By on September 27, 2012

Did Ken Lewenza hose Sergio Marchionne and Chrysler? Ask me that a few days ago and I may have said yes. Now that the terms of the CAW and Chrysler have surfaced, I’m not so sure.

A superficial glance at the situation seems to have the scoreboard favoring the CAW. Chrysler agreed to the pattern agreement that includes the $9,000 per worker lump sum payments that Chrysler was dead set against, as well as the return of the COLA payments in Q4 2016. Kenny 1, Sergio 0, right? Not so fast.

Ford and GM all have product and investment guarantees written into their labor agreements. Chrysler’s is noticeably void of them. One of the expected conditions of the agreement was that a third shift would be added at the Brampton Assembly plant that builds the rear-drive Chrysler LX cars. According to the Windsor Star, that didn’t happen

“In Brampton, the CAW could only secure a promise to maintain the two shifts at the plant that manufactures the Chrysler 300, Dodge Challenger and Charger during  the life of the agreement.  “That plant is incredibly important,” said Lewenza.”

Chrysler will keep the three-shift Windsor plant up and running for the life of the agreement. The minivans are selling like hotcakes in Canada, and dominating in the US minivan market, and Chrysler needs every bit of capacity they can get. Previous reports estimated that further investment in the Brampton plant could add as many as 1,000 jobs and be worth as much as $400 million, but there’s a possibility that rear-drive car production could leave Canada, not for the United States, but Italy.

Here’s the scenario; the next Chrysler 300 and Dodge Charger will use a rear-drive platform that will be utilized across the Chrysler-Fiat empire. Depending on the day, it can be an Alfa Romeo, or a Maserati or an SRT Baracuda.  The specific models aren’t as important as the fact that it’s a global platform. And that means products based off of it can and will be built and sold around the globe. Over at Fiat, plants are running at 50 percent capacity and Italy’s economy is in the toilet. Jobs would be brought home, plants could be running at or above the magic 75 percent number and Chrysler sheds the financial burden of assembling cars in Canada.

Meanwhile, the CAW sold 1,000 badly needed manufacturing jobs (the kind they complain are disappearing in Canada) for $9,000 per worker in lump sum payments. Right now, it looks like incredibly short sighted thinking. It may be a “damn good deal” for the current workers at Chrysler, but the lack of any job/investment guarantees likely came as a quid pro quo for Chrysler maintaing the lump sum payouts. What if the CAW agreed to rescind them, in exchange for promises to expand the future of Canada’s manufacturing base?

The odds of that deal getting ratified by workers is about as likely as Sergio not saying “vaffanculo” to Canada and the CAW come 2016.

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44 Comments on “CAW And Chrysler Reach Deal: Marchionne May Get The Last Laugh...”


  • avatar
    NMGOM

    CAW is on thin ice.

    After 2016, if labor conditions do not favor continued Canadian production of minivans, there is nothing that stops them from being made in Mexico.
    See Link — http://en.wikipedia.org/wiki/List_of_Chrysler_factories

    And if RWD goes to Italy, so does Chrysler 300 production.

    Indeed, Sergio is laughing, — all the way to the bank….

    ———–

  • avatar
    DeadWeight

    I agree with your premise. Sergio absolutely must have some cold, Sicilian genes in his DNA, because he shoved it good and hard up the CAW’s culo, and the real proof is that he did it while all smiles, even radiating warmth and affection.

    Do not take offense at what I wrote, for I am great friends with so many Italians & Sicilians (their mothers cook for me; a great honor) that I promise each of you that they would not mind nor take exception to my honest description of the Sicilian nature. IN FACT, it is a source of pride amongst Sicilians!

  • avatar
    Doh

    It will all work for Sergio, except for all of the Canadian Taxpayers that have sunk Tax $$$$ into keeping Canadian Jobs.

    Not that they won’t buy a Caravan, but Hopefully most will purchase a Sequoia instead. But I hope they remeber this day.

    When will Unoin workers realize that the Job that we Canadians subsidized with our hard earned dollars, means more than $9000 in their pockets?

    $70k/year for 4 Years, and $9000 then your job is gone. Sold Canada out for $289000 and your job.

    • 0 avatar
      tatracitroensaab

      Protectionism is dead, and the tide of free trade frankly cannot be stopped. These high paying low skill manufacturing jobs are unsustainable – as the manufacturing segment grows increasingly more mechinized, these Canadian workers are going to have to gain other skills. Protectionism does not help a country – it has been proven multiple times only to promote inefficiency and pass on higher prices to consumers.

      • 0 avatar
        tresmonos

        It isn’t dead, yet. Ask all of the Mexico operations that were literally gearing up for export capacity to Brazil. That was the biggest free trade failure I’ve seen.

      • 0 avatar
        tatracitroensaab

        @Tresmonos Brazil is one of the largest examples of protectionist failure — its consumers have to pay through the roof on their vehicles in order to subsidize an inefficient manufacturing sector. I mean really, anyone who has taken a basic high school economics class can tell you that.

        “Protectionism is a misnomer. The only people protected by tariffs, quotas and trade restrictions are those engaged in uneconomic and wasteful activity. Free trade is the only philosophy compatible with international peace and prosperity.”

        Walter Block

  • avatar
    acuraandy

    And I was ‘paranoid’ for stating the obvious that Senor Marchionne would decreed that LX production be moved to Mexico?

    Called this one guys. Hecho en Mexico, ‘Imported from Detroit’, with Italian and/or Chinese parts. The day I see a Jeep Wrangler ‘Made in Italia’ will be the day I COMPLETELY write-off Fiatsler.

    But I suppose, this makes complete sense: (Chrysler is ‘bailed-out’ by the US taxpayer -the first time!-, Renault buys out George Romney!-RAN AMC, AMC is bought out by Chrysler, Chrysler is bought out by Diamler, Diamler is bought out by Cerebrus, Chrysler is bought out AGAIN by Fiat via the US taxpayer (in a ‘shotgun wedding’-US ‘President’ Barack Obama).

    Seems like the EU obtained reciprocity. Kudos (?)

    • 0 avatar
      bikegoesbaa

      Why do you have “President” in “quotes”?

      • 0 avatar
        brettc

        Just a hunch, but he probably thinks Barry O was born in Kenya so he’s not really the President.

        Very smart of Sergio to do what he’s apparently done. Not good for Canadian Chrysler workers or Canadians in general, but probably very good for Fiatsler in the future. Especially if the Canadian dollar stays at parity with the US dollar.

    • 0 avatar
      acuraandy

      @bikegoesbaa, brettc:

      I put President in quotes because he isn’t mine. Yes, i’m American, and yes, I thoroughly disagree with pretty much every policy his admin puts into effect. FWIW, i’m not a ‘birther’, to even question where he was born is idiotic. There are/were plenty of natural-born communists in the US, just sayin’.

      Personally, I can’t wait for this US prez election to be done and over with; as many, i’ll be waiting for the results. If Romney wins, i’ll be uprooting my fam and moving to North Dakota to help get much needed oil out of the ground (and make a good living to boot). If Obama wins, and if the Canadian gov’t allows, i’ll attempt to get a Canadian work permit and do the same. BTW Canucks, if you guys do let me in, I promise to keep my mouth shut politically, eh? :)

      • 0 avatar
        sunridge place

        Damn Andy…..whatcha waiting for? The boom is already on!

        http://www.foxnews.com/us/2012/07/19/on-job-hunt-boom-in-oil-industry-makes-north-dakota-rich-in-jobs/

  • avatar
    th009

    I can’t see 300/Charger production in Italy. That plarform is way too big for what Alfa Romeo needs — currently Alfa’s biggest model (the Giulietta) is a Golf competitor. Not to mention that manufacturing in the Euro zone and shipping to the US would be substantially more expensive than dealing with the CAW.

    Now, Mexico could be a whole different matter …

    • 0 avatar
      geozinger

      I’m glad to see I’m not the only one who thinks there’s a little pretzel logic in this post…

      I thought the Euro as battered as it is, is still trading higher against the dollar; there’s no way European production (unless it’s Serbia!) would be less expensive. Even then, the old Zastava plant can’t build something as large as an LX-sized car. And shipping isn’t free, either.

      I’d agree with you on Mexico, though. Especially if the Brazil FTA is hosed, there should be plenty of capacity (and a market) for the successors to the LXs.

      • 0 avatar
        DeadWeight

        I agree they probably won’t move their large car production to Italy, but it’s moot, since Mexico and the U.S. are both viable options, probably alongside two other South American countries at some future point.

        Ergo, the end result will be the same for the CAW.

    • 0 avatar
      jrhmobile

      The idea that Fiat is going to move significant Chrysler production to Italy may, at first, seem politically expedient. But for Chrysler to actually do so would be financial peril.

      it would be easy to move production INTO Italy, of course. But fluctuating currency rates and enormous expenses to ship all that product back to the States would be prohibitively costly almost instantly.

      And moving it back out of Italian plants would be politically untenable. As it is, Marchionne is being called on the carpet by the Italian government over his chest-beating and bleating that if Italian labor doesn’t knuckle under, he’ll take car production out of the country.

      As th009 intimated above, Mexico may be another possibility. As the US’ other free-trade partner, it offers much lower labor costs. But it’ll cost a lot of money and leverage for Fiat to move production from Canada to Mexico. And ensuring production continuity south of the border has great costs too that have nothing to do with labor expenses.

      If you think The Great Sergio has the CAW over a barrel, you haven’t been paying attention.

      • 0 avatar
        Lorenzo

        Who says the Italian production would come to the US? Fiat grabbed Chrysler for the Jeep brand to make it a global brand. Chrysler and Dodge are not that well known globally, but Jeep is. 4WD (not AWD) makes a lot of sense in North Africa, the Middle East and other places that don’t have developed road systems. With a premium label on the Grand Cherokee and variations of the 4-door wrangler possible (to say nothing of Fiat’s own small cars using Jeep’s 4WD tech), all bases are covered, and distances from Italy to S.E. Asia through the Suez Canal are a lot shorter than from Toledo, Ohio.

    • 0 avatar
      Joe McKinney

      There is a reason why Volkswagen builds Jettas and New Bettles in Mexico and Passats in Tennessee. It’s not because they could build them cheaper in Europe.

      • 0 avatar
        th009

        VW’s Puebla and Chattanooga plants were incremental capacity, new local production for local sales. Moving existing production to the other side of the world (and shipping the results back) is a whole lot more complicated yet.

  • avatar

    All I see on 99 percent of the comments is a desire to move Auto Jobs away from North America! So if this happens what will become of the other two Players here? There are other Auto Makers here too, most people seem to forget that both Honda and Toyota have manufacturing plants here in North America, that will likely grow in the years ahead and lets not forget the German makers operating in the Southern USA, I should not forget Nissan either, but compared to other Asia makers they are quite small in comparison.

    • 0 avatar
      Freddy M

      I don’t really see the comments expressing an outright desire to move jobs out of NA more than I detect a hint of schadenfreude regarding how the CAW (or most Unions in general) were handed the short end on this deal. Although I too agree that in the long run they’re getting what they deserve for their short-sightedness, I think it’s not lost on any of us that their bone-headed decisions can only ultimately lead to the further erosion of the labour base in North America.

      • 0 avatar
        dejal1

        The use of “labour” is telling. Any chance your are Canadian.

        Canadian when you can stick it to the US and North American when you get stuck.

        This is a Canadian issue and not a North American issue at this point.

        If the jobs move (and I hope they do), it would be nice for them to move south and not east. We are not all in this together. Canadians and the US are not friends, we just happen to share a border and have some common interests.

        If the US can’t get the jobs, I hope they go to Mexico. Some Mexican getting a higher standard of living could make a dent in illegals crossing the border into the US.

      • 0 avatar
        Freddy M

        I used North America in reference to Gentle Ted’s original post. You are right that the UAW and CAW problems are indeed separate and that our economies though linked very closely are also quite separate as well. Nonetheless, despite this, the laboUr (yup Canadian here) erosion in NORTH AMERICA (minus Mexico if we’re gonna be pedantic about their economic growth) is indeed occurring regardless of whether we are working together to stop it, or taking up a me myself and I attitude.

        Our countries may not be friends (no countries truly are) but we are ALLIES at the moment, and our economies are intrinsically linked. But yes, YOU and I are not friends so I will happily never set foot in whatever corner of your pleasant US of A you call home.

        Take the stick out of your @$$ dude.

      • 0 avatar
        NMGOM

        Freddy M…

        With all due respect, I am not altogether sure that comments like “Take the stick out of your @$$ dude” are a credit to yourself or benefit TTAC’s readership. Your perspectives have been much better in the past. No offense intended.

        ————

      • 0 avatar
        geozinger

        @deljal1:”Some Mexican getting a higher standard of living could make a dent in illegals crossing the border into the US…”

        Not likely.

        Multinationals have been building plants in the maquiladora zone for decades (most of the work from my hometown GM supplier plant is there now), and up until recently we had plenty of Mexicans working in the US. The multinationals are not going to pay much more than the going rate in Mexico. Not enough to keep many from crossing the border.

        Since several states have enacted ‘get tough’ laws against illegals, and the general economic downturn (which probably had a lot more effect than the laws), I personally have seen a reduction in illegals around here (Western Michigan).

        I’m sure that will all change if the economy comes back to where it was. Or the economic situation in Mexico degrades further.

      • 0 avatar
        Freddy M

        @NMGOM
        In retrospect it was tasteless.

        @dejal1
        I apologize for that comment. It wasn’t justified.

      • 0 avatar
        schmitt trigger

        +1 on this one… i don’t want either that manufacturing jobs move out of NA…what I believe that the B&B here feel, is that the Unions do not seem to comprehend that we no longer live in the 1950 or 1960s.
        The jobs environment has changed, and everyone must adapt. That includes the golden Unions.
        It is painful not to have COLA, but it is even more painful to be unemployed.

      • 0 avatar
        danio3834

        @dejal1 Why aren’t the US and Canada friends? Their cultures are similar and the economies of the countries are so interlaced, Canada is practically a 51st state and the USA the 4th Canadian territory.

        That’s like Michigan saying to Ohio “we might be neighbors, but we’re NOT friends”. Although I will concede many Ohioans and Michiganders do infact feel that way.

        The “us vs. everyone” mentaility in the USA is a cancer that is draining the economy and future any prospects of its recovery. Canada is your number one trade partner, the few vehicles that are manufactured there pale in comparison to those that are imported from the USA.

        If you took all the jobs from non-Canadian companies based in Canada and moved them to the US or other countries, who in Canada would buy those goods? I suppose if you really hate Canadians, you probably don’t care. But from a business standpoint however, it’s important to note and no American car company wants to lose 10 percent of their volume.

      • 0 avatar

        dejal1

        One doesn’t have to go all DeGaulle and say that countries have no friends, only interests. The US and Canada share the longest peaceful border in the world. That border also stands between two of the great democracies of the world, countries whose armed forces have shed their own blood together defending others’ freedom. Our shared interests are so extensive that I think the word friend is not unwarranted. YMMV.

        In terms of automotive production, the American automakers’ Canadian operations have been so integrated with their domestic operations that though they work through Canadian subsidiaries, they’re effectively the same operations, which is why all of the Big 3 are organized with North American operational groups. Ford’s been building cars in Canada since 1904 (lots of Fords had “Windsor” motors in them), GM and “McGlaughlin-Buick” go back almost a century, Chrysler acquired the Brampton plant when they bought out American Motors, and I’m too lazy to check it but I’m sure if you look at the history of the Windsor plants that produce the Chrysler minivans, you’ll see that they’re pretty old factories themselves.

        You’re 100% correct about growing the Mexican middle class. It’s funny how the US will get slammed for a striated society with haves and have nots and in the meantime Mexicans who are more or less shut out from a much more striated society have been flocking here. In a similar manner, Africans immigrate to the US, while our domestic radicals carry on about American racism.

      • 0 avatar
        acuraandy

        @FreddyM:

        ‘ALLIES as the moment’? As far as i’m concerned, Canada has and will always be a friend of mine, quite frankly you guys seem to have your economic ‘shit together’ far more than the US does :)

        Politics aside, it would absolutely be cost prohibitive for LX platform to be produced outside of NA, and I offered those comments in jest.

    • 0 avatar
      BuzzDog

      Actually, Nissan is hardly a minor player, both in terms of U.S. assembly numbers and its size among Japan-based automakers. Most of the Nissans sold in the U.S. are built in the U.S.

  • avatar
    danio3834

    I wouldn’t get ahaed of ourselves. Screwing the same cars together by Italian union workers vs. Canadian workers wouldn’t provide much cost savings. Especially when you factor in floating them over there. With the volume they sell, they’ll keep that production in North America.

    If a third shift is added, it will be with new workers, which will close the gap with 2nd tier UAW labor.

    I know every White Collar Jim commenter would love to see the union “get what’s comign to them” but the reality is they did give some serious concessions in the contract.

    • 0 avatar
      acuraandy

      Hey danio:

      I am a ‘worker bee’. Not union. And am certainly not a ‘White Collar Jim’. And I hope CAWs efforts fail. Not to the deteriment of the working class, but to send a message to the union fat-cat bosses that the ‘good times’ are over.

      Companies big and small are fighting for very survival right now. I won’t even get into macro-economics right now. Just sayin’…:)

  • avatar
    canman

    Hmmm…..you have to wonder about the wisdom of building cars in Italy at all destined for the NA given Sergio’s mantra for labor costs. It costs around 1800.00 to build a mini van in Windsor and that will go down with the new contract which is around 5% of all costs. The labor contract negotiated in Italy and blessed by Sergio in 2011? Read it yourselves:

    “Fiat SpA (F) and Fiat Industrial SpA signed a collective labor deal with their 86,000 Italian employees that increases shifts and shortens breaks in exchange for a 20-billion euro ($26 billion) investment plan.

    Workers’ base salary will rise 5.2 percent, Roberto Di Maulo, head of the Fismic union, said in a telephone interview from Turin. Employees will also receive a 600-euro production bonus in 2012 and be paid 10 percent more for overtime, he said.

    “The agreement signed today signals a historic moment for our company and its workers,” Chief Executive Officer Sergio Marchionne said in an e-mailed statement without providing the agreement’s financial details.”

    The whole article is here:
    http://www.bloomberg.com/news/2011-12-13/fiat-seals-one-year-labor-deal-for-italian-workers-with-wage-increase.html

    Labor costs rise in Italy – labor costs go down in Canada. Means transfer work to Italy??

    • 0 avatar
      NMGOM

      Well, canman, you are absolutely right.

      …and if the European slump (reported again this morning on Autonews.com) continues, Sergio won’t have to worry about making any North American vehicles via Fiat in Italy. He will have to worry about making Fiats in Italy…

      A analyst working for VW reported that some of the European car makers WILL go bankrupt without government intervention. To whom do you think he was referring……?

      Mexico is looking increasingly better….

      ————–

  • avatar
    tresmonos

    I agree with danio3834. Until you see ground broken for a new plant, or capacity added at existing plants, this really means nothing. It takes a tremendous effort to move production, and the overhead advantage a Mexico sourced unit has over a CAW built unit ranges between $500 and $1000. ROI has to amortize within 5 years to justify any capital expenditure. With the current economy, companies are cutting that time frame. Now if the life spans of platforms coincide with the contract and there is excess capacity elsewhere, production will be sourced at the most feasible and cost effective location. From my personal experience, Italy isn’t a great source of labor in terms of efficiency and cost.

  • avatar
    Darkhorse

    I have never worked in an auto assembly plant but I often wonder why there are ANY labor issues these days. Why are human beings even needed given the sophistication of robotic assembly today? Maybe the jobs of the future involve watching robots to make sure they don’t screw up.

    • 0 avatar
      danio3834

      There are still a lot of tasks that require human dexterity due to their complexity, like installing and routing a wiring harness for example.

      Sure it would be possible to design an automated process to complete this task, however there has to be a cost benefit and the complexity of the automation would be too high.

      A human operator can be easily programmed for quality control as well, ensuring that each connector is snapped in place, the harness not pinched etc.

      On the flip side, most body shops are now fully automated with robots performing the dangerous and precise tasks of welding panels together. 30 years ago, most panels were still spot welded by hand.

  • avatar
    Glenn Mercer

    Wait, wait, is Fiat planning on a new model and I missed it? Is this the famous Alfa Vaffanculo that we’ve been waiting for, for all these years? Where do I place my order? I’ll have to look up the meaning of that word sometime, but ever since I found out “Quattroporte” just meant “Four Doors” I’ve been afraid to: everything sounds better in Italian! But I bet Vaffanculo means something really, really cool….

    …. oh.

    To quote Roseanne Roseannadanna: “Never mind!”

  • avatar
    Gardiner Westbound

    The Detroit-3 Canadian workforce has fallen from 70,000 to less than 21,000 in 30 years, the result of corporate arrogance and union intransigence. They took every last dime out of the cars for profit. After making cars for decades that barely survived the warranty period intact a majority of consumers won’t consider buying an American brand car.

    Bludgeoning the automakers into accepting unaffordable contracts simply hastens the denouement. The CAW union bosses claim victory, but the CEOs are not nincompoops. They won’t pay the world’s highest auto assembly wages indefinitely. The widely anticipated third shift at the Brampton Chrysler plant won’t happen and with it a thousand long term jobs.

    Taxpayers will rebel at any suggestion they should bail out the carmakers again. Without taxpayer subsidies they will pack up and leave Canada within 10 years. They can’t afford to build cars here.

  • avatar
    Dimwit

    This is a joke. Everyone seems to think that Mexico is some sort of paradise for assembly plants. I take it that you guys don’t read the news. Mexico is corrupt and violent. Not a particularily great place to do business. Yeah, not all of Mexico is that bad, just near the US border. Urrr, right. Brampton will be fine for a while.

    The biggest thing will be new product and that’s a concern. Sergio is playing games with the complete Empire by shuffling and witholding models throughout FIAT and only making minor changes to the Chryco models. The Dart is the only new thing they’ve introduced and it better be a huge success. We’ll see how 2015 goes.

  • avatar
    Glenn Mercer

    I think you are right.

    I’ll just have to calm down, take my meds, and await the return of Alfa to the USA with some other model. I do remain convinced Alfa will be here soon, right about the same time as the paperless office arrives, and trans-Atlantic kerosene-powered dirigible service… (sigh)


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