With one swift announcement to shut down Canada's last pickup-truck assembly factory, General Motors Corp. has rocked the manufacturing sector's relationship with organized labour and triggered what could be a monumental fight over the future of auto jobs in Canada.
Just two weeks after hammering out a new, three-year labour agreement with the Canadian Auto Workers, GM said yesterday it will close the plant sometime next year and lay off 2,600 workers.
But the union says that deal committed GM to assembly at the Oshawa, Ont., truck factory until 2011.
Analysts say it is perhaps the biggest slap in the face ever for CAW leader Buzz Hargrove since it comes just as the ink was barely dry on the deal he negotiated with GM. The agreement keeps overall compensation for active Canadian auto workers unchanged at about $67 an hour.
More than 11,000 CAW members in the Canadian factories of GM, Ford Motor Co. and Chrysler LLC have lost their jobs since 1999. Thousands more are under threat if the Canadian dollar continues to rise against other currencies and current industry trends continue.
"It's very troubling news for the union," said Harley Shaiken, a labour relations specialist at the University of California at Berkeley. "The union has shown it can be pragmatic. But that is based on a level of trust. This undermines the trust that's critical to a productive relationship."
Mr. Shaiken said GM's move could make future bargaining more acrimonious and less prone to compromise.
But the immediate danger is simply a strike. The CAW, which represents 13,000 hourly workers at GM Canada, vowed to fight the closure without saying how. Mr. Hargrove acknowledged that one possibility might be to throw out the agreement altogether and then walk off the job.
Under the new pact, GM committed to assembly in Oshawa until at least 2011 in exchange for hundreds of millions of dollars in labour-cost reductions. But the language of the agreement says that depends on market demand for the trucks made in Oshawa: the Chevrolet Silverado and GMC Sierra. Also, parts of the agreement on product commitments are unenforceable until September, according to a source familiar with the document.
Mr. Hargrove called GM's move "illegal," saying it violates the whole concept of collective bargaining between manufacturers and unions.
David Paterson, vice-president of corporate affairs at GM Canada, said GM believes it bargained in good faith.
If employment levels fall further, GM may eventually be forced to repay some of the $435-million in financial assistance it has received from the Ontario and federal governments as part of its mammoth $2.5-billion Beacon investment project earlier this decade, said Arturo Elias, president of GM Canada. He insisted, however, that GM is not in violation of its financial covenants with Ontario and Ottawa.
More broadly, GM's move is a clear sign that companies are steering toward lower-cost production sites and away from organized labour as they navigate an industry undergoing profound change.
GM will build planned hybrid versions of the Sierra and Silverado trucks in Mexico instead of Oshawa. Ford Motor Co. announced last week it would build its new Fiesta small car in Mexico in a blow to the U. S.-based United Auto Workers union and its president, Ron Gettelfinger. Chrysler is sourcing new small cars in Asia.
"Buzz Hargrove has made it impossible to make cars in Canada. And Gettelfinger has made it impossible to make cars in Michigan" because of the uncompetitive compensation of their union members, said Peter Morici, professor at the University of Maryland School of Business and former chief economist at the U. S. International Trade Commission. "The production is moving out of the [union] sphere of influence."
GM had initially demanded the CAW lower its costs to narrow a $30 cost gap that exists between its workers and those employed by Toyota Motor Co. and other Japanese manufacturers in the United States. The CAW rejected that demand, saying it will not be compared to a non-unionized workforce.
