By on September 21, 2012

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 would 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.

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26 Comments on “Editorial: Did The CAW Swindle Sergio?...”

  • avatar

    You’ve actually got to give a little credit to the CAW for how they handled this process – start with Ford (Ford knows that any cost reduction to them is and increase to the other 2 since they were at a disadvantage in the first place), GM falls in line and they avoid/force the one guy willing to put up a fight to play along.

    Not bad.

  • avatar
    Gardiner Westbound

    Watch for the American brand automakers to transfer more operations to U.S. and Mexican plants until there’s nothing left. In ten years they’ll all be gone.

    • 0 avatar
      dash riprock

      That would be my expectation. Ford, by previously cutting production and products produced in Canada, had the least exposure and the greatest ability to add CAW jobs as a contract sweetener. Chrysler producing a much larger % of their NA vehicles in Canada is in a much tougher position to bargain. The CAW knows this and is trying to take advantage of it. Pereversly, the company that has shown the CAW the greatest commitment of production will be treated the worst. Chrysler will probaly sign a contract they are not happy with to maintain their sales momentum, but will be making plans to never again be put in this position.

    • 0 avatar

      They will indeed be gone. The CAW reminds me of the old ditty about the former Canadian PM MacKenzie King: “William Lyon MacKenzie King sat in a corner and played with string. Loved his mother like anything. William Lyon MacKenzie King.” Ken Lewanza and King have about the same comprehension of reality.

  • avatar

    yes, the union may have won the battle, but they lost the war – they just don’t know it as usual. As Gardiner Westbound says “in ten years they will all be gone”.

  • avatar

    @kars….So we can assume that Canadians are going to stop driving cars within 10 years?

  • avatar

    Remind me again how much Marchionne paid for this. No way to see into the future, but from what I can find quickly, the currency relationship is at the highest $C to $U in 30 years or so. A 10% or so drop in $C value would make a big difference. A few days ago Marchionne was whining about not getting support from the other European car companies for govt help. If he really gets short of money, he can always bamboozle the idiots at GM out of a few billion with some alliance fantasy.

    • 0 avatar

      “If he really gets short of money, he can always bamboozle the idiots at GM out of a few billion with some alliance fantasy.”

      This was good for a billion laughs until I remembered whose money GM uses. :(

  • avatar
    el scotto

    Any comments from VW about the Routan? Rutane? Butane? as these talks go on?

  • avatar

    Sergio’s musings about utilizing excess European capacity to produce NA products says a lot about how dire Fiat’s situation is on its own continent. It’s not a desirable solution long-term, though. There’s huge exchange rate risk to that idea, and using “excess capacity” on low-margin export products to NA isn’t sustainable.

    All that gives the CAW more leverage this round. Now if Sergio wants to shift production to Mexico or the US in the future, though, all bets are off.

  • avatar

    Sergio will eventually agree to pretty much what the others have, but I for one think it suits him to have a short term strike. Why? He will get some very minor concessions, but more than that, it “psychologically” sets the stage for him to move out whatever production he can to Mexico. On his own schedule where it doesn’t hurt him. And when he announces shifting production, he just says, the CAW didn’t listen, so they get what they deserve.

  • avatar

    I tend to agree with “Mikey” and that Mr. Westbound has several bees in his bonnet too, I have seen his negative posts on many sites, somehow I think he has a particular “hate” for anything that is made by any Union be it be CAW or UAW.
    If he owns a German made Vehicle, does he not know they too are Union
    made in Germany?

    • 0 avatar

      @Gentle Ted…Yes indeed the Germans have a very powerfull Union. They even have a union guy on the board.
      Contrary to popular belief, the BMW is NOT assembled by elves in the Black Forest. You are not required to hold a PHD to bolt gas tanks on a Mercedes.

      The UAW/CAW workers could only wish for a contract, that could come close to BMW Germany labour deal.

      • 0 avatar

        The Germans have a strong export economy and have successfully convinced the world their taxicabs are on par with the best of the best, the truth being irrelevant. If UAW/CAW realized this and partnered with the automakers to try and achieve a similar lofty position for their products, everyone would be much better off over time.


  • avatar

    Nobody swindles Sergio.

  • avatar
    Roberto Esponja

    They shut down a minivan plant in St Louis about four years ago. Unless the place has been gutted, hypothetically they could reopen it. I’m sure Missouri wouldn’t mind…

  • avatar

    Hi Mikey and others, the difference in the Unions in Germany and the ones here in North America is like Day and Night, in Germany the Companies respect the Union and the Union respects the Company, something that is not going to happen in either the US or Canada in my lifetime, don’t forget the Unions in Germany have a Man on the Board of these Automakers too, I am sure you don’t see that here in North America, more is the Pity!

    • 0 avatar

      As I recall the UAW (admittedly not the CAW) actually does have a seat on GM and Chrysler’s boards:

      Or perhaps it’s the VEBA that has a seat and not the UAW proper?

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