Monday, January 26, 2009

Auto productivity gives Canada an edge

As negotiations for concessions start at reeling General Motors and Chrysler, the Canadian Auto Workers says workers at assembly plants here hold a labour cost edge over their union and non-union counterparts in the United States.

In efforts to debunk public impressions that workers will need to slash pay because of a big labour cost gap before the automakers can obtain government loans, the CAW says better productivity here gives Canadian workers a strong overall advantage over competing non-unionized employees at foreign-based automakers in the U.S.

That should limit demands for major concessions here, union leaders argue.

The CAW, which represents some 20,000 workers at GM and Chrysler in Canada, says its members earn an average of $67 an hour in wages and benefits That translates into about $53 (U.S.) an hour because of a falling Canadian currency during the last six months.

Hourly wages and benefits at unionized assembly plants in the U.S. are about $60, while labour costs are $49 at non-unionized plants of Japanese, Korean and German-based automakers in the U.S.

But a senior CAW official says an internal study released today shows Canadian workers have a significant edge in productivity that gives them an overall labour cost advantage compared with their counterparts at unionized and non-unionized U.S. plants.

CAW economist Jim Stanford said higher productivity here translates to the equivalent of a $5-an-hour edge over unionized assembly operations in the U.S. and $16 at non-union plants south of the border.

"Overall, it costs less to assemble a vehicle in terms of labour expenses in a CAW plant than it does at a non-unionized transplant in the U.S.," said Stanford, who is also a strategist for the national union.

The CAW's position contrasts sharply with the view of some industry watchers that labour costs at GM and Chrysler here are $15 to $25 an hour higher than non-unionized foreign-based producers in the U.S.

Those figures do not include the productivity factor.

The U.S. government wants the United Auto Workers members to take big pay cuts at GM and Chrysler in the U.S. before the automakers qualify for up to $17.4 billion in financial aid so they are more competitive with their Japanese-based rivals.

The two Detroit-based automakers are also asking for reductions in CAW members' wages and benefits that would make plants more competitive here so they can get up to $4 billion in loans from the federal and Ontario governments.

CAW president Ken Lewenza has said the union would be "part of any solution" to keep GM and Chrysler alive in Canada. But he also rejected reports about a large labour cost gap with other automakers.

He said in an interview that the automakers on both sides of the border have not identified "benchmark" wage and benefit rates from their competitors that they would use in negotiations for any concessions.

Union officials met with GM of Canada last week, but Lewenza said there was little talk about how much the company is seeking in concessions.

"We're just in a holding pattern right now," he said.

The two sides are waiting for a clearer indication from the U.S. government about what cost cuts it is seeking, including worker concessions, he said.

In his report on productivity, Stanford said average labour productivity is more than 11 per cent higher in Canadian plants compared with the U.S., and about 35 per cent better than operations in Mexico.

Unionized assembly plants in Canada are more productive than non-union operations, according to the report.

Stanford noted that high productivity has as much of an impact on competitiveness as hourly labour expenses and will provide an edge for Canada in the industry's restructuring.

"Part of our goal with this study is to remind decision makers and the public that cost competitiveness depends just as much on production as it does on wages," he said.

Meanwhile, TD Economics released another gloomy outlook for the North American auto industry. The bank predicted a 28-per-cent plunge in auto production this year, which will put more pressure on reeling suppliers.

Several analysts have forecast double-digit declines in sales and output in North America in 2009, but few industry watchers have estimated declines that high.

TD economist Dina Cover noted that while General Motors and Chrysler will get billions of dollars in loans from governments on both sides of the border, "the risk of bankruptcy has far from been eliminated."

TD expects a modest recovery in sales in 2010, but business will remain at a "depressed level" of 11 million vehicles in North America, down from 15 million to 16 million annually in recent years. Cover also said Detroit-based automakers will shrink in Canada and that will mean fewer parts suppliers, too.