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Get your popcorn ready

Outcome of fight between GM, CAW over pensions could dictate the future of DB plans in Canada

By Todd Humber

General Motors Canada is the latest company to ditch the much maligned defined benefit (DB) pension scheme.

In a memo to its salaried, non-unionized workforce, the Oshawa, Ont.-based automaker announced it would be switching them to a defined contribution (DC) plan as of Jan. 1, 2013, according to the Toronto Star.

The move by GM to set aside the salaried workers’ DB plan sets the stage for a doozey of a showdown with the Canadian Auto Workers (CAW) union as they head into talks this fall with the Detroit Three. Ford and Chrysler undoubtedly have their popcorn ready.

So does the public sector, both government and unions alike. If the Detroit Three is successful in killing the DB plan for CAW members, it could be the first in a long line of dominoes that take down DB plans across the country. But that’s a very big “if.”

DB membership declining

Membership in DB plans is on the decline. Between 2009 and 2010 alone, the number of Canadians covered by DB plans shrunk by one per cent to about 4.5 million while membership in DC plans rose, according to the most recent data available from Statistics Canada.

DB pension plans are as expensive for employers as they are prized by workers. DB plans guarantee workers a pension for as long as they live — they’re the gold standard of coverage. But their negative impact on the books has spurred many organizations to convert to DC plans — where a worker invests money, often matched by the employer, and draws on that pool of cash in retirement.

DC plans shift all the risk off the employer and onto employees. If markets perform well, employees could potentially reap a windfall. But if markets underperform, employees could be disappointed with their nest eggs and be forced to work longer than planned.

CAW ‘not going down that road’

GM couldn’t legitimately ask hourly workers to abandon a prized benefit the company’s white-collar workers enjoyed. By proactively killing it, it took some wind out of the union’s argument — but not much, judging by the CAW’s posturing.

The union knows DB pensions are in the crosshairs. But listen to Chris Buckley, chair of the CAW’s GM bargaining committee, who summed up the union’s position on pensions in six words: “We’re not going down that road.”

Concessions aren’t on the menu for the tough talking union at a time when the black ink is flowing again for automakers. On the other side of the table, GM has little appetite for the status quo. Dan Akerson, GM’s chairman, described Canada as “the most expensive place to build a car in the world right now.”

CAW, CEP merger

This is all expected, a typical part of the posturing stage of negotiations. But know this: This year, more than any other, the CAW wants to flex its muscle. It needs to — it’s on the verge of forming a megaunion via a merger with the Communications, Energy and Papersworkers (CEP) Union of Canada.

It wants to transform the working landscape in Canada, and start growing the numbers of unionized workers across the country, reaching into sectors and organizations that typically haven’t been ripe for organizing.

It wants to be seen as strong, it needs a win to show working Canadians union membership has its privileges.

If GM is able to scrap DB pensions for unionized workers in that environment, it’s not difficult to imagine other “untouchable” plans will follow in its wake.

Todd Humber is the managing editor of Canadian HR Reporter, the national journal of human resource management. He can be reached at todd.humber@thomsonreuters.com.

© Copyright Canadian HR Reporter, Thomson Reuters Canada Limited. All rights reserved.

Todd Humber

Todd Humber is the publisher and editor-in-chief of Canadian HR Reporter, the national journal of human resource management. Follow him on Twitter @ToddHumber
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