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Chrysler poised to gain from deal on new workers

Chrysler could benefit by adding a shift of workers at its plant in Brampton, Ont.


Ford Motor Co. led the way in contract talks with the Canadian Auto Workers union, but Chrysler Group LLC stands to benefit most from a key provision of the new agreement.

Chrysler, which has no employees on layoff, is the only one of the Detroit Three companies in a position to immediately capitalize on a change in the way newly hired employees will be treated – if the auto maker's recent success translates into new jobs.

First, though, the CAW must reach labour agreements with Chrysler and General Motors Co. Whether those companies will accept the deal the CAW reached with Ford on Monday is still subject to intense negotiations taking place at a downtown Toronto hotel. "I think they're trying to get to grips with what the total cost of the agreement is," CAW president Ken Lewenza said late Tuesday.

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Chrysler's decision on the contract has taken on added importance in this round of talks because its ranking among auto makers in Canada has improved in recent years as its rivals closed plants. Chrysler is poised to supplant GM as the largest car manufacturer in Canada next year and it has a larger share of its North American vehicle production in this country than any other company.

If Chrysler accepts the terms of the Ford deal, newly hired employees will be paid $20.34 an hour compared with the $33.90 paid to longer-term workers.

That's just the savings on wages. Other changes such as placing new workers in a hybrid pension that combines a defined-benefit plan with a defined-contribution plan will cut total hourly costs for new employees to somewhere in the low $30 range, compared with about $60 now.

"How much they save from that obviously depends on how many [people] they hire," said CAW economist Jim Stanford.

The strongest possibility for new hiring at Chrysler is at its assembly plant in Brampton, Ont., where it could add a shift of workers to assemble its flagship large cars, the Chrysler 300 and Dodge Charger and Challenger models. That would add about 1,000 jobs to the plant and immediately put 11 per cent of Chrysler's Canadian work force at the lower tier.

Sources involved in the talks have identified Chrysler as the most rigid on the issue of newly hired employees, with the company insisting it needed a permanent second tier of workers and not the gradual wage progression to full pay over 10 years that Ford accepted. That rise to full pay after 10 years is a better proposition for the companies than the current system, in which they reach full pay after six years.

Sergio Marchionne, Chrysler's chief executive officer, has been the most vocal about the need to match labour costs in Canada and the United States and how a refusal by the CAW to reduce those costs might lead to decisions to stop investing in its Canadian plants.

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The deal with Ford has not widened the gap in labour costs between plants in the two countries, but it's not clear yet if it reduces the gap, said Kristin Dziczek, director of the labour and industry group of the Center for Automotive Research in Ann Arbor, Mich.

Another feature of the CAW deal is that there is no limit on the number of workers the three companies can hire in Canada at the lower rate. That differs from the contract the companies signed with the United Auto Workers, which restricts the percentage of so-called second-tier employees.

Chrysler has also benefited most from the permanent two-tiered wage system at its U.S. plants that Mr. Marchionne also wanted to put in place in Canada.

"They've been able to take more advantage of the entry-level provisions so they have a higher proportion of their work force in the entry level," Ms. Dziczek said. "That in and of itself makes Chrysler cheaper per hour in the U.S. by $8 (U.S.) an hour" than Ford and Chrysler.

The CAW provision on new hires will also benefit GM, but to a smaller extent and not as soon because it's planning to close one of its assembly plants in Oshawa, Ont., next year, which will eliminate about 2,000 jobs and likely lead to some layoffs.

But about 75 per cent of the 1,400 workers at GM's St. Catharines, Ont., engine and transmission plant will be eligible to retire in the next few years so new hiring is a possibility there.

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About the Author
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


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