Marchionne: Chrysler Has "Other Options" Beyond Canada

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.”