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Marchionne throws down gauntlet, says Chrysler has ‘other options’

Hourly labour costs at Chrysler’s plants need to be the same on both sides of the Canada-U.S. border, Chrysler chief Sergio Marchionne said on Friday, just 10 days before a deadline for a strike.

REBECCA COOK/REUTERS

Chrysler Group LLC chief executive officer Sergio Marchionne issued a warning to the Canadian Auto Workers union in the midst of contract negotiations, saying the auto maker has "other options" than Canada for assembling vehicles.

Hourly labour costs at Chrysler's plants need to be the same on both sides of the Canada-U.S. border, Mr. Marchionne told The Globe and Mail on Friday, just 10 days before a deadline for a strike that would halt more than one-quarter of the company's North American production.

"Nobody in their right mind would continue to create an unlevel playing field in its own organization," he said in an interview at the annual Spruce Meadows Round Table south of Calgary. "It's impossible. We have other plants, other options."

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The issue of hourly labour costs at Canadian assembly plants operated by Chrysler and its Detroit-based rivals – and how to reduce them to match U.S. costs – is at the heart of the negotiations between the three companies and the CAW.

"You need to deal with the question of the disparity of the Canadian manufacturing environment and the American one," Mr. Marchionne said.

At Chrysler, he said, the difference will be a factor in whether the company spends $400-million to build a new paint shop at its plant in Brampton, Ont., which builds the company's flagship full-sized sedans.

"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."

A new paint shop could trigger the addition of a third shift of workers and about 1,000 new jobs, and secure the plant's future for almost a decade.

The Brampton plant is the only source of those cars.

Chrysler's Windsor, Ont., assembly plant is the only location where its minivans are assembled.

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It's unusual for chief executive officers to make such blunt comments with the deadline for an agreement in crucial contract talks just days away, but it's par for the course with Mr. Marchionne, who has ignored many of the unwritten rules that have traditionally bound the leaders of the Detroit Three auto makers.

CAW president Ken Lewenza issued a warning of his own when informed of Mr. Marchionne's comments.

"He's doing incredibly well on the retail side in Canada and you can't expect our wages and benefits to be identical to the UAW," Mr. Lewenza said. "It's impossible. If he's suggesting that's the outcome of these negotiations, we've got problems."

Earlier this week, the union said there was so little progress in negotiations that it is prepared to go on strike against all three companies simultaneously.

The union and the companies are still "miles apart," Mr. Lewenza said Friday, but he added that the discussions had become more constructive in the past few days.

Each of the three companies has tabled what are effectively the 2011 UAW agreements, he said.

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Those four-year deals provide annual profit-sharing cheques instead of prescribed wage increases and a two-tiered wage system in which newly hired workers are paid slightly more than half of what longer-term workers receive.

Mr. Marchionne said he hopes profit sharing will generate higher wages for U.S. workers than they would have earned under guaranteed annual wage increases.

"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. I don't have it and you shouldn't have it."

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About the Authors
Auto and Steel Industry Reporter

Greg Keenan has covered the automotive and steel industries for The Globe and Mail since 1995. He also writes about broader manufacturing trends. He is a graduate of the University of Toronto and of the University of Western Ontario School of Journalism. More

Asia Bureau Chief

Nathan VanderKlippe is the Asia correspondent for The Globe and Mail. He was previously a print and television correspondent in Western Canada based in Calgary, Vancouver and Yellowknife, where he covered the energy industry, aboriginal issues and Canada’s north.He is the recipient of a National Magazine Award and a Best in Business award from the Society of American Business Editors and Writers. More

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