TORONTO (CP) -- Chrysler is already considering where it could move its Canadian operations if it can't get a deal with the Canadian Auto Workers union by the end of the month, sources familiar with the automaker's plans said Tuesday.
A source said Chrysler has begun to consider "alternative locations with more competitive cost structures" for its Canadian operations, which employ about 10,000 hourly workers at assembly plants in Brampton, Ont., and Windsor, Ont., and a casting plant in Toronto.
"There is very real and significant risk to good paying automotive jobs in Canada, at least as it stands for Chrysler, if in fact (the CAW) continues to hold onto this 1930s vestige of economic pattern bargaining," said the source.
Chrysler Canada has said it needs to cut its labor costs by approximately $20 an hour to be competitive with foreign automakers such as Toyota.
"We are hopeful that our discussions with the CAW will achieve the objective of closing the CAW labor cost gap -- and ensure our long-term viability," the company said in a statement emailed to The Canadian Press.
"As a contingency measure, however, we are evaluating alternative solutions in the event these discussions are unsuccessful. Chrysler has an 84-year history in Canada, and we look forward to continuing to build and sell great products here."
The company estimates its all-in hourly labor costs -- which include wages, benefits and legacy costs such as pensions -- to be approximately $76. To be competitive with Toyota plants operating in Canada, it says it needs to reduce those costs to $57 an hour.
Chrysler president Tom LaSorda told a parliamentary subcommittee last week that the company may not be able to continue operating in Canada if it can't reduce its labor costs enough to be competitive.
Tony Faria, co-director of the automotive research centre at the University of Windsor, said that Chrysler could move its minivan production from Windsor to a plant in St. Louis that produced minivans until it was mothballed last year.
And the company could move production of the Chrysler 300 sedan and Dodge Charger and Challenger muscle cars, built in Brampton, to plants in Michigan or Mexico that produce similar-sized cars.
However, Faria said the process of terminating all Canadian employees and mothballing its plants would prove a "costly undertaking" for the company, particularly if it factors in the number of Canadian consumers who will boycott Chrysler products if it does pull out of the country.
"It's not an unreasonable threat that Chrysler is making because they can do what they say they might do, but it's something I do not believe they in any way want to do," Faria said.
CAW president Ken Lewenza said last week there is no way the union will give more to Chrysler than it gave to General Motors Canada in negotiations earlier this month.
On Tuesday, he said the union is engaged in a "constructive dialogue" with Chrysler and dismissed what he called "destructive innuendo."
"Chrysler's claim that CAW labor costs are $20 per hour too high is utterly false, and is not justified even by their own internal data," Lewenza stated.
He added that Canada has been a "bright light" for Chrysler.
"Our labour costs are very attractive, and we have committed to keeping them that way. Our productivity is superior, the company's president just confirmed that it has been highly profitable in Canada, our governments are ready to help, and our consumers love Chrysler products," he said.
The union's collective agreement with Chrysler expires in September 2011 and bars the closure of any Canadian facilities until then, the CAW added.
Chrysler estimates the agreement with GM, which was ratified by CAW members last week, cuts that company's labor costs by approximately $7 an hour -- an amount LaSorda characterized as "unacceptable."
The source said Chrysler Canada believes it can achieve its cost reduction goals without cutting base wages. Instead, the company will look at cutting benefits such as paid time off, unemployment assistance and overtime premiums.
When CAW benefits are compared to those of the United Auto Workers in the United States, there is plenty of wiggle room, the source said.
For example, CAW employees receive a maximum of six weeks vacation time, while UAW employees only receive five, and CAW workers also receive substantially more break time per shift than their American counterparts.
The source said Chrysler would also consider moving to a two-tier wage structure like that used at its plants in the United States, cutting benefits for retirees and possibly developing a union-administered benefits trust, as well as scrapping other benefits like the company's tuition assistance plan for dependants.
Chrysler Canada must submit a finalized restructuring plan, including a new labor contract, to the federal and Ontario governments by the end of March in order to receive the roughly US$2.3 billion in aid it has requested.
The company has said that if it can't reach an agreement with the CAW it won't receive government aid, thus forcing it to close its Canadian operations.