RSSCanada’s Auto Industry: The Elephant in the Room
When a shift closing was announced at General Motors’ truck plant in Oshawa last week, union representatives went into full-out “We need government assistance” battle cry. The problems of the Canadian auto sector were blamed on the high-valued Canadian dollar and unfair international trade practices, as well as weak U.S. auto demand at this time. The foreign trade issue concerns cars that are allowed into Canada from the likes of South Korea, while there is no reciprocal access for domestically produced cars into their market.
While there is truth in these arguments, they fall short in one serious respect. They ignore the elephant in the room. “All-in” wages (base rates plus supplements) in the unionized automaking sector in Canada are as much as one-third higher than they should be. This is relative to sister plants of the Detroit Three in the U.S. and new foreign-owned plants throughout North America and around the world.
Last fall’s UAW agreement in the U.S. made auto plants south of the border much more competitive. The recent tentative agreement between Ford Canada and Canadian autoworkers (the CAW), which is likely to serve as a template for later bargaining sessions with Chrysler and GM, falls well short of what is needed to save auto production in Canada. It leaves wages for existing workers frozen at current levels and takes away some of the returns going to new hires. The Detroit Three automakers in Canada should be demanding, and the unions, for their own long-term good, should be accepting major concessions on the wage front.
You may well say that it is easy for economists to talk. They don’t have to accept the pain of an imminent wage cut. That’s true, but it doesn’t change the facts. The world keeps on changing, whether we like it or not. The Canadian dollar has risen to parity with the U.S. dollar and there is nothing to suggest a reversal of this any time soon. At the same time, the foreign competition is growing smarter and stronger.
Overall, the loonie at $1.00 U.S. is good news about the Canadian economy and also reflects our good luck in having plentiful resources. The production of goods in this country, however, has become an endangered species. Sometimes you have to give up something in the short term to ensure better results over the longer term. If you’re an autoworker, do you want higher wages now and no job in a couple of years, or would you prefer lower take-home pay for a while, but a higher probability of long-term employment?
Over the course of what is becoming a rather long career, I have come to understand that you can either resist change or you can embrace it. Let’s put this into auto-related vernacular. If you resist change, then you will be the speed bump that is driven over and left behind. If you are willing to embrace (the right kind of) change, then hop on the bus and let’s motor on down the road.
Five years from now, if the Detroit Three are largely absent from the Canadian auto scene, then some commentators will be lamenting, “Why didn’t anybody speak up earlier?” Well, some of us are. The question is whether or not we are being heard. Unless I’m missing something, the CAW-Ford agreement is a car wreck in the making.
Alex Carrick
