Canadian Auto Workers To Gm: Outsource This, Eh?

Canada's auto workers, furious with GM, are set to walk out

Just a few months ago, the 1,300 unionized workers at General Motors Corp.'s trim plant in Windsor, Ont., were feeling good. GM of Canada had reported a record $1 billion 1995 profit, and the plant had just received a glowing write-up for quality in GM Today, an in-house magazine. But with the ink barely dry, GM in April suddenly said it would sell the plant, reasoning that it could obtain the seats and door panels for Cadillacs and some Chevrolets made there more cheaply from outside suppliers.

The move now has become a rallying cry for the Canadian Auto Workers, as the union gears up for a fight with GM. The likelihood of a U.S. walkout by the United Auto Workers, the CAW's former parent, has diminished in recent weeks, particularly after GM popped a surprise contract offer on Sept. 10. Yet the possibility of a costly strike looms large in Canada, where the CAW has set a Sept. 17 strike deadline at Chrysler. "The people of Canada may not go to war to keep Quebec," thunders CAW President Basil "Buzz" Hargrove, "but they'll go to war with GM to keep their jobs."

Hargrove's union, which broke away from the UAW a decade ago, is playing out a script that once seemed likely to happen in the U.S. Hargrove wound up targeting Chrysler Corp. after the UAW focused on Ford and GM. Still, Chrysler has had good labor relations in Canada: It has hired more than 2,000 workers there since 1993 and has no stated plans to outsource work. The CAW hopes to get guarantees of current employment levels, knowing full well that its GM members may have to strike to get similar terms.

The Canadian union's demands are sure to inflame GM. Hargrove wants the Big Three to agree to talk with the union before doing any outsourcing. In good times, the union would approve outsourcing only if a company simultaneously created an equal number of new jobs in the same region. Hargrove admits this would be "a major intrusion into what has historically been management's rights." His toughest demand: GM must reverse decisions to outsource some 5,500 of its 26,000 Canadian jobs.

So far, GM is holding firm. "We require continued flexibility to improve the competitiveness of our operations," says Dean W. Munger, vice-president for personnel at GM of Canada. Warns Dennis DesRosiers, a Toronto automotive consultant: "GM can't agree to what Buzz wants" and reduce its cost disadvantage.

Not agreeing could be costly for GM, too. The Canadian dollar is worth just 73% of the U.S. dollar. And Canada's national health system saves the company about $750 per vehicle in workers' health-care costs. All told, Detroit spends as much as $10 an hour less than its $43-an-hour average U.S. labor bill by manufacturing in Canada. Today, a record 16% of the industry's North American production is done in Canada.

"WE ARE READY." Clearly, a Canadian walkout at any of the Big Three would hit profits. It also would ripple south as supplies of key parts used in U.S. plants dried up. Most at risk: GM, which would lose production of some of its best-selling vehicles--including one-third of its pickup trucks--plus key components used in U.S. plants. Within two weeks, GM could lose "hundreds of millions" in foregone profits, says University of Michigan labor economist Sean McAlinden.

Given the stakes, most experts expect Chrysler to come to terms with the CAW soon. While a short walkout is possible, the company has room to grant workers a pay hike, analysts say, because the CAW, unlike the U.S. union, never agreed to profit-sharing. It's far harder to envision an easy solution at GM. Hargrove's members seem to be spoiling for a fight. "If [a strike] is what it takes, we are ready," says Don Whalen, chairperson of the CAW's local at Oshawa, Ont. The union has a $36 million strike fund, plus a line of credit for an equal amount. That's enough to pay strike benefits at GM for about 16 weeks. To ration funds, Hargrove says he may try a selective strike, starting with a few plants and then escalating.

GM's Munger says he's "confident" that a strike can be avoided in Canada, and GM could buy peace by trading away some Canadian cost advantage. But with the CAW talking war, the concessions will have to be colossal to head off a bruising fight.

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