Statement from CAW President Ken Lewenza Regarding Canadian and U.S. Auto Restructuring Announcements
March 30, 2009, 5:20 PM EST
This challenge before us is not just about saving the auto industry. This is about our overall economy, and our future as a trading nation.
Economic studies (like the recent report from the Centre for Spatial Economics) show that if the Detroit 3 disappeared from Canada, we'd lose up to 600,000 jobs. Only 25,000 of those 600,000 jobs are CAW members who work for the Detroit 3. The rest are other Canadians.
We'd go from recession to depression overnight. So this isn't just about auto. And it isn't a bailout, either. After all, these are commercial loans, not hand-outs. Bridge financing from the government's own banking institutions, the like Export Development Corporation. Not from taxpayers' pockets.
We all have a stake in keeping this industry going in Canada. We're all counting on the jobs, the exports, the taxes that are generated by this industry. It's not a bail-out, it's an investment.
And remember: direct labour costs are just seven percent of the picture. Mr. Clement said today that they are flowing the funds to Chrysler because they need it to meet payroll. They also need it to pay the other 93% of their costs. Not just payroll.
There were several positive developments in today's government announcements.
First, the Chrysler-Fiat merger. Chrysler will be stronger as a result of this merger. There could be benefits down the road for Canada: things we could produce for Fiat in both our plants in Canada.
Perhaps best of all, it will hopefully mean that Chrysler is once again run by people with a vision for auto manufacturing, rather than private equity interests, who are interested in quick cash, and nothing else.
So I want to endorse the proposed partnership with the conditions that we can negotiate adequate protections for Canada and preserve the Canadian footprint.
Second, I also endorse the plan for governments to guarantee warranties on Chrysler and GM vehicles. The Canadian government should do the same thing here.
I am also encouraged by the old-vehicle scrappage incentive that President Obama suggested. That scrappage incentive is a good idea which has already worked wonders in Italy and Germany. It promotes auto sales, and gets the oldest, most polluting vehicles off the road. We want Canada to do the same thing, in concert with the U.S.
In fact, I am very glad that Canadian officials are working so closely with Mr. Obama's team. And very glad they are sticking to the 20% footprint commitment. That is absolutely essential as we move forward - to preserve our share of this vital industry.
In fact, we could go further. Our union has proposed a North American Auto Pact. Have all three countries work together. Protect a fair manufacturing footprint for North America, and each country in it. Promote investment, technology and environment.
Now let me turn to the impact of today's announcements on autoworkers, and on auto bargaining.
First of all, I now understand what was going on last week in our Chrysler bargaining. Every time we were inches away from a deal, the goalposts kept shifting. We were pawns in a bigger drama. It was clearly impossible for us to reach that deal. Chrysler's officials must have known what was coming down today, and that's why they pulled away from reaching a deal.
Everyone should remember what the CAW has already done in the midst of this crisis. First, last May, we opened bargaining early with the three North American automakers, and reached an early settlement. We've never done that before in our history. The deal produced $300 million in savings per year for the industry, as verified by the companies themselves.
Then things got worse. Much worse: financial crisis, credit freeze, and an unprecedented collapse in auto sales. And so we agreed to re-open our May 2008 contract, so that the CAW would be part of the solution, and to preserve our Canadian investment advantage that results from attractive hourly labour costs and superior productivity.
We did what the government asked of us. We reached an agreement with GM, ratified by our members, in time for the March 31 deadline. We did that, and GM confirmed its value. They confirmed in U.S. Treasury submissions that our active costs will match the U.S. transplants.
We reached that deal and ratified it, on time. That didn't happen in the U.S. but we were able to accomplish this in Canada.
And it would have happened with Chrysler, too, if company negotiators in fact had permission to reach a deal. We would have ratified the same deal this past weekend (we had ratification meetings booked for Saturday and Sunday in all Chrysler locations). And it would have had the same effect: reducing CAW active costs to the same as the U.S. transplants, and reducing our legacy costs.
So on active labour costs, we have clearly done our job. Our wages and benefits and pension costs for our active workers, going forward, are fully competitive. There is no doubt about it.
And that doesn't even count our productivity advantage: -8% versus UAW plants and 24% versus non-union transplants.
We are not going to re-open our collective agreement with General Motors, which determines those active costs, one more time. We did it once ten months ago. And we did it again one month ago.
Re-opening our contract yet again would make no difference whatsoever to the situation faced by the industry.
And we committed to continue bargaining with Chrysler. Reducing compensation in line with that pattern. And taking additional measures to improve productivity and operations, to reduce costs several more dollars per hour.
Now today, listening to Mr. Obama and Mr. Clement, it seems they are zeroing in on legacy costs. In the U.S., this is clearly about pushing the companies and the UAW to finalize the deal on the VEBA.
First, I want to be sure people understand what legacy costs are. Legacy costs are not the compensation our members get for the work they do on the assembly line.
Legacy costs are expenses still unpaid from the past. Mostly for people who have retired. Some of whom haven't worked at the companies for decades.
The biggest portion of legacy costs results from the pension funds being underfunded. We know why that is. The global financial meltdown. That wasn't the fault of workers. And the failure of government pension regulation. That has been a real problem at General Motors, thanks to their special status under Ontario pension law. Government has a clear share of the responsibility, for the faulty funding rules they implemented.
Also, our health care costs for retirees. We have a real advantage, thanks to our medicare system. And we've done lots of innovative things at CAW to reduce legacy health costs further. Like our generics-only drug plan.
Legacy costs have become a problem for the industry today for three reasons:
Number 1: Demographics. The workforce is aging, so there are more retirees. Toyota plants in Canada don't have retirees yet. (Of course, in Japan Toyota has major legacy costs.) But they will one day. It's a fact of life that people get older. You can't do anything about that.
Number 2: Downsizing of our operations. Even as we have more retirees to support, we have fewer plants and active workers to generate the funds needed to pay for legacy costs. We've allowed our industry to wither away. We've allowed imports to take the lion's share of our market. And so today it's very hard to pay the legacy bills. If our industry was the same size as it was two decades ago, legacy costs wouldn't be a problem.
Number 3: Governments. They have a role in ensuring that pension and health programs can work long term, by effectively regulating pension funds, and by providing a strong network of public pension and health benefits.
Let me make this very clear. Legacy costs are contractual entitlements that our retired workers earned through their sweat and toil. We can't take those entitlements away from them. We have no legal right to take those entitlements away from them. Pension legislation doesn't allow us to do that, nor would we want to.
The legacy cost problem cannot be solved at the bargaining table.
We will continue to engage in discussions with the companies and governments over how to control and manage legacy costs. Innovations like our generics drug plan. Innovations like a Canadian VEBA plan to pre-fund retiree health benefits that we have proposed.
The CAW is willing to engage in wide-open tripartite discussions with the companies and with governments over how to address those legacy cost issues.
There are ways to address these issues, going forward. But it can't be done at the bargaining table. And that's why there's no reason for us to go back to the bargaining table again with General Motors.
We will continue bargaining with Chrysler. And we will continue talking with the companies and the governments over legacy issues and how to manage them going forward.