are meant to make GM and Chrysler competitive with other non-unionized auto manufacturers, the government has ignored the CAW’s assertions that GM and Chrysler in Canada are in fact competitive on the global stage, said Lewenza.

Unionized plants in Canada are the most productive in the world and workers’ compensation is on par with the compensation Japanese autoworkers receive in Japan and German autoworkers receive in Germany, he said.

“We’re very, very competitive,” he said. “We don’t know why we’re being unfairly targeted when our cost is only seven per cent of the total (production) cost.”

Clement has told various media outlets he isn’t demanding specific concessions from the union and it is up to the companies and the union to negotiate an agreement.

“But if it’s a condition of the loan, then he’s dictating it,” said Lewenza.

However, because the government isn’t forcing the automakers or the union to accept the bailout and its attached conditions, Ottawa’s demands aren’t tantamount to interference in collective bargaining, said David Cote, a Toronto-based labour lawyer with Cote and Company.

“I don’t think it will have a whit of an effect on how collective bargaining works between management and labour in the auto sector,” he said. “There’s no obligation on the part of the government to provide this bailout. The government gets to impose whatever conditions it wants to impose.”

If public opinion was on the side of organized labour on this issue, then the government would be more circumspect in the conditions it chose, said Cote. But the public, for the most part, thinks unionized workers have a pretty good deal and can afford to make concessions if they want to keep their jobs.

The union’s biggest obstacle is no one cares about the argument that cutting workers’ wages will hurt the economy even more or that a small reduction in the price of a car thanks to a labour-cost reduction won’t increase car sales, said Cote.

“I don’t think the public cares and I think the government doesn’t care,” he said. “The union doesn’t have any leverage.”

But if the union gives in on wage concessions, the bailout conditions won’t prevent the CAW from coming back in the next round of contract negotiations and asking to make up what it lost, said Cote.

Ottawa’s demands follow Washington’s demands that Chrysler and GM in the U.S. cut labour and production costs in order to access a $17-billion US bailout.

But that same government pumped $700 billion US into an aid package for the financial services sector without any conditions on the salaries or remuneration of employees, and the Canadian government did similarly with a $25-billion takeover of bank-held mortgages, said Ken Georgetti, president of the Canadian Labour Congress.

“I find it outrageous,” he said. “I don’t think Mr. Clement understands the idiosyncrasies of the auto industry and I’m sure from his comments he doesn’t understand that every automaker in the world is suffering right now.”

Mazda and Mitsubishi have each applied for a subsidy from the Japanese government to cover 40 per cent of workers’ wages on days when the plants suspend operations. Last month the government loosened its criteria for the subsidy to help more firms weather the recession.

And all the talk about autoworkers potentially having to take a wage cut or face layoffs is the quickest way to make them stop spending money, said Georgetti.

“It’s counter-productive to what the government is supposed to be doing in this budget,” he said. “The immediate challenge is to get the domestic economies going again. How do you do that? By putting money in people’s pockets who are going to spend it and removing consumer insecurities so that people who do have money will start to spend it.”