By on August 23, 2012

Chrysler is coming off a strong year sales-wise, but negotiations with the Canadian Auto Workers will force the company to make a tactical decision; should Chrysler take a tough line in an effort to reduce costs, or look for a quick settlement in order to hold off a strike, maintaining their sales hot streak.

All of Chrysler’s minivans and rear-drive cars (such as the Chrysler 300, Dodge Charger and Dodge Challenger) are built in Canadian plants/ With 27 percent of its vehicles made in Canada, a strike would have serious ramifications. In its native market, the Dodge Grand Caravan is a top-selling nameplate,while in the U.S., Chrysler’s double-digit sales gain could be in jeopardy.  Chrysler is thought to be the automaker being target for a strike by the CAW, but other observers feel that the company will take a hard line in negotiations.

Chrysler’s potential “wildcard” (as industry observer put it) is CEO Sergio Marchionne. A report in The Globe and Mail claims that

Mr. Marchionne has been vocal about how wage rates at Chrysler’s Canadian operations are uncompetitive and how Canadian workers need to accept so-called two-tiered wages that provide new workers with pay that’s about half of what established workers earn. The $7-an-hour gap between Chrysler’s Canadian and American plants arises mainly from the wage structure in its U.S. factories. Newly-hired Chrysler workers in that country will earn between $15.78 (U.S.) and $19.28 an hour between 2011 and 2015, compared with $29.11 for established workers…The Canadian plants of the Detroit Three also pay lower wages to new employees, but after six years, those workers are brought up to regular union rates.

Chrysler’s Canadian operations are expected to deliver nearly a third of the company’s $3 billion profit in 2012 alone. Aside from vehicle assembly, a strike at the Toronto-area casting plant would put a major crimp in the company’s production pipeline. But with Chrysler looking to cut labor costs while getting workers to accept a profit sharing deal, it’s tough to predict how the showdown between Marchionne and CAW President Ken Lewenza will go down. If Chrysler is the first automaker to negotiate, the deal will likely set a precedent for future negotiations with the other two domestic automakers.


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14 Comments on “Chrysler’s “Wildcard” In Labor Talks: Marchionne...”

  • avatar

    Quick settlements and appeasements got the three domestics into trouble in the first place. I say call their bluff. It’s a tough economy out here thanks in no small part to the government so if they want more money ask DC for it.

    • 0 avatar

      There won’t be any strike. This is just posturing. In the end the CAW will end up with less than they have now and learn to like it.

      And there won’t be a strike in the US either when the UAW starts to negotiate on their side of the border. By now even the UAW has learned the merits of not collectively bargaining away the jobs of their members.

      Let’s not forget that the Chrysler division is now a foreign-owned entity. Foreign-owned by Fiat of Italy. The government of Italy is not going to bail out the UAW or Chrysler like the government of America did. And it is unlikely that the American government will bail out Chrysler again.

      This is a Canadian matter and the Canadians will sort it out but there won’t be any strike.

  • avatar

    Keep this in mind folks. The CAW, has a similar problem to the UAW. Its called cash flow, or a lack of such.

    Yesterday, the CAW “leadership” agreed to merge?…with another of Canadas,not so big unions. The end result will be a super union. Something like the success of the Packard/Studebaker merge.

    Its all a little scary.

    These are the same folks that administer my health benifits.

    • 0 avatar
      el scotto

      Mikey, do you have health benefits that are above and beyond Canadian National healthcare? When I was stationed in the UK, English GF mostly used the national health system and a couple of private doctors for better care. I used to work with an old crusty Canadian Army gunner and he loved national healthcare.
      I hate say this, but I think the CAW’s smart response is wages remain stable, two-tier wages, and benefits remain the same. Times are hard and the market is tough.

    • 0 avatar

      “Its all a little scary.”

      Yeah, I can believe that since neither Studebaker nor Packard is still around and the super-union was unable to prevent their disappearance.

      However, this is a Canadian matter and you guys will sort it out, one way or the other. You always have before.

      I do not believe that you or your colleagues who contracted for these benefits during your employment will lose anything in the process.

      Just like in the US, your government will make up the difference or the loss, because a legal contract remains a legal contract. In the US we have the PBGA. You won’t be shorted but future employees may see their benefits package change.

  • avatar

    @el scotta….Our health care system doesn’t cover, dental, glasses, eye exams, or drugs. For these benifits GM Canada covers active employees.

    As part of the 2009 CAW/GM agreement, the CAW agreed to the “Health Care Trust” for retirees. In the U.S. its called VEBA.

  • avatar

    Fiat has better cost in Mexico, Brazil and Argentina. Chrysler didn’t have nowhere else to go, but Fiat is a whole other story.

    And then there’s overcapacity in Italy.

    Don’t know, but I’d be extra careful if I were CAW. Sure they can make some damage right now, but in the long run they might just be shooting their own feet.

  • avatar

    Mikey, When you turn 65 here in Ontario, eye exams are covered by OHIP, but not the cost of Glasses, Drugs are also covered after paying $100.00 per year currently, Dental you are on your own.

    Re the new Union, I don’t think you have any worries with the Coummunications, Energy and Paper Workers Union, that’s my old Union, I do think I am more worried with the CAW! I may be wrong too, time will tell!

  • avatar

    @Gentle Ted…I was one of those that disageed,with leaving the UAW. They didn’t want, nor ask, for my input then.

    I suspect thier not going to have any need for my thoughts now either.

  • avatar

    Initial posturing by both sides works well for the respective stakeholders. Mark Carney in his talk to the CAW on Wed made it bluntly clear that companies in Canada are sitting on a mountain of dormant cash, and that cash should be put to productive use in Canada.

    The average Canadian consumer is “tapped out” on his credit, employers cannot cut pays to the average Canadian consumer who needs to keep paying back his loans, lines of credit, mortgages, to keep the economy rolling along at an already tepid pace.

    Its a delicate balance, to uphold the Canadian economy at a 2% growth rate, the burden is on Canadian companies to step up to the plate to further the progress.

    When all the dust settles the companies will come to the table, more than the employees.

    Mark Carney’s speech to the CAW

  • avatar

    It’s annoying to read an entire paragraph in red italics. Please stop doing that.

  • avatar

    I understand that regular hourly rate in Canada of $3X.XX is high, but isn’t a wage for new employees in the US of $15.78 incredibly low? Is this frozen for the entire 4-year period or subject to performance/inflation based increases?

    I’m struggling to see how automakers can actually attract resonable employees for a salary of only 33k USD.

  • avatar

    Correct me if I am wrong here, but my understanding was that the Canadian facilities’ total labour costs compared much more favourably (yes, with a ‘u’) to the US plants when benefits were added in, because the employer’s part of health care coverage was so much more expensive in the US. Maybe looking at hourly wages rather than total labour costs per hour is not entirely objective?

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