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Benefits may have cost Canadian autoworkers their advantage
WINDSOR, Ontario — Chrysler and General Motors are demanding steep givebacks in pensions and other benefits from members of the Canadian Auto Workers union on the grounds that, unlike their American counterparts, they can count on generous government-sponsored health care.
Autoworkers in Canada have long enjoyed a cost advantage over their American counterparts across the Detroit River because their health care isn't paid for by their employers, but by all Canadian taxpayers through the government.
That advantage is now being held against Canadian autoworkers in talks to prevent a GM bankruptcy and to promote a merger of Chrysler and Italian automaker Fiat.
Without a deal with Canadian autoworkers, there will be no deal for Chrysler to merge with Fiat and save U.S. jobs at Chrysler. Fiat Chief Executive Sergio Marchionne told Toronto's Globe and Mail newspaper on Wednesday that "we are prepared to walk" on the entire Chrysler merger if Canadian autoworkers don't yield.
Canadian workers are staring down steep benefit cuts as U.S.-based carmakers pull out of Canada to preserve American jobs first. Canadian auto manufacturing has sunk even faster than U.S. car making has, and 15 years of integrated North American manufacturing is unraveling fast.
A decade ago in Windsor, seven assembly plants employed 25,000 CAW members. Today there's just the Chrysler plant, operating a single shift and employing 4,500 or fewer workers. Canada has lost more than 70,000 auto manufacturing positions nationwide during the past decade.
Canadian autoworkers acknowledge that they enjoy cost savings from their national health insurance.
"We've been using it as a bargaining chip for years. It's an advantage for us as Canadians, no question about that," said Rick Laporte, the president of CAW Local 444 in Windsor, which represents workers at the Chrysler plant where Dodge Grand Caravans are made. "Where we find ourselves in trouble here is the prescription drug costs; the cost of long-term care over here."
Laporte is the chairman of the CAW's master bargaining committee, which on Wednesday agreed to resume negotiating with Chrysler. The CAW, he said, is willing to shorten lunch breaks and do other things to boost productivity for Chrysler, but it's holding firm against many health and pension concessions.
Unlike their U.S. counterparts, Canadian autoworkers don't contribute toward their own pensions, thanks to decades of collective bargaining agreements. Beyond pensions, carmakers historically have picked up the $2,200 Canadian (about $1,820 U.S.) monthly cost of nursing homes for aged and infirm retired autoworkers, along with some prescription drug costs, which for Chrysler alone exceeded $85 million Canadian ($70 million U.S.) last year.
"Even though we have the public system that covers core (health care) benefits . . . we still face a challenge in that legacy cost area. There was no system set up to pre-fund those retirement benefits," said Jim Stanford, a research economist with the CAW in Toronto.
Those so-called legacy costs have eroded the cost advantage that Canadian autoworkers once enjoyed from their health care system and the cheaper Canadian dollar.
"Those have been negotiated away in Canada, and we've lost the advantage of both of those," said Tony Faria, a business professor and auto industry expert at the University of Windsor.
Canadian autoworkers have only themselves to blame, he suggested, for adding costs that eroded the country's advantages.
National health care makes Canadian autoworkers anywhere from $5 to $7 cheaper in hourly labor costs than their U.S. counterparts, Canadian economists say. In these turbulent times, their health plan also provides a measure of security to Canadian autoworkers, who don't fear losing their families' coverage if they lose their jobs.
"I wouldn't want an American-style health care system . . . it would be absolutely detrimental," said Lino LoMedico, 47, a forklift driver who's worked for almost 18 years at Chrysler's Windsor plant.
Workers such as LoMedico, active and retired, are being told that since they have the security of national health care, they must give up some of their pension and welfare benefits.
Chrysler has two weeks to merge with Fiat or go bust. If there's no merger, then Canadian autoworkers expecting monthly $3,000 Canadian pensions would be guaranteed by law $1,000 Canadian. Even that amount, to be paid from Ontario's Pension Benefit Guaranty Fund, is no longer guaranteed because that pension protection system was underfunded by carmakers.
"The (provincial) government has allowed them to underfund it because they've always said they're too big to go broke," Laporte said. "Now we're in this position, and who is paying the price?"
In the U.S., the United Auto Workers union and carmakers have agreed on a structure to transfer the health and pension obligations of retirees to the UAW. This Voluntary Employee Benefit Association, funded by active workers and carmakers, would remain intact even in case of bankruptcy.
Canadian autoworkers want their own VEBA. Canadian law, however, still prohibits reopening a collective bargaining agreement, Laporte said.
"They continue to drive at us the costs, and we're not stupid people," he said. "We're bargainers, and we understand that long-term cost and where we are going and we've said to the company we are prepared to sit down. But until all three parties sit down, we're going nowhere. We are prepared to sit down."
Active and retired workers in Canada are nervous as the deadline looms for Chrysler. The Obama administration is calling the shots, and it's made it clear that it won't aid Chrysler as a standalone company.
"All we do is work to support the beer companies, because all we do is drink and worry," said Larry Moreney, 59, who retired nine years ago at the company's request to save the job of a younger worker.
For CAW members drinking at Purple's, a favorite watering hole across from the Chrysler plant, years of retirement planning may soon come to nothing.
"I'm really pissed off," said Kevin McInnis, 51, a forklift driver with 33 years at the Chrysler plant and four years from a retirement that now seems unlikely. "I should have been out the door, and now I have to work most of the rest of my life."
Like their U.S. counterparts, Canadian autoworkers think the Obama administration is asking too much from workers and too little of the banks that made loans to the carmakers.
"I'm truly disgusted with Obama . . . I thought change was going to come," said Liz Lesperance, 44, a single mother who's prepared her three daughters for hard times ahead. Workers have "given and given and given and he asks for more cuts . . . . there's nothing left for them guys to give back to them. I was truly disappointed with him."
Across the border in Dearborn, Mich., a Ford retiree who works as a tour guide at the River Rouge plant that makes F-150 trucks, gives a sober assessment. Speaking privately because his job doesn't permit him to talk to the media, he grumbled that workers are being asked to bear the brunt of the burden in saving the auto industry.
"It's either us or the taxpayers," he said, adding that taxpayer support for bailouts isn't high.
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