By on September 10, 2012

With the CAW’s strike deadline looming, Chrysler CEO Sergio Marchionne is taking a harder line in the media, pushing his vision of a profit-sharing agreement between Chrysler and the CAW, while boldly stating what everyone knows, but is afraid to say; auto makers have “other options” when it comes to building cars.

Chrysler, in particular, has plenty of unused capacity in Europe, thanks to slow sales of brands like Fiat and Alfa Romeo. On paper, the underutilized European plants could fill in for Canadian factories should things go south, though the logistical realities are much more complex.

Marchionne, along with other automakers, are said to have been pushing for a Canadian labor contract similar to the 2011 agreement between the auto makers and the UAW; labor costs in Canada would be brought to the same level as American plants via a two-tier wage system (with new hires making about 50 percent less than current employees) and a profit-sharing system would replace guaranteed wage hikes. One source at a Big Three automaker told TTAC that the unions are apprehensive regarding profit-sharing, due to fears that a vehicle could flop due to factors beyond their control (such as a botched marketing campaign or a similar screw-up), causing them to lose out on the bonuses.

Speaking to The Globe and Mail, Marchionne was adamant in presenting his proposal as the most equitable solution

“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.”

Chrysler is looking to add a paint shop to their assembly plant in Bramalea, Ontario, where the full-size LX cars are built. The $400-million investment would add another decade to the plant’s lifespan while adding 1,000 new jobs, but Marchionne is hesitant to invest in the plant given the current climate

“You need to deal with the question of the disparity of the Canadian manufacturing environment and the American one,” Mr. Marchionne said. The question is: Do you commit capital when your overall [cost] structure is higher than it is in the best alternative, which is the U.S.”

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61 Comments on “Marchionne: Chrysler Has “Other Options” Beyond Canada...”


  • avatar
    danio3834

    Sergio sums it up perfectly without being emotional, agressive or nasty at all. This is a business, not a charity, and we will save money where possible in this cut-throat industry. I really really really hope the CAW doesn’t try and bite off more than they can chew.

    • 0 avatar
      tuffjuff

      I love Sergio Marchionne. He has to be the most straight-forward, fun CEO of a major company in a while. His stance makes total sense, and I’m glad he’s decided to say what the rest of the industry is too afraid to say. Unions are far from irreplacable – be selfish and greedy and you deserve to loose your job.

    • 0 avatar

      Maybe they should build them in Detroit so they can brag about them being “built in Detroit”.

      I love the 300 and I’d love it more if it were made in the USA.

      • 0 avatar
        mikey

        @bigtruckseriesreview….Come on dude,we got to eat to..eh?

      • 0 avatar
        acuraandy

        Hey mikey,

        What ya talkin’ aboot?

      • 0 avatar
        mikey

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

      • 0 avatar
        Volts On Fire

        So… how much would we need to give the Canadians for them to take Detroit off our hands? Everybody would win.

      • 0 avatar
        mikey

        @VOF…Do we get the Red Wings.

      • 0 avatar
        acuraandy

        mikey:

        That’s all well and good, you put your time in, was promised certain things for time worked and that’s just fine.

        My real beef is with the union leadership, trying to screw you, new hires and the taxpayers of Canada over, so THEY can live high on the hog. Just like what the UAW did here in the US.

        And full disclosure, i’m not union. Never have been, probably never will be by choice. When I was younger (1999ish, you know, the .com ‘boom years’), my father’s company, of which he was a supervisor, decided to close shop and move to Brazil due to, yes, union demands run amok. Thus, i’m a staunch union critic.

        Often times nowadays, the guys running unions are as eliteist as the worst Ivy League educated trust-funded brats. They have their best interests at heart, and nothing else. Not sure if retirees still have a vote, but you should try to get the current leadership fired.

      • 0 avatar
        mikey

        @Acurandy.. I lived it every day, and saw it every day,for 36 + years. There is no escaping the truth.
        As much as it pains me to admit it…..your right.

      • 0 avatar
        Volts On Fire

        If that’s what it would take, mikey… sure!

  • avatar
    dejal1

    Nows the time for the UAW to step up and make an offer for the jobs.

    But, the UAW will probably screw that up.

  • avatar

    One thing everyone should know that here in Canada, everything from a bottle of Milk to a Vehicle costs a lot more here than in the USA, thus I can see why the CAW does not want to get into profit sharing, its hard to get a Loan of any kind with out a firm committment for Wages!

    • 0 avatar
      danio3834

      You can thank the far more burdensome tax structure as compared to the US for the added costs. Gotta keep that lumbering monster of a social system running somehow. It’s just an economic shell game like any other.

      • 0 avatar
        Nostrathomas

        You’d be surprised. Canadian tax rates are often lower than American ones…especially on the corporate side. We have the lowest Corporate Tax in the G7.

        In Alberta, taxes are considerably lower. Corporate Tax rates here are 26.5% (or 14% for small businesses under 400k!). The average Corporate Tax rate in the US is 39.2%.

        I moved here from NYC and am paying lower taxes all around. But yes, my TV and my groceries, and general stuff is more.

      • 0 avatar
        Nostrathomas

        Oh and btw, Canadians pay less per capita for their health care than Americans do. The US spends about 17% of their GDP on health care, while Canada spends about 11%.

        Lumbering indeed….

      • 0 avatar
        Pch101

        “Canadian tax rates are often lower than American ones…especially on the corporate side. We have the lowest Corporate Tax in the G7.”

        Your effective corporate tax rates are about average for the OECD, when provincial taxes are included. The same thing can be said of the United States.

        The effective tax rate is what matters. Income taxes assess a charge against “income”, but not every nation defines “income” in the same way. The US has so many credits and deductions available that the effective rate and the statutory rate are two very different animals.

      • 0 avatar
        danio3834

        I worked in the US paying US taxes for years as well. That’s the real source of my gripes.

        The overall rate and actual burden was always much less at a similar income level. Since working back in Canada, I’ve seen my before tax salary rise, but take home fall, along with added sales taxes and overall costs due to transport and import fees levied against goods.

        I’m sure the numbers can be jiggered a number of ways, like I said it’s a shell game about hiding the true cost, but I can tell you the bottom line for the working person is definitely worse in Canada. I’m sure it’s fantastic for someone with no income however.

      • 0 avatar
        tuffjuff

        @Pch101

        Bingo.

        My effective tax rate has typically been around 10% (after deductions, etc). Last year it was around 3% – thank you government incentives for going to school.

      • 0 avatar
        golden2husky

        ……The effective tax rate is what matters….

        Exactly!!! Everything else is meaningless as it can be twisted and distorted into nonsense. Nor is a total dollar value have much meaning. No matter how large that number may be, if it is, say, 12 percent, it is much less of a burden than an average earner paying 35 percent

    • 0 avatar
      garythompson

      But, but surely that is all made up for by the wondrous socialized medicine system….

      • 0 avatar
        YellowDuck

        @garythompson: To some extent it is, yes. Employers’ costs for medical benefits are *much* lower in Canada. The primary reason is that medical services are much cheaper there. Something to do with much lower malpractice insurance premiums, and no insurance companies taking profit off the top.

      • 0 avatar
        danio3834

        The socialized system really only covers the most basic of care. Pretty well everyone carries supplemental medical insurance (from their employer or personal) to cover the things the public system doesn’t. Dental, vision, medication etc.

        In spite of how many people are sold on the system, it really offers little in value to those who pay taxes in the form of 30% off their paychecks, 43% on gasoline, more than 50% on booze and smokes, and 13% on everything else you buy. It just hides the true cost through playing various shell games through taxation, but leaves you little in the way of choice.

      • 0 avatar
        YellowDuck

        @danio3834 – No not really. Health care, per unit service actually provided *is* a lot cheaper in Canada – I am talking actual dollare spent whatever the source, not health preiums per se. Like, maybe 2/3 the cost of the US for the same services. The difference is that those of us with jobs are paying to provide health care to everyone, not just to ourselves and our families. Personally I like it that way.

        You’re also kinda wrong about income taxes – they really are not that much higher in Canada when you look at total taxes owing as a percentage of inccome after deductions. I can testify to that, as a person who has lived and worked in both countries. We do have other deductions like CPP (Canada Pension Plan) but, unlike Social Security in the US that is not money down the drain, because the plan is actually solvent into the foreseeable future.

        Totally agree though that our sales taxes are kind of out of control.

      • 0 avatar
        jimboy

        To an extent, yes, despite your snark. Canadians have a health care system in place like 99% of the industrialized world (you clever Americans excepted), and WE are not responsible for VEBA in the U.S. When you add in VEBA costs to the American UAW, Canada is VERY competitive since we are not expecting our EMPLOYERS to carry our health care costs like Americans do.

        So, all snottiness aside, Canadian workers are simply looking for some assurances that they won’t be stuck with a wage level from 2006 for the next ten years. (even retail workers get a raise once in a while!) And I am NOT a union member or supporter, but everyone still has rights, even in ‘socialist’ Canada.

      • 0 avatar
        Gardiner Westbound

        Opinions are like azzholes, everybody’s got one.

        Mrs. W. spent yesterday in the emergency ward for a heart issue. She was taken in immediately, hooked up to an array of specialized machines, and attended to by a team of doctors and nurses. Tests were run and re-run at three hour intervals. She was released late in the day with copies of all her tests and the attending physician’s written report.

        In the rush to get to the hospital we forgot to take her medication list. No problem. The hospital looked up her prescription record on the Ministry of Health system and printed it out in less than a minute.

        The family doctor called first thing this morning. The tests and report had also been electronically transmitted to her. She will see my wife later this afternoon to plan her long term care.

        Cost $0.00 (Prepaid by taxes)

      • 0 avatar
        28-Cars-Later

        Don’t you pay for it with your wonderful 15% sales tax?

        EDIT: I was referring to the health care

      • 0 avatar
        garythompson

        ‘snark’,\'snottiness’? I guess I should have included a little winky face ;) No place for a little gentle teasing it seems. :(

      • 0 avatar
        mkirk

        Great, so even if the Canadian labor cost is competetive with the US labor cost, if you are talking about factory relocation that isn’t the important question. The real question is if the cost is competetive when compared to that other North American nation to our south.

    • 0 avatar
      dejal1

      Not Sergios problem. He’s asking “How much”.

      The other facts are meaningless to “his” bottom line.

    • 0 avatar
      28-Cars-Later

      Having visited Toronto in July, I was somewhat appalled at some of the expenses… you know how they say everything is bigger in Texas? Everything is just more expensive in Canada, evidently. Great city/country though I would def go back for another visit.

      • 0 avatar
        200k-min

        You obviously haven’t been to Europe or Japan or Hong Kong. The US is amazingly inexpensive for a first world nation. I’ve been appalled at Vancouver real estate prices (massive bubble there) and booze is just asinine, but overall Canada isn’t terrible. The GST is stupid, but it is only 5% + provincial. Isn’t the UK something like 22% VAT? That blew me away when living in London.

      • 0 avatar
        28-Cars-Later

        Other than Canada the only other place I have visited was Ireland and there I think it was the Dollar/Euro conversion which hurt more than the cost of things. A decent pub meal was 10 or so Euro and a Guinness varied between 4.50 and 6 Euro, which is on par for what Dollars buy you here in the States, and of course there was no tipping in Ireland which helped. Didn’t buy too many products over there so I can’t comment on the cost of living, although the VAT was quite annoying.

      • 0 avatar
        Lemmy-powered

        28 Cars Later wrote:

        “Having visited Toronto in July, I was somewhat appalled at some of the expenses … Everything is just more expensive in Canada, evidently.”

        And then:

        “…the only other place I have visited was Ireland and there I think it was the Dollar/Euro conversion which hurt more than the cost of things.”

        Friend, what you saw in Canada is very much the result of USD/CAD conversion, not just the “cost of things”. For most of the past 20 years, American visitors (and US companies) found Canada to be very cheap.

      • 0 avatar
        28-Cars-Later

        Probably right Lemmy-powered. I must have been born in the wrong decade and missed out out the strong Dollar… oh well still like Canada and Ireland, just don’t enjoy some of the taxes on top of the unfavorable currency conversion, but that’s life right?

    • 0 avatar
      200k-min

      The real issue with Canada is the strength of the loonie. Back when the Canadian Dollar was worth about 60 cents to the US Dollar an American company like Chrysler could get massive benefits in just exchange rates. After all most of the sales and profits are in US Dollars. At parity all the extra expenses of Ontario are killing them with no real benefit.

      Ottawa would be wise to devalue the currency back to mid-1990′s exchange rates to save the Ontario manufacturing base. The Albertans wouldn’t care either since they sell oil in US Dollars.

      • 0 avatar
        Chicago Dude

        The Albertans most certainly do care.

        When people talk about cheap currencies and exports, they are really talking about products for which demand is elastic. Oil is relatively inelastic – they are going to export very nearly the same amount regardless of the strength of the currency. In that case, a strong currency and strong exports is the absolute best possible scenario.

      • 0 avatar
        28-Cars-Later

        “a strong currency and strong exports is the absolute best possible scenario.”

        Evidently at the detriment of other industries. A strong currency makes exports from Canada much more expensive, so if you number one trading partner’s currency was deliberately weakened to encourage its exports, keeping your currency too high limits the exports of your [Canadian] elastic products, thus hurting Canadian jobs and industry.

        If you have an inelastic product such as oil which is already traded internationally in dollars, if it could help the rest of the economy, devaluation makes sense.

  • avatar
    Rental Man

    As a Non-Union memeber I always feel there are 2 class employee’s and the union ones have it better. As a manager I’m asked to work harder, for more hours and have my bonus and base salary based on whatever the company decides. I also do not get to retire with a pension. If the union employee worked more hours he got paid for them. If the company wants to get rid of him they have a harder time to prove he must go and must arm themselves much more facts.

    I never looked to become a union employee, I just rarely feel sorry for the cry. The now gone job-banks should say it all.

    • 0 avatar
      tuffjuff

      The other point of view is that people who are *not* unionized (i.e. the majority of contemporary jobs in the US) have the option to find a new job if they don’t like what they get. If you’re stuck at an employer with uncompetitive benefits/pay you can always look elsewhere. When looking at this stuff I wouldn’t even acknowledge the idea of unions, if that applied to my position, because I largely expect them to go the way of my grandmother. And rightfully so.

  • avatar
    acuraandy

    Ok, frequent readers here know my position on organized labor. The UAW/CAWs time has come and gone, and although I recognize and appreciate what their forefathers did for the entire working class, I really don’t think you’ll see any blood spilled at Fiatsler plants if they do strike.

    CAW leadership needs to take a good, hard look in the mirror and make the decision: make a symbolic stand and lose tens of thousands of jobs, or take the cuts and ensure the rank-and-file still HAVE A JOB. This isn’t the 1930′s. Those jobs can (and would be) absorbed by the US, Mexico, (Greece? lol) Asia, etc. where labor costs are less.

    ‘Left’ leaners, you can blame Bill Clinton for this (see: NAFTA).

    All Marchionne is doing is HIS job, maximizing profit for Fiatsler. THE MONEY HAS TO COME FROM SOMEWHERE, and the world is broke. Why is that so difficult for the unions to realize?!

  • avatar
    redliner

    Sergio has simply verbalized what has always been the case. This is a business, not a charity house. Spread the wealth, yes, but only when wealth exists, and at least for know, there seems to be very little wealth to go around at the domestic companies.

    The UAW/CAW basically want automakers to guarantee jobs and make financial commitments that may prove to be burdensome on the company if things take a turn for the worse. Who would want to agree to that?

  • avatar
    philadlj

    “I cannot institutionalize and guarantee you that wealth.”

    PRECISELY. The risk must be shared. Like it or not, companies do not exist purely to provide people with comfortable jobs for life, regardless of their success.

    They may have served that role at one point with regards to the auto industry in America and its hat, but that may have been a mistake then (in terms of building expectations it would always be that way) and certainly isn’t viable now.

    • 0 avatar
      panzerfaust

      That is certainly the money quote. Owning shares in a company means owning the risks a company takes in investments, and product introduction. Investments are not sure things. Bravo Sergio.

  • avatar
    mikey

    I’ll stick with my original prediction…There will no stike in Canada.

    Having said that,I’m not as confident as I was.

    The CAW is in uncharted waters. Think about it. No target picked? Its never happened before. The greenback and the loony at par with a strke deadline? Another first.

    As of today the former big three in Canada have a 100% united front. They ain’t blinking….unprecidented!…..can anyone say “solidarity”…? They tore that page right out of the UAW/Caw playbook.

    With Ford and GM’s field stock numbers,and the lack of fab plants, Chrysler is the only company that a stike could really hurt.

    Mr Marchionne has made his position very clear. Ken Lewenza has made a lot of promises?….commitments? Hmmmm… politicions breaking promises?

    Say it ai’nt so

    Seven days to go.

  • avatar
    Dimwit

    When it’s all said and done, the rhetoric of all sides clearly stated, there won’t be a strike. Why? Because of the state of the industry. Lewenza isn’t stupid and Mexico is looming large in the mirror. Canada cannot afford to lose the auto industry and they will not allow stupidity to jeopordize a complete industry.

    You will hear of mighty “11th hour” bargaining sessions, yadda, yadda, yadda but deals will be made.

  • avatar

    Someone mentioned that our Tax rate was 15%, now it depends on which Province or Territory you live in, here in Ontario at present its 13% which is made up from Ontario Provincial Tax of 8% and 5 % GST this combined Tax is called HST, I certainly think a Tax like this should be in the USA too, its a fairer version I think.
    That’s why Petrol(Gasoline) costs around Can.$1.29 per litre here, in Alberta that has no Provincial Tax then a litre of Gasoline would be a lot less, today the Canadian dollar was 3% over the US Dollar, some Tax people think it may goes 15% over the US dollar, the where will you all be?

    • 0 avatar
      28-Cars-Later

      “today the Canadian dollar was 3% over the US Dollar, some Tax people think it may goes 15% over the US dollar, the [sic] where will you all be?”

      Not in Canada much I would imagine.

      Taxes stifle growth so no thanks friend, we’re not looking for Canadian style sales taxes on top of the dozen or so other taxes we are already subject too.

    • 0 avatar
      mikey

      @Gentle Ted

      My fellow Canuck, The question is “where will we be”? My guess ” up the proverbial creek with out a paddle.

    • 0 avatar
      jimboy

      Gas on the weekend here in Edmonton, Ab. was $1.14 a liter, and sorry I have no idea how you convert that to gallons, but probably around $4.00 U.S. And we have no provincial sales tax; we only pay the 5% GST.

      • 0 avatar
        Carrera

        I wish I could say the same about Nova Scotia. Gas here is 1.38/liter. Ripp-off capital of the world…no car manufacturers here…not since Volvo closed shop.

      • 0 avatar
        CarShark

        According to xe.com, the CAD is worth $1.02. A gallon is 3.785 liters. So $1.14 CAD times 1.02 is $1.16 USD per liter times 3.785 is $4.39. AAA’s currently says the average cost of one gallon of regular is $3.82. That’s a 57 cent difference per gallon.

        Using that same math, unlucky Carrera is paying $5.34 a gallon. Yeesh.

  • avatar

    Notice how the CAW is always more militant than the UAW? That’s because the American labor movement is much less socialist than other labor movements. Sam Gompers, who founded the AFL, said that the biggest sin an employer can commit against his employees is to fail to turn a profit. Walter Reuther fought fiercely against communist infiltration of the UAW. There are exceptions but for the most part, American labor unions are capitalist.

  • avatar
    mikey

    @Ronnie…Your right, our system evolved from the U.K. Our government, and courts, also paterned after the mother country.

  • avatar
    oboylepr

    Maybe Ken will pull a rabbit out of the hat. In spite of the obligitory rhetoric and grandstanding maybe the CAW will negotiate an agreement that will put Canadian factories in a very competative position and attract all kinds of work up here to The Great White North.

    I can dream, can’t I?

  • avatar
    mikey

    @oboy….Dalton and company, are writing the back to work legislation for the teachers. How long do you think Ontario could survive a prolonged auto strike?

    • 0 avatar
      acuraandy

      ‘how long do you think Ontario could survive a prolonged auto strike?’

      I’d bet not long. Again, there is too much competition in the world auto labor (labour?) market for this threat to be taken seriously, any CEO (especially like Marchionne who seems to have his ‘shit together’) worth his/her weight in salt would tell CAW to kick rocks. Their demands are insane, and are reminiscent of Greek government employees.

      The same thing happened (albeit rather silently) here in Minnesota, USA, when Ford decided almost a decade ago to shutter the Twin Cities Assembly Plant, the oldest Ford plant in continuous operation (and BTW the only Ford plant in the WORLD to produce its own power, via hydro-electric plant on the Mississippi River).

      The dirty little secret there was, Minnesota’s oppressive personal and corporate income taxes were cutting into the Blue Oval’s bottom line.

      Ontatio, are you listening?

    • 0 avatar
      gosteelerz

      I wanna throw a shoe at Dalton.

  • avatar
    panzerfaust

    400 mil is a huge investment, there are plenty of other options for Chrysler Fiat, throw that money at a plant in the US, or Mexico for that matter, and as stated, Fiat has plenty of un used capacity.


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