Canadian auto industry faces existential threat as talks begin
The Canadian auto industry is facing its biggest existential threat since the 2009 crisis, with the future of at least three plants at risk as autoworkers gear up to begin labour negotiations this week.
Unifor, which represents more than 6,000 Canadian autoworkers, will open talks with General Motors of Canada on Wednesday and with Ford Motor Co. of Canada and Fiat Chrysler Automobiles (FCA) Canada on Thursday. The existing contracts expire on Sept. 19 and the union is already talking openly about the possibility of a strike.
In some ways, this round of talks is even more critical — and contentious — than the 2009 negotiations that accompanied the government bailouts of GM and Chrysler, said Jerry Dias, national president of Unifor.
“During the ’08-’09 crisis, we were debating about keeping the companies alive on both sides of the border ... there wasn’t a fear at the time of them choosing some operations over another,” Dias said in an interview. “The challenges today are much different. The challenges today are profitable companies making global decisions that, candidly, don’t include Canada.”
Canada’s auto production has already fallen to 889,000 in 2015 from a high of 1.63 million vehicles in 1999, according to the International Organization of Motor Vehicle Manufacturers. That puts it in 15th place globally, down from eighth place in 1999.
The operations with the murkiest future are GM’s two plants in Oshawa, Ont. The company plans to shut down one plant in 2017 after an existing mandate to build the popular Chevrolet Equinox crossover expires. The other plant, meanwhile, has no product slated for it beyond 2019 and is currently running on only two shifts. (A plant running at full capacity has three shifts.)
“A solution (to Oshawa) needs to be based on optimizing capacity,” said a GM Canada executive who asked not to be named because of the sensitive nature of the negotiations. “It’s in all our interests to do that, but you need to have a competitive business case to get there.”
Dias said he’s prepared to “force” GM to invest in Oshawa and will call for a strike if necessary.
“I’m convinced that they have no interest in investing, therefore to sign an agreement without forcing it would be irresponsible,” Dias said. “I’m convinced that if we do not secure Oshawa in this set of negotiations, we’re going to have a closure.”
Unifor is also worried about the future of Ford’s engine plant in Windsor, Ont., which had hoped to build the company’s next-generation 1.4-litre and 1.5-litre engines but lost out to a plant in Mexico last year.
Slightly less urgent but no less important is FCA’s plant in Brampton, Ont., which needs to upgrade its aging paint shop.
It’s not just investments that Unifor is looking for — wages hikes and a faster track to the top pay grade are also on the table, Dias said.
“Our members haven’t had a pay increase in 10 years and they deserve one,” he said, adding that he’d also like to see changes to the wage scale that currently takes a decade for workers to reach the top.
However, workers are unlikely to get everything they want, said Kristin Dziczek, director of the industry, labour and economics group at the Center for Automotive Research in Ann Arbor, Michigan
“The car companies start out with a target cost of the agreement that they’re trying to reach and then there’s horse-trading within that,” she said.
There are many other factors besides labour costs that go into an automaker’s investment decisions.
An executive at GM Canada said he’s been in touch with the Ontario and federal governments about a variety of concerns, including electricity costs, environmental regulations, international trade agreements and government support.
“We look at the union negotiations as a first hurdle in making our business case, but the business case would also require us to address a number of macroeconomic factors, public-policy factors, supply-base issues ... to be able to make a final decision (on Oshawa),” the executive said.
An executive at Ford Canada who spoke on background echoed many of the same concerns and said its Canadian plants have to be able to compete globally.
“Often there’s a temptation just to compare ourselves to the States, but we should be comparing ourselves to China, India, Mexico — all the global players,” he said.
Ray Tanguay, a former chairman of Toyota Canada who is now automotive adviser to the federal and Ontario governments, said the various stakeholders are working hard to make the case that Canada is a good place to invest.
However, he cautioned workers against pricing themselves out of the market.
“We have to make sure we don’t go for the big (wage) increase, make sure we don’t start to pass on the liabilities to employees,” Tanguay said in an interview.