OTTAWA AND TORONTO — The head of the Canadian Auto Workers union is signalling he may be prepared to compromise on the contentious issue of pay and benefits for auto workers, a day after Ottawa and Ontario announced a $4-billion lifeline for Detroit car makers.
CAW president Ken Lewenza signalled that his union may have no choice but to follow in the footsteps of its larger U.S. counterpart, much as the Canadian government followed Washington's lead on the auto bailout package.
"When you include our productivity, when you include some of the advantages we have in Canada, we're in pretty good shape, but that doesn't stop the fact that you have to watch what people are doing throughout the world," Mr. Lewenza said in an interview yesterday.
"What the [United Auto Workers union in the United States] would do, for example, would have an impact on us, what they would do in Japan ... would have an impact on us."
If the Bush administration calls on the UAW to bring its compensation into line with that of Japanese auto makers, and the CAW is forced to follow suit, some analysts have estimated that the resulting cuts for the Canadian union members could range from $15 to $25 an hour.
Prime Minister Stephen Harper and Ontario Premier Dalton McGuinty announced on Saturday that they are providing $4-billion in emergency loans to General Motors of Canada Ltd. and Chrysler Canada Inc., in lockstep with the $17.4-billion (U.S) bailout package U.S. President George W. Bush unveiled a day earlier. The loans represent Canada's one-fifth share of the Detroit car makers' production in North America.
"We are doing this on the assumption that we cannot afford, either in the U.S. or Canada, a catastrophic short-term collapse," Mr. Harper said at a news conference in Toronto. "But on the other hand, we are doing this with the knowledge that the auto makers must change the way they are doing business."
The loans come with strings attached. GM and Chrysler must present plans by Feb. 20 outlining how they will restructure their operations so that they can remain viable. They have until the end of March to present evidence that the plan will actually proceed, including striking a deal with the CAW, showing how they plan to cut costs.
The Detroit Three car makers have asked for at least $6-billion (Canadian) to help their Canadian subsidiaries cope with a massive decline in vehicle sales. According to the terms of the loans, GM will get $3-billion, while Chrysler will receive $1-billion. They will receive the money in three instalments, beginning next Sunday.
(Ford Motor Co. of Canada Ltd. is in better financial shape than its Detroit rivals and is seeking a $2-billion line of credit.)
GM and Chrysler will receive all of the money by the end of February. In return, Ottawa and Ontario are putting them on a short leash. The companies must put limits on executive compensation and report any transactions exceeding $125-million.
Ottawa and Ontario will also become shareholders of GM and Chrysler. They are to receive warrants for non-voting, common shares in the companies, equal to their 20-per-cent share of the U.S. bailout package.
The federal and Ontario governments are hoping to retain Canada's 20-per-cent share of domestic production. But the big unknown is whether they can do so as the auto sector braces for another tough year. Opposition politicians seized on that uncertainty yesterday.
"Our point is that if we put up 20 per cent of the money, we should have a guarantee that Canada has 20 per cent of the production and the jobs," Toronto-area Liberal MP John McCallum said on CTV's Question Period yesterday.
Both auto makers and their suppliers expressed widespread approval of the package. "The support announced today sends a significant signal of stability in the face of the economic and credit challenges faced by Canada's auto sector," GM Canada President Arturo Elias said in a statement, entitled GM To Earn Canada's Trust.
© The Globe and Mail
