A WRF Closer Look at The Big Three Automaker Agreements
A WRF Closer Look at The Big Three Automaker Agreements

A WRF Closer Look at The Big Three Automaker Agreements

September 1 st 1999

Contents of the Deal

The CAW's 1999 round of bargaining with Ford Canada and Daimler-Chrysler Canada has been hailed a trend-setter. (At the time of writing, the GM contract is not yet settled, although they have publicly committed to follow the pattern.)

While the eventual agreements are impressive on several counts, the biggest buzz has been caused by wage increases averaging three per cent per year (4.5 per cent including the cost of living adjustment, which makes it 13.5 per cent over three years). The CAW/Ford agreement also included a $1,000 signing bonus for all CAW members on the active payroll, and an increase of $300 per year (to $1,200) in the vacation bonus.

According to the CAW's president, Buzz Hargrove, the top bargaining priority in this round of negotiations with Ford was improving the union's pension plan, for both present employees and past retirees. The main purpose of this emphasis is to encourage early retirement, with the hope of leaving younger workers' jobs more secure and creating new high-wage jobs for young people.

This job creation effort is further strengthened by an additional two weeks off per year (on top of regular vacation and holidays) with full pay. The shorter work time without any loss of total compensation has created, according to the CAW, 2,500 jobs throughout the Big Three. To further bolster the CAW's job creation efforts, Ford has agreed to hire 100 apprentices over the three-year life of the agreement.

The CAW has also advanced its "family agenda." Ford has agreed to a childcare program that will add a $10 per-day-per-preschool-child supplement, up to $2,000 per year, to the compensation package of CAW members with young children. It has also agreed to an annual $800 tuition subsidy for dependent children of CAW members attending college or university.

At Daimler-Chrysler, pension plan improvements, additional paid days off (10 per year!), and various family-friendly features (improved maternity, adoption, and parental leave benefits), were also part of the package.

However, in the Daimler-Chrysler negotiation, the top priority was to staunch the flow of outsourcing to parts manufacturers. Clearly aimed at maverick manufacturer Magna, the CAW was not able to leverage itself into Magna with the help of Daimler-Chrysler. Magna employees have since voted 52 per cent in favour of being represented by the CAW, although the Ontario Labour Relations Board will have to resolve various disputes regarding the validity of the vote.

The CAW did reach agreement with Daimler-Chrysler on three "work ownership" positions: (1) the company will not sell any plant, in whole or in part, during the three years of the agreement; (2) it will not outsource additional major operations (including instrument panels, transportation, and janitorial services) during the three years of the agreement; and (3) such outsourcing as might occur will be replaced with other work so that affected plants will suffer no loss in employment levels.

Analysis

Beyond the media hype generated by the bread and butter numbers, questions have emerged about the broader implications of these high-profile agreements.

Are these agreements the new benchmark for wage settlements?

The auto industry, ever since Henry Ford determined it was important to pay his workers well enough for them to afford to buy a new car, has long been at the forefront of trends. Considering that the 1990s have seen minimal increases above cost-of-living, 13.5 per cent over three years is not unreasonable.

Keep in mind that this is an industry where profits are high and production is at near capacity. The combination of low interest rates and high consumer confidence has led to optimistic projections. Management negotiators determined that the cost of a strike simply wasn't worth it.

Will these agreements place upward pressure on wage demands? Of course they will. But that doesn't mean these demands will be equally met, especially in industries where profit levels don't match those of the auto industry. And, in an era where the income gap between workers and management has been widening, an increased payment for the contribution of workers is not a bad thing.

Is an increase in inflation next?

It does workers little good if wage increases are clawed back through inflationary increases that lessen their buying power. Both Ford and CAW spokespersons insisted the cost of new cars wouldn't rise. But where, then, will the money come from?

Ford reportedly earns a pre-tax profit of $854 per vehicle sold, the second lowest profit level of all automakers. The increased cost of this settlement apparently amounts to about $300 per vehicle. One can be certain that shareholders won't volunteer to see profits cut by one-third, so another way will have to be found to balance the books.

The easiest way is for the automakers to put increased pressure on their suppliers to cut costs. It's unfair, especially considering that wages in the auto supply sector already lag behind assembly plants by as much as 30 per cent.

It's also an industry in a state of considerable flux, with merger-mania expected to reduce the number of players from 30,000 in 1986 to an estimated 5,000 in 2003. Workers in the auto parts sector have been understandably hesitant to exercise their right to join a union, the state of labour law and attitudes of shareholders towards unionization being what it is.

The result is that the auto parts industry, and particularly its workforce, will be asked to pick up the slack. These workers will end up paying a disproportionate part of the settlement that CAW members in the assembly plants enjoy.

So does this make the CAW position regarding organizing Magna seem benevolent?

The CAW was much maligned in the popular press for pressuring Daimler-Chrysler to support their efforts at organizing Magna, a key auto parts manufacturer, by making it a strike issue. But such a strike would never have happened anyway, both for practical as well as legal reasons. It was a public relations exercise, and both sides knew it.

Would it be in the best interest of workers in the auto parts sector to unionize? Without a doubt. As long as the significant gap in negotiating position between this industry and the automakers continues, these workers will be vulnerable and pay the price in terms of compensation levels and job security.

Which makes the CAW's position regarding Magna's employees seem benevolent. But this benevolence needs to be viewed with a grain of salt.

CAW's interest in Magna is historic. This company is clearly the best positioned to be a major winner in the merger game currently being played out, and a successful organizing drive at Magna will mean a huge influx of members and union dues for the CAW, as well as a further stranglehold on the industry.

Up until just now, Magna workers have resisted the CAW's repeated and public courting. The CAW even tried a top-down approach a few years back, when Buzz Hargrove had a much-publicized meeting with Magna President Frank Stronach. But the decision is for Magna employees to make, not for assembly plant CAW members to strike over.

It's ironic that instead of raising the bar for all workers, the effect of Big Three agreements will be to widen the gap between the well-paid and the not-so-well paid. Those working in the auto plants win. Those in the low-paid auto parts industry lose. Again.

Are these agreements good news for family values advocates?

With increased university tuition costs as a result of government cutbacks, negotiating an $800 per child subsidy for post-secondary education is commendable. And yet it is just another nail in the coffin of publicly funded post-secondary education, which is supposed to be available to all, regardless of income levels.

The CAW or the Big Three cannot be blamed for responding to immediate needs. But it does reflect an entrenchment of the broader public policy agenda of downloading responsibility for post-secondary education from the state to other areas of society.

Will the long-term effects of an education subsidy be the same as with childcare? In this agreement, the daycare subsidy for pre-school children is further expanded to a maximum of $2,000 per year.

For women whose first choice is to be in the workforce, great. But these trends make life more difficult for women whose first choice would be to raise their own pre-school children. Many cannot afford to do so because their husbands work at an auto parts manufacturer, where wages lag well behind those employed by the automakers and whose future job security is very much in doubt.

The hype may say this is a great deal for workers, and from the perspective of the CAW and autoworkers at manufacturing plants (to whom the CAW owes its primary responsibility of representation), it certainly is. But looking at the broader social impacts, the effects of this deal may not be as in line with the CAW's social vision as it publicly advocates. Achieving change within a social and economic system is easier talked about than accomplished.

Full details of the Daimler-Chrysler agreement can be found at www.caw.ca/chrysler/hourly.htm.

Ray Pennings
 
Ray Pennings

Ray Pennings co-founded Cardus in 2000 and currently serves as Executive Vice President, working out of the Ottawa office. Ray has a vast amount of experience in Canadian industrial relations and has been involved in public policy discussions and as a political activist at all levels of government. Ray is a respected voice in Canadian politics, contributing as a commentator, pundit and critic in many of Canada’s leading news outlets and as an advisor and strategist on political campaign teams.

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