CAW: Big 3 Focus On Labor Concessions Futile

Canadian union's president says labor concessions would not make 'measurable difference,' amounting to less than $500 per new car.

MONTREAL (CP) - The Canadian Auto Workers union will stand firm against a growing clamour for labour concessions, which will do nothing to save the ailing North American auto industry, CAW president Buzz Hargrove said Monday.
''Labor concessions won't make any measurable difference to the financial future of North American auto producers,'' he said in a speech to the JP Morgan automotive investment conference in Detroit.
Even if the Big Three got everything they are asking for from American unions, they would reduce the average production cost of a vehicle sold in North America by only $500, Hargrove said.
That's equal to less than two percent of the average selling price of a new car in the U.S. and one-sixth of the sales incentives being offered.
Although negotiations between the United Auto Workers and the Big Three have begun, Canadian talks aren't slated to get underway until 2008. That will be Hargrove's last round of negotiations before his retirement in 2009.
''I can tell you, as clearly as I can, that my swan song will not involve turning my back on that principled tradition that has served the CAW, and Canadian workers in general, so well since 1985,'' he told the analysts. ''We have drawn a line in the sand against concessions for over 20 years. We're not going to erase it now.''
Hargrove also criticized Canada's Conservative government for failing to develop an automotive policy and blamed much of the industry's woes on the artificial suppression of the Japanese foreign exchange rate.
But business professor Peter Morici said Hargrove's bravado notwithstanding, Canadian workers won't have much choice but to follow the lead established during negotiations by their American brothers.
''Hargrove has very little to say about what is going to happen,'' the professor at University of Maryland's Robert H. Smith School of Business said in an interview. ''Because whatever the UAW settles on, Hargrove will have to follow or the plants will leave Canada.''
The professor said wage concessions are just one part of the puzzle to reduce the US$3,000 cost disadvantage the Big Three has with Toyota and other imports.
''All these issues are significant but none by themselves will solve the problem.''
A ''transformational contract'' also involves legacy health-care costs and the actual higher cost of U.S. workers, work rules, vacation time, 30-year retirement fund and restrictions on suppliers.
''The system is endemically broken,'' Morici insisted. ''You have a better chance of building a quality car inside the Canadian postal service than you do right now inside all of these restrictions in the contract.''
But Hargrove dismissed all the naysayers who have in the past portrayed his group as a bankrupt union that was going to bankrupt the automotive companies.
He said the union's tough stand against concessions has forced employers, governments and others to address the true problems.
Hargrove spoke with industry financial analysts as Bob Nardelli, Chrysler's new CEO, outlined the newly private company's efforts to return to profitability.
Nardelli and his new No. 2, Tom LaSorda, spoke by phone with Hargrove earlier Monday.
They said they assured Hargrove that LaSorda will retain the authority and responsibility he previously had as DaimlerChrysler CEO to guide union negotiations.
''That's the story line and we'll work with the CAW,'' LaSorda told reporters in a conference call from Detroit.
Chrysler has announced plans to cut 13,000 jobs in the United States and Canada by 2009 after losing US$618 million in 2006 and $1.98 billion before interest and taxes in the first quarter of this year.
He noted that Chrysler recently announced it is devoting three shifts each in Brampton and Windsor, Ont., to assemble the LX products and minivan respectively.
''They're fully utilized up in Canada. So they're in pretty good shape right now.''
Nardelli denied that the company's transformational plan is focused on shedding company jobs through subcontracting.
''It's not a strategy of outsourcing,'' he said, noting the pair spent two hours in discussion with the UAW's Ron Gettlefinger. ''It's a strategy about being globally competitive and making the right decisions about whether it's design, it's manufacturability, location to manufacturability and the extent to which we make capital allocations to invest in those various production plants.''
On Friday, DaimlerChrysler transferred an 80.1 percent stake in Chrysler to New York-based Cerberus, one of the world's largest private equity companies, in a $7.4 billion deal. The German automaker, which is to be renamed Daimler AG, retained a 19.9 percent interest in Chrysler.
Morici criticized Nardelli's appointment as the wrong man for the job. He said the former Home Depot lacks the background to create more desirable vehicles and a better supply chain. And he is hardly a poster boy for corporate diplomacy given his $210-million golden parachute and leadership style.
''It's a distraction and it will reap nothing but trouble.''
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