By on July 18, 2012

Contracts talks between the Canadian Auto Workers and the Detroit 3 won’t start before August. But combattants are already lobbing grenades across the border. Ford of Canada told Reuters that Canada is now the most expensive place in the world to make cars.

“Right now, labor costs are higher in Canada than at any other Ford operation in the world,” Ford Canada spokeswoman Lauren More declared vis-à-vis Reuters. “When it comes to future investment, labor costs are one of the most important considerations. The 2012 agreement has the potential to either improve or erode Canada’s labor cost competitive position.”

Tough talk, and it is likely to get tougher. The parties have no common ground. Carmakers want lower cost. Unions want a share of the big profits that have been announced.

Said Ken Lewenza, president of the CAW:

“I think talks are going to be incredibly tough.  The companies are being strong in their public comments. We are being equally strong.”

Including benefits, the CAW’s total average labor cost in U.S. dollars is about $60 an hour, says Reuters.  “That compares with $58 for U.S. workers at Ford, $56 for General Motors and about $52 at Chrysler.”

A lot of this is created by the strong Canadian dollar. Production in Canada looked like a bargain when, a few years ago, the buck bought a loonie and 30. Now as the CAD is on the march towards parity with the greenback, that calculation doesn’t look so good.

 

Get the latest TTAC e-Newsletter!

51 Comments on “Ooops, Canada: Detroit 3 Say Production In Canada Way Too Expensive...”


  • avatar
    Volt 230

    So either take less money and benefits, or they will move So of the Border instead, low wages no benefits more than willing to take them jobs.

    • 0 avatar
      psarhjinian

      And have the same jobs move north again if/when the dollar weakens? Okay, sure, let’s abet the race to the bottom.

      • 0 avatar
        bikegoesbaa

        How is this “race to the bottom” distinct from “the *cost* of labor changing to more closely reflect the actual *value* of labor”?

        It seems like those might be two different ways of describing the same thing.

    • 0 avatar
      charly

      There is a third option. The problem with Canada is not wage or benefits but the exchange rate of the Canadian dollar. Getting the exchange rate lower is not that difficult. Just find a way to get less dollars to flow to Canada in a way that doesn’t cost to much jobs. My suggestion would be to kill the Albertan economy

  • avatar
    jjster6

    “Now as the CAD is on the march towards parity with the greenback…”

    Check your exchange rates Schmitt. Whille not worth more than the US dollar at this moment, in the past couple of years the Canadian dollar has spent a lot of time worth more than the US dollar!!!

    • 0 avatar

      “Check your exchange rates Schmitt.”

      We don’t know each other and haven’t broken bread together. Uncivilized behavior can trigger eviction.

      • 0 avatar
        Steve65

        You’re threatening to ban him for a perfectly legitimate point, couched in perfectly civil language, and addressed directly to the author?

        How much ass-kissing is required to safely mention an editorial error?

      • 0 avatar
        MeaCulpa

        Sehr geehrter Herr Schmitt

        The only thing that was remotely uncourteous with the quoted part of the post was the omission of a title or titles before your surname and, perhaps, some preceding niceties. Calling such an omission Uncivilized seems – in my humble opinion – a bit harsh, not to mention threatening – albeit in veiled terms – with expulsion from this fine site. Holding your posters, even though it is your prerogative to do that, to such a high standard of courteous behavior in informal writing can be construed as somewhat archaic and might even be misconstrued as an aversion to criticism of your fine writing.

        Mit vorzüglicher Hochachtung
        MeaCulpa

      • 0 avatar
        geo

        It’s fair for writers, bloggers, and journalists to demand respect from guests who are passing through their page. If a stranger came to my home or workplace and addressed me like that, I’d be a little pissed as well. It’s their home, and we should remember that we’re the guests.

      • 0 avatar

        Continued uncivilized behavior DID trigger a few choice evictions.

    • 0 avatar
      challenger2012

      I believe if you used his first name, Bertel, rather than Schmitt, your sentence would sound less crude or if you used Mr. Schmitt to address him. We can disagree, but it is how we do so as civilized men that makes this a forum rather than a Mud Slinging contest.

    • 0 avatar
      geo

      It’s fair for writers, bloggers, and journalists to demand respect from guests who are passing through their page. If a stranger came to my home or workplace and addressed me like that, I’d be a little pissed as well. It’s their home, and we should remember that we’re the guests.

      • 0 avatar
        mik101

        Is there an echo in here? You don’t need to post the same thing 4 minutes apart.

        At the same time, I believe you are wrong. We are not his guests, we are the ones that pay his bills. Without the ad revenue from visitors surely the site would cease to exist. While it’s one thing to want to be respected, the original post said nothing defamitory or offensive to Bertel. Schmitt is his last name. Exactly, his name. If not calling someone Mr. is worthy of banning then I think some people need to get real lives away from the internet…

      • 0 avatar
        geo

        I meant to delete the other post, which was posted in the wrong area, but I couldn’t. But thanks for the important tip.

        In the comment, Bertel’s last name was used in a slightly condescending tone. Yes, perhaps the response was too extreme and he probably should have let it slide, but the tone of the comment irked him enough to express it.

        As for your “paying customer” point: if you are a shop owner, you reserve the right to tell people to take a hike, if you feel they are talking down to you in the slightest, especially on the wrong day. They don’t have the birthright to be in your space, even if they pay the bills. Try going to a small mechanic shop, address the owner, whom you don’t know, by his last name only, and tell him he should really update his mechanical knowledge. You won’t be there long, even if you explain to him that you used his real last name, and that you said nothing defamatory. Again, this is their personal space and livelihood. You’re a guest.

  • avatar
    geeber

    I thought national health care was supposed to make Canada a better place to build vehicles…? Guess not.

    • 0 avatar
      mike978

      What has it got to do with healthcare. Bertel’s point about the exchange rate is correct and a 30% shift (in the wrong direction for Canada) outweighs most other costs.
      The exchange rate has a big impact and is a big reason why VW and BMW are doing well.

      • 0 avatar
        geeber

        You apparently missed the claims, a few years ago, by advocates of a single-payer health care plan for the United States, that Canada was a better place to build cars because it had one.

        It turns out that this is not the case. Total labor costs (and a single-payer plan doesn’t lower labor costs for companies, which was the main argument by single-payer plan advocates) and exchange rates are the real determining factors.

      • 0 avatar
        Pch101

        Geeber, you’re really missing the point. Every dollar that US companies spend in Canada is more costly than it used to be, because of the exchange rate.

        US industry is oriented around a Canadian dollar in the low 80’s. Dollar parity effectively amounts to a 20% increase in the cost of everything. Since the accounting is in US dollars, the exchange rate gets priced into the expenses, across the board.

        Canadian healthcare costs are far lower than they are in the US. In contrast, the US has the highest per capita healthcare costs on the planet. If Canadian healthcare costs were equal to those of the US, then this cost situation up north would be even worse for US companies than it is now.

      • 0 avatar
        Carrera

        Well, to some extent healthcare has something do do with it…or it should. Since the company doesn’t have to pay their share for the health insurance/benefits like they do in USA, labor costs should be lower. Unfortunately, the cost of living is so much higher in Canada than in USA, I can see how the plants in Canada are in trouble. And yes, the CAD$ has been higher than the USD in the very recent past…as high as 6 cents stronger than USD. I temporarily reside in Canada and I get paid in USD…ouch!!!! Before I moved here from USA I didn’t realize how much more expensive life in Canada was. We are truly blessed down South when it comes to cost of living.

      • 0 avatar
        geeber

        The claim was made that single-payer health care gives Canada a competitive advantage over the United States as the location to build vehicles.

        Obviously, this hasn’t been the case.

        (For that matter, the lack of a national health care plan didn’t stop VW from building a plant in Tennessee to manufacture Passats for the North American market. Nor did it stop Toyota, Honda, Nissan, Hyundai, BMW and Mercedes from building plants here.)

        Nothing was mentioned about exchange rates at that time.

        If the real reason for building a vehicle in a particular country is to shield the manufacturer from variations in the exchage rate, fine (and I believe that it is the real reason).

        If people put forward a rationale as to why a company locates a plant in a nation to support their argument for the institution of a particular policy, and it turns out that this rationale really had nothing to do with the ultimate decision, it’s fair to remember that, too.

      • 0 avatar
        Pch101

        Geeber, you’re still missing the point.

        All of the costs in Canada have gone up as a result of the exchange rate. Nobody was anticipating dollar parity.

        Meanwhile, the Germans currently gain the advantage of US dollar weakness when they come to the US. Everything for them in the US costs less. It’s the same effect, but going in the opposite direction.

        If US employers could have lower healthcare costs than they do now, then that would create even more benefit. As it stands now, they’re the highest on earth, and a large proportion of those costs are borne by employers. Businesses tend to like it if their expenses can be cut.

      • 0 avatar
        CJinSD

        Why do zero-payer defenders pretend to be blind to big government’s role in making Canada too expensive for industry? Currency parity shouldn’t make a country that is saving money on healthcare spending uncompetitive, but it does because the real cost of the nanny state is measured in standard of living.

      • 0 avatar
        mike978

        Other countries have “national” health services but are competitive (such as Germany and the UK) in car manufacture. In those countries the currency (Euro and GBP) has also devalued alongside the USD. Picking up on Canada and saying “see nationalised health costs jobs” but ignoring the significant adverse change in the exchange rate is just being selective.

        Anyway these are unionised jobs so aren`t they scum to you CJ? Going of your previous posts.

      • 0 avatar
        CJinSD

        Sure, but this is a teachable moment when we can point out that bankrupting the government, swallowing the private sector whole, and sentencing future generations to serfdom won’t save any organized crime manufacturing jobs in even the medium term.

        BTW, talk about Europe’s economic health is a bit misguided. By a bit I mean completely. Germany doesn’t know how it will weather the costs of the EU safety net. They’re milking a big dumb market just like the big-3 did with SUVs, but that doesn’t mean that their fundamentals are any sounder.

      • 0 avatar
        mike978

        CJ – you are misguided to talk of Canada becoming bankrupt. They have a national debt of around 30% of GDP. The lowest of the G7 nations. How is this inflicting serfdom on future generations? Please explain how the private sector is being swallowed whole. Such hyperbole just weakens your argument.
        Canada has weathered the financial crisis better than most countries and has grown relatively robustly – hence the Canadian dollar becoming stronger. The market has spoken. I don`t doubt there are various issues behind this but if 5-10 years ago jobs were being added and now they are potentially lost what has changed? The healthcare system and costs are similar but the exchange rate has changed for the worst (from a Canadian perspective). No company can cope with a 30% change in just a few years. The Japanese have the same problem with the yen (as has been well documented by BS on here). But perhaps the Japanese are in serfdom too (especially since their debt is around 200% of GDP)!

        I specifically mentioned Germany and not any other Euro member because it is doing amongst the best (certainly compared to the PIGS). I know that doesn`t say a lot but specifically its auto industry is doing well on any metric – volume, profits, employment etc.

      • 0 avatar
        Pch101

        I realize that this is futile, but one last shot:

        The issue isn’t that costs in Canada are rising, it’s that American dollars are falling.

        Canada has a nominal inflation rate, but the exchange rate is going to be a problem to a American company that converts its accounting back to US dollars.

        Canada has considerably lower per capita healthcare costs than does the United States. That is simply a fact. But in any case, healthcare has absolutely nothing to do with the falling US dollar.

      • 0 avatar
        CJinSD

        mike978,

        I’m saying socialized medicine will destroy the USA, not Canada. We have added to costs rather than reduce them while adding incentive to abuse the system, reducing the number of people who will pay for their coverage or have their employers pay, and doing nothing to reduce thievery by trial lawyers, who are patrons of the regime doing the harm. The pass it don’t read it cretins also loaded every new insurance policy with mandatory coverages for special interests rather than good medicine, driving costs to the stratosphere. The thugs in the streets trying to intimidate people into accepting all this are sent their by their crime bosses saying that it will preserve their jobs. It won’t, just look at their Canadian counterparts.

  • avatar
    snoproblem

    Yawn, same tired old rhetoric in a contract year.

    Most expensive? I guess we can just take their word for that, shouldn’t check the numbers ourselves. Just like the “creative” accounting that show Hollywood blockbusters not making any profits, right?

    *puke*

  • avatar
    mikey

    Parity with the “greenback” ? Its all in the oil. When the oil price goes down, its a reflection on the US economy. When the price of oil goes up, the Loony is not far behind.

    Full disclousure here. I’m a retired GM Canada hourly, and a former CAW and UAW member.

    The facts, are the facts. There is no disputing the points points Bertel makes.

    Lewenza, like his UAW counterpart, talks a tough story. The table has literally turned. With Oshawa consolidated slated to close,and a shaky future for Cami Ingersoll, the CAW doesn’t have a gun,or for that matter bullets.

    The situation at Ford or Chrysler is some what better. But not by much.

    I see more concessions, with an expanded two tier system. We are going to see benifits slashed. I can see more insourcing. That means bringing more outside companys in. Material handling,maintenance etc.

    What I don’t see…is a labour related work interuption. There may be a few radicals amongst the rank and file,but not enough to have any impact.

    Personally, I don’t like it,but is the reality of the modern world.

    • 0 avatar
      psarhjinian

      The situation at Ford is worse. The Edge and MKX sell well, but the Flex and MKT don’t. Oakville’s been downsized a bit, and it’s only saved, I think, for being a very modern plant. The problem is that they’re not building much of what people want to buy.

      Chrysler is actually okay.

  • avatar
    Darkhorse

    I think the CAW should use the Ontario Health Insurance Plan (OHIP) as a negotiating tool. With OHIP, they can negotiate solely on salary not health benefits. Last time I looked at this, Canada was paying 9% of its GDP on health care vs. 20+% in the US. There’s got to be some leverage there.

    • 0 avatar
      psarhjinian

      Healthcare already helps a fair bit: benefits costs in Canada for any automaker are lower versus the US. If nothing else, I’m surprised the automakers didn’t push for single-payer in the US.

      The problem, really, is wage. And it’s not really that much of a problem, it’s more of a bargaining chip. The Canadian dollar has been stubbornly high, and isn’t likely to go a lot lower, and the US labour market is more willing to bargain lower. We saw this with EMD/Caterpillar in London, and I’m sure GM, Ford and Chrysler feel significantly emboldened by what happened at EMD, while the CAW should be worried.

      The only, and I mean only, hope, is for the UAW and CAW to cooperate, if not the European and Korean unions as well. Otherwise they’re playing with a weak—publicly weak—hand.

      • 0 avatar
        geeber

        From what I’ve seen, the taxes necessary to support a national health care plan wipe out the lower direct costs for the employer.

      • 0 avatar
        psarhjinian

        Canada’s corporate tax rates are lower than the US. Individuals might pay higher marginal tax rates, but this is offset by American employers and citizens paying more for healthcare.

    • 0 avatar
      juicy sushi

      All of that is already factored in. There is no leverage there. The blunt truth is that with the exchange rate being what it is, the CAW has priced itself out of competitiveness. 15 years ago, the Canadian dollar went through the floor, and prices and wages rose to reflect that. Then, as the dollar appreciated, prices and wages did not slowly deflate (due to the inherrent stickiness of prices and wages), so now you have people paying for things and being paid in dollars scaled to a currency in 1997 terms, but with a dollar actually valued near parity. Hence, ridiculously high wages to pay ridiculously high prices. It’s not easy to persuade workers to take a major wage hit when they see the cost of living increasing steadily, but with the exchange rate creating such pressure, there’s not really much that can be done.

      As a side note though, the current provincial government in Ontario is not a majority, and the main opposition party recently made some noise about introducing legislation to make the Ontario a “right-to-work” location, similar to some U.S. states. That could create some additional friction, but also provide manufacturers a way to stay in Ontario while cutting costs, by closing CAW plants and then opening new ones in areas with a desirable workforce (essentially down the road, literally the next town over).

  • avatar
    oboylepr

    Shheesh! Harper only announced last month $1B to build a new bridge between Windsor and Detroit. Now it looks like we won’t need it. Hey Stephen, wanna save a billion? Cancel the bridge. The Americans are leaving Canada and taking their ball with them. It won’t be long before the Canadian ‘domestic’ auto industry will consist of Toyota and Honda! Who knew? The CAW membership will consist of Air Canada flight attendants, that is if AC doesn’t go belly up as well. Ah well, maybe they can organise Air Transat!

    • 0 avatar
      psarhjinian

      What’s galling about that bridge is that Michigan coughing up it’s fair share is being blocked by a, well, a plutocrat who has a monopoly on traffic going across the existing bridge. It’s the busiest border crossing on the planet, and yet nothing’s getting done.

      That the Canadian government is essentially offering to pay for the whole thing because Mr. Moroun is, let’s not mix words, a greedy obstructionist, tells you a lot about the problems of handing public utilities to for-profit private companies.

  • avatar
    DC Bruce

    Well, our friends in Canada are being whipsawed by the effect of the commodities boom (which includes oil, of which Canada is a big exporter) on the currencies of commodity-rich countries. Canada is one of them, along with Australia, Russia, etc. In every instance, domestic industry takes it in the chin as their products are less competitive on world markets. It’s not just the workers who feel the pinch.

    It’s worth noting that Japanese auto workers have the same problem, in that their employers are having to “offshore” an increasing amount of their production (viz, Nissan) in order to deal with the stubbornly high Japanese currency (not a product of the commodities boom, but of an economy that, for 50+ years has been structured to rely on exports and has suppressed domestic consumption).

    This is one reason why workers and their unions should not oppose productivity-enhancing measures. Higher output per worker makes labor costs a relatively smaller share of total product costs, allowing more “cushion” of those costs rise because of currency appreciation. Greater productivity is, in part, what has allowed German workers to keep their jobs, even though much of their product is sold into an export market. That and the fact that a big piece of that market is on the same currency (the Euro).

  • avatar
    Gardiner Westbound

    When the C$ was worth less that the US$, less than 62¢, the CAW rationalized higher wages saying Canadian workers were being paid in cheaper dollars. Now it wants to bury that rationalization, apparently until the last CAW member is unemployed. The no-cost solution is to agree on a wage that reflects the Canadian medicare cost advantage, then index it to the value of the C$. If the dollar goes down, wages go up, and vice-verse.

    • 0 avatar
      psarhjinian

      In defense of the worker (or to blame the OEMs for their part) they still price their cars like we’re at US$0.62. And the automakers are not alone in this.

  • avatar
    el scotto

    Two dollars? Two freaking dollars? Companies that have billions invested in plants and a qualified workforce are freaking out over two dollars an hour? Sound like companies aren’t sweating quarterly profits but this hours profits.

    • 0 avatar
      Dimwit

      Yep. Absolutely disgusting. The amazing thing is how silent both Cdn gov’ts are. The bailout gave them almost 10% of GM and Chryco. That’s gotta be leverage somewhere!

  • avatar
    Felix Hoenikker

    When I worked in manufacturing during summer college breaks in the 70s, the job I had was represented by the United Chemical Workers who modeled themselves after the UAW since we supplied the auto industry.
    While the guys I worked with were OK on a individual basis, they were complete morons when they congretated. Since everyone got paid the same princely, in my humble opinion, wages their idea of advancement was to do less than the next guy. Most of them had completely lost sight of the fact of how well they were paid given their skills. The few who would voice this opinion were ignored.
    I imagine that the US UAW was even worse in their view of job entitlement. So as the US auto industry started to implode in the late 70s so did my former work place. I still remember my exit inteview with the plant manager after my last summer there. He said run away from this place as it would self destruct in the next decade which it did.
    While the folks I mentioned contributed far more to society than any hedge fund or but pirate like Goldman Sachs, they were like dinosuars of 65 million years ago looking up at the streaking asteriod saying WTF is that thing.
    Northern neighbors please take note.

  • avatar
    Potemkin

    Does anyone really know what the big 3 base their $60 an hour rate on. Is it the mythical employee who racks up the max in dental, drug and health benefits, sits in the job bank for the max time, lives to draw his pension till 110, goes on disability as soon as he has his 90 days, well you get the idea. Does the cost per hour in the US take into account health care coverage costs?

  • avatar
    highdesertcat

    Aw, Hell, all this is just posturing. Posturing on the part of the employers and posturing on the part of the union(s). Different go’round, same song and dance.

    In the end the CAW will get their wish and share in the profits. However, as with the UAW, if there are no profits, the union(s) will still get their share of the profits, even if it drives their employers into bankruptcy.

    Once bankrupt, the taxpayers and the omnipotent governments will be there to bail out the unions and their failed employers.

    It’s happened before. The precedent has already been set. It will happen again.

    The more things change, the more they stay the same. Vuja De, all over again….

  • avatar
    alluster

    Canada joins Japan in becoming one of the costliest places to assemble cars. Automakers should be allowed to move production as they please. They need to be looking after themselves and provide the best bang for the buck for their customers. $10 an hour for a Indian worker vs $60 an hour for a Canadian worker could get you standard alloys, standard all wheel disc brakes, power locks and power windows for the same cost.

    Det 3 should join forces and build a mega assembly plant in some developing nation, with enough capacity to take over production on a moments notice and keep it on standby. If the unions decide to play hardball, the Det 3 can tell em to go suck on a rock. Most people could care less about where their next car is built if the quality is on par.

    • 0 avatar
      psarhjinian

      “Automakers should be allowed to move production as they please”

      This would be totally acceptable if labour had the same freedom to move transnationally that capital does. But it doesn’t, and that tilts the playing field somewhat.

      I’m all for moving jobs willy-nilly, but I’d like to see completely open immigration first.

    • 0 avatar
      C4Spec

      If quality was on par, exactly.

      Mit freundlichen Grüßen

      C4Spec

  • avatar
    alluster

    Swiss Delegate: Ahhh, ven you say “Canada is on strike,” what exactly do you mean?
    Stephen Abootman: What do you think it means? [pounds the table]
    Stephen Abootman: We’re striking, buddy! No more! That’s it! Until we get what we want.
    French Delegate: Who are you exactly to authorize this strike?
    Stephen Abootman: I’m Stephen Abootman! Leader of the WGA!
    French Delegate: The WGA?
    Stephen Abootman: [crosses his arms] Yes! The World Canadian Bureau!
    [the other delegates don\'t react]
    French Delegate: What exactly does Canada want?
    Stephen Abootman: We want: more… money!
    Aide 1: [with mustache] Yeah! More money!
    Japanese Delegate: More money from where?
    Stephen Abootman: Just more money! You know! Canada doesn’t get enough money! Other countries have lots of money; we want, we want some of that money! Hu- how about- the Internet? The Internet makes lots of money! So give us some of that money!
    Aide 1: Yeah! Give us Internet money!
    British Delegate: A Mister A- Abootman, you seem to- not understand how… global economics works. I think that…
    Stephen Abootman: Don’t give me that fat-cat fancy lip-wiggling! Are you gonna give Canada more money or what?
    [pounds his fist on the table a few times]
    British Delegate: I’m afraid we can’t.
    Stephen Abootman: Then you leave Canada no choice.
    [heads for the doors. His aides open them and he heads out]
    Stephen Abootman: This strike shall continue!


Back to TopLeave a Reply

You must be logged in to post a comment.

Subscribe without commenting

Recent Comments

New Car Research

Get a Free Dealer Quote

Staff

  • Contributing Writers

  • Jack Baruth, United States
  • Brendan McAleer, Canada
  • Marcelo De Vasconcellos, Brazil
  • Vojta Dobes, Czech Republic
  • Matthias Gasnier, Australia
  • W. Christian 'Mental' Ward, Abu Dhabi
  • Mark Stevenson, Canada
  • Cameron Aubernon, United States
  • J Emerson, United States