Editorial: Did The CAW Swindle Sergio?

As the Friday workday winds down, we’re still without an agreement between the CAW and Chrysler. Ford and GM are waiting on ratification by the CAW members at their plants, and it’s looking more and more like Ken Lewenza and the Canadian Auto Workers were able to outmaneuver Sergio Marchionne.

In the run-up to the talks, Marchionne’s rhetoric was, to use the old cliché, “tough but fair”. Rather than bluster and grandstand, his remarks about the need to reduce fixed costs were grounded in reality, while also padding his verbal blows with deliberate flourishes of magnanimity, telling The Globe and Mail

“People have got to get it through their heads that I’m not Mr. Scrooge here,” he said…I’ve got to run the business and the business says that, if I do well, I’m willing to distribute that wealth…I cannot institutionalize and guarantee you that wealth.”

Couple that with the enormous goodwill that has accompanied his transformation of Chrysler from a a four-wheeled farce to a serious contender in a number of segments. But, to paraphrase Jay-Z “it was all good just two weeks ago”.

As of 5 P.M. Friday, Chrysler remains the sole auto maker not to have reached any agreement, and from this vantage point, it appears that Marchionne has two options.

1. Come to an agreement with the CAW, using the Ford and Chrysler agreements as a pattern.
2. Risk a strike

Ford and General Motors have now effectively set the tone for whatever agreement Chrysler and the CAW reach. The “pattern” is not what Marchionne wants; no permanent two-tier wage system, no profit-sharing, a cut in fixed labor costs that doesn’t go as far as he’d like.

CAW President Ken Lewenza told the Windsor Star that

the union would be pressing for product investment at the two-shift operation in Brampton. “Chrysler has been a very stable company in Canada.”

Chrysler’s Windsor minivan plant is currently operating with three shifts, and adding another one to Brampton would be in line with the GM and Ford agreements, which will add new jobs to the Oakville and Oshawa plant. While those jobs will allow for the re-hiring of laid off workers, added jobs at Chrysler would see the new hires start at reduced wages and entitled to a less generous pension plan. But with Marchionne said to be made of sterner stuff than your average man, the alternative could be a strike – one that could have serious blowback for Chrysler.

With as much as 25 percent of their production located in Canada, a protracted strike would harm the record sales years that Chrysler is having in Canada and the United States. His threats of moving production out of Canada are theoretically possible, but their execution would be difficult. Not only w ould setting up plants in the United States, Mexico or even Europe (taking advantage of excess capacity) take time and effort, but the optics could be disastrous. Chrysler is at risk of a backlash if plants close and too many jobs are lost. GM and Ford could have a field day painting an ugly picture of Chrysler as a company that cares more about outsourcing than Canadian jobs.

If I had to place a bet, I’d say that Marchionne and the CAW will come to an agreement largely in line with GM and Ford’s agreements. The possibility exists that Sergio would move some production from Canada to another locale, but given the success of the Canadian-built minivans and the possibility for a third shift at Brampton, it’s hard to see where cuts could be made.

As one insider told me last week “every negotiation is supposed to be the biggest, the most tense, the strike to end all strikes…so far it’s never happened”. This round of talks failed to live up to the hype; the coordinated strikes at all three OEMs never materialized, nor did a dramatic confrontation that saw the CAW and Marchionne locking horns.