Strength in sector may allow CAW to reject UAW concessions accepted last year in U.S.
A study suggesting there will be capacity shortages at the Big Three automakers within the next few years comes as no surprise to Jim Stanford, an economist with the Canadian Auto Workers (CAW) union, but it does boost the union as it heads into contract talks this summer.
“There’s been a consistent trend in this direction,” he says. “Auto sales are rebounding and they’re stronger than expected.”
The study was done by the Center for Automotive Research in Ann Arbor, Mich., for the Canadian government.
While the study has not been released publicly, it apparently suggests capacity will be an issue at Chrysler, Ford and General Motors by 2018, making it difficult for them to close more Canadian plants and putting pressure on policy makers for investments and subsidies.
The increased demand is driven by the market in the United States, where auto sales have plummeted over the past few years and are suddenly spiking again, Stanford says.
Global vehicle sales rose six per cent year-over-year from March 2011 to 2012, with car and light sales in the U.S. increasing by 13 per cent during that same period, according to Scotiabank’s April 2012 Global Auto Report.
“There’s a pent up demand,” Stanford says. “People have been driving vehicles for longer than they would normally. We’re still not back to where we were, but we’re well ahead of where we thought we would be when they laid out the restructuring plans (in 2009).”
All of this puts the CAW in a “strengthened” position for collective bargaining, according to Pradeep Kumar, an expert in collective bargaining and the auto industry at Queen’s University in Kingston, Ont.
“They’ll be in a better position to be rejecting some of the concessions they’ve been asked to make,” he says, referring specifically to the two-tier wage system accepted by the United Auto Workers in the U.S. which was predicted to have a ripple effect north of the border.
Tight capacity should also put a damper on talk of wage cuts, Kumar says. In January, Chrysler Group CEO Sergio Marchionne told reporters at the Detroit Auto Show that “the Canadian system needs to be as competitive as the American side.”
“I don’t think they can afford to be too strict about that at the bargaining table, especially Chrysler which has seen the most benefit from this increased demand,” Kumar says, noting none of the auto-makers will be able to afford a work stoppage in such a competitive environment.
The auto boom could even lead to the re-opening of several plants, including the GM truck plant in Oshawa, Ont., says Kumar.
“The truck plant was highly productive,” he says. “GM may want to negotiate some kind of investment subsidy to get it running again.”
Where the new capacity will come from will be a key issue, Stanford says. New shifts can be — and already have been — added at several plants, but there will be a need for new infrastructure, he says.
“In 2009, the auto-makers dramatically reduced and built new business plans based on a modest level of sales,” he says, adding that re-tooling closed plants could be expensive and, in some cases, a non-option. The Ford plant in St. Thomas, Ont., for example, is already being sold off.
For Canada to benefit from this anticipated demand now and in the future, the federal government needs to implement a national auto policy, Stanford says.
The CAW unveiled a 10-point strategy last month, which includes policies such as negotiating Canadian manufacturing footprint commitments that would base targeted incentives on the percentage of manufacturing done in this country.
The proposed national auto policy also calls for strategies such as investing in skills training and reducing the value of the Canadian dollar.
The Canadian government needs a targeted plan for attracting auto manufacturing business, like the capacity coming up for grabs now, Stanford says.
“For too long, it has said we shouldn’t pick ‘winners’, that we should just create a business friendly environment and hope for the best,” he says. “Well, that hasn’t worked. With a $1- to $3-billion dollar industry making a minimum 30-year commitment, you can’t sit back and hope tax cuts will do it. You have to be in like a dirty shirt.”The CAW plans to meet the MPs from auto industry ridings in June.