Early this month Labor Notes published a piece critical of the Canadian Auto Workers’ new contracts with the Detroit 3 auto makers. Following is the CAW’s account of the bargaining and contracts.
The Canadian Auto Workers union has just reached new master and local contracts covering its 20,000 members who work at GM, Ford and Chrysler. Labor Notes readers may be interested in both the provisions of the new contract, and in the political and organizational strategies followed by the union before and during the bargaining.
The 2012 auto talks took place in the context of a decade-long deindustrialization that has hammered Canadian manufacturing. Beginning around the turn of the century, Canada’s economy shifted structural gears: natural resource export projects (focused largely in Western Canada’s tar sands region) became the leading force in the national economy.
A side-effect of that resource boom has been a dramatic appreciation of the Canadian currency—which has risen 60 percent against the U.S. dollar in the last ten years (in step with surging global commodity prices). Canadian manufacturing costs thus look dramatically higher in international terms than they used to (even though actual domestic labor costs, relative to Canadian consumer prices, have been stagnant).
Opposing that shift to a resource-dominated economy, the CAW has campaigned for a more balanced, sustainable approach to economic development. The union has called for strict limits on foreign takeovers of resource companies, strong environmental regulations to slow down tar sands expansion, interventions to limit appreciation of the exchange rate, and pro-active procurement strategies by government to support domestic manufacturing.
In the lead-up to bargaining, the CAW launched a focused campaign for a new national industrial strategy for auto, called “Rethinking the Auto Industry.” In formal submissions to government officials, web and social media materials, and an Ontario-wide series of community town-hall meetings (involving some 3,000 activists and community leaders), the CAW argued that labor costs are not the central determinant of manufacturing success in auto or any other sector. Instead of joining a global race-to-the-bottom in wages and labor standards, the CAW argued for a ten-point automotive policy strategy aimed at maintaining a proportionate share of auto production in Canada.
The union’s proposals included government ownership of minority equity shares in the major automakers, an end to free trade agreements, and support for environmental improvements in vehicles and manufacturing processes. Local activists collected tens of thousands of signatures on a “Good Jobs Pledge” supporting the concept of an interventionist national auto strategy. (All materials are available at rethinktheeconomy.ca.)
The CAW’s initiative generated significant national media attention. While conservative political and media commentators labelled the union’s ideas dangerous and radical, the campaign certainty succeeded in broadening debate about the future of Canada’s auto industry beyond just labor costs.
Companies Bemoan Higher Costs
Ahead of bargaining, each of the three companies launched aggressive media campaigns arguing that Canadian auto wages were far higher than U.S. costs (in light of the escalation of the Canadian currency). Ford complained of a $15 per hour total cost gap, while Chrysler said CAW costs were 20 percent higher than in the U.S. Base production wages in the CAW contracts are $34 per hour. Pensions for production workers equal $68 per month per year of service. These higher costs are partly offset by savings resulting from Canada’s public health care system, but overall costs are higher in Canada (when the currency is as high as it is now).
All three companies threatened disinvestment from Canadian operations if the cost gap versus U.S. operations was not closed. They also demanded that the CAW accept a permanent two-tier wage structure for new employees (comparable to the system now in place in U.S. plants). Chrysler’s new CEO Sergio Marchionne was especially explicit, warning that Canadian plants would close if the CAW did not match American labor costs. Company officials and media commentators predicted that this was the round of bargaining when the CAW would finally be forced to accept a profit-sharing system. (The CAW’s opposition to the profit-sharing philosophy was an important factor in its 1985 breakaway from the U.S.-based United Auto Workers, UAW.)
Officials from Canada’s right-wing federal government echoed the company claims, arguing it was up to the CAW to “save” the Canadian auto sector through wage concessions. This was the first round of bargaining since the 2009 restructuring, when the Canadian and Ontario governments participated in the joint rescue of GM and Chrysler (led by the U.S. Treasury). The two Canadian governments contributed $14 billion (Cdn.) to those bailouts; many now argued the union should “pay back” this assistance by accepting wage concessions.
Preparedness
To prepare for the bargaining, the CAW convened a series of shop-floor leadership training events, culminating in a weekend-long conference at the union’s educational centre at Port Elgin. At that session, 300 shop floor representatives and stewards participated in workshops on the arguments (including the problems with two-tier wage and profit-sharing systems), in-plant communications strategies, and strike readiness. The union also built a fast-response communications network linking the national union and all locals. Through this system, daily leaflets were distributed in the plants during the critical period of the bargaining, supplemented by extensive email and social media outreach.
The previous contracts, negotiated during the 2009 restructuring of the industry, expired at midnight on September 17. The CAW retained the legal right to strike at all three companies (unlike in the U.S., where the right to strike at GM and Chrysler was suspended by the U.S. government until 2015 as part of the bankruptcy restructuring). This turned out to be important in the union’s ability to reach an acceptable deal.
The union’s pre-bargaining positioning emphasized the need to reject further wage and benefit concessions, given the auto industry’s impressive (if fragile) turnaround since the 2009 crisis. Given the dollar’s impact on relative costs, the CAW signalled it would contemplate forms of compensation improvements (such as lump-sum benefits) that would not increase the fixed-cost gap between Canadian and U.S. plants.
The union also indicated its willingness to negotiate around the terms of the new-hire grow-in program, a long-standing feature of its collective agreements in the auto industry and elsewhere. Under a new hire wage grid, new hires start at a lower rate and “grow in” to full wages and benefits over some years; the union argued this is preferable to a permanent two-tier wage structure. Given the impact of the Canadian currency on relative costs, this was seen as a way of enhancing the chances for future investment (and hence hiring) in Canadian plants without permanently reducing the level of compensation in the industry.
No Target Company
All three companies rejected this broad framework for an agreement, however. So as the September 17 deadline approached, the union adopted an unusual tactic: instead of selecting one “target” company to negotiate the first contract, it imposed a contract deadline on all three companies, threatening to stop work across the industry unless the companies abandoned their demands for concessions and accepted the union’s proposals. This unprecedented stance required a high degree of local readiness to underline the position of the union’s bargaining committees; strike committees readied for a work stoppage at all three companies, with a special national conference of strike captains from all three firms and detailed local preparations.
Three days before the deadline, Ford Canada indicated its willingness to negotiate around the union’s preferred framework (including lump-sum payments and no permanent two-tier system). So the CAW announced it would place its main emphasis on reaching a deal with Ford—but kept the strike deadline in place at the other two companies (so that no company could “abstain” from negotiations). This sparked an angry public reaction from Chrysler, hinting darkly that the CAW must abandon its pattern contract system or face disinvestment.
A tentative settlement was reached with Ford mid-day September 17. Talks also began moving quickly with GM and Chrysler, as the deadline approached at those companies, too. However, late that evening, the CAW agreed with GM and Chrysler to postpone the strike deadline indefinitely so long as progress continued to be made. By that point both remaining companies had indicated a willingness to engage around the pattern framework reached with Ford. But the union retained the right to re-impose a strike deadline in the event that talks reached an impasse, with 24 hours’ notice.
The Terms
In the subsequent days, first GM and then Chrysler eventually came to accept the terms of the CAW-Ford pattern. This consisted of a four-year agreement, with a freeze in base wages, $9,000 in lump sum bonuses, a freeze in pensions, and some incremental benefit improvements. The COLA system was suspended for most of the contract, but the union succeeded in keeping the COLA language in the collective agreement, and quarterly wage adjustments will come back into effect just before the contract ends; the existing COLA adjustment (33 cents per hour) was also retained.
New hires will begin work at 60 percent of base wages, growing in to full wages and benefits after ten years of seniority. They receive full health benefits, statutory holidays, and childcare subsidies as soon as they finish probation. At General Motors, on the strength of the new hire grid, the union also managed to close the door on a category of temporary workers (called SWEs) which the company had been abusing since 2009; now this category can only be used for its true intended purpose (providing supplemental workers only during launch periods).
On the difficult issue of pensions for new hires, the companies (like all employers these days) pushed hard to eliminate defined-benefit pensions entirely, replacing them with individual savings accounts. All the companies claimed that they could not add any new pension liabilities to their balance sheets, given the financial pressures they face. The union resisted this demand, citing the well-known problems with defined-contribution plans.
In the end the two sides agreed on a two-part pension consisting of a smaller defined benefit supplemented by a group savings plan. (This “hybrid” model had been pioneered by the CAW a year earlier with Air Canada.) The compromise system preserves the principle of the defined-benefit pension, and hence keeps the door open for future improvements (depending on economic and financial conditions, of course). Compared to the experience at many major manufacturers in Canada where defined-benefit pensions have been eliminated entirely for new hires (like U.S. Steel, Vale Inco, and St. Mary’s Cement), this was seen as a significant victory.
Each company also made commitments to production, investment, and employment at their various Canadian locations (although the union’s past experience with this type of contract commitment suggests they are very hard to enforce).
Overall labor costs will remain approximately stable under this deal. Given the three companies’ strong production and marketing performance in Canada, it is unlikely they will seriously contemplate disinvestment from Canadian facilities as a result of this deal.
Strong Ratification
The agreement was ratified strongly by CAW members at all three companies—by an 82 percent margin at Ford, 73 percent at GM, and 90 percent at Chrysler. While the compensation improvements in the agreement are modest by any measure, union members recognized and endorsed the importance of defeating the companies’ demands for more concessions (despite the auto industry’s continuing recovery), for a profit-sharing system, and for a permanent second tier of new hires.
A few external critics have argued that lengthening the new hire wage grid to ten years (from six previously) is tantamount to a two-tier system. This concern was not raised at any of the ratification meetings for the new contract. The companies certainly do not view the new hire grid as equivalent to a two-tier system; indeed, GM and Chrysler only eventually agreed to the arrangement under threat of a work stoppage.
New hire grids (of ten years or even longer) are a common feature of collective agreements in Canada. The union’s focus was on avoiding the creation of a permanent “second class” of workers, which would result in an eventual major downward shift in wages. This would undermine labor’s long-run effort to establish a well-paid compensation standard in heavy manufacturing.
Other things being equal, of course, shorter grow-in periods for new hires are better than longer ones (just as wage increases are better than lump-sum payments, when they can be bargained). But the grow-in system is not seen as a matter of principle in the same sense as resisting profit-sharing systems, two-tier wage deals, or outright wage concessions. At any rate, since no union can “dictate” contract terms in the present economic environment, the key test is whether a union is mobilizing and fighting back—both in collective bargaining and in the political arena—not whether the final agreement reached is somehow “ideal.”
In the ratification meetings the CAW leadership stressed the importance of continuing the union’s campaign for a national auto policy, acknowledging that the union’s ability to confirm future investments through collective bargaining is limited. An active role by government is required to ensure that Canada retains a proportionate share of this valuable industry. Leaders also spoke of the need to strengthen ties (at both the national and the local level) with the UAW, in hopes of limiting the companies’ efforts to whipsaw one union against the other.
The next big challenge facing the CAW is to complete the formation of a new union, in conjunction with the Communications Energy and Paperworkers union of Canada (CEP). This new organization will represent over 300,000 members in a wide range of industrial sectors and will be the largest private-sector union in Canada.
From the beginning this initiative has emphasized the urgent need for union renewal and for a dramatic expansion of new organizing. The new union concept has been endorsed by conventions of both unions, and the two sides are now working toward the launch of the new union (its name to be determined) sometime in 2013. Materials related to this project are available at newunionproject.ca.
Jim Stanford is an economist for the CAW.
