Canadian Auto Workers Strike Deal with Ford

UNCLAS TORONTO 000130

SIPDIS

SIPDIS
SENSITIVE

E.O. 12958: N/A
TAGS: ETRD ELAB PGOV SENV CA
SUBJECT: Canadian Auto Workers Strike Deal with Ford

Ref: (A) Toronto 123 (B) Toronto 32 (C) 07 Toronto 457

Sensitive But Unclassified - Please Protect Accordingly.


1. (SBU) The Canadian Auto Workers (CAW) union has tentatively
agreed with Ford Canada to freeze wages and reduce vacation pay in
their new three-year contract, which will enter into force on
September 17, 2008. The agreement enables the union to avoid the
two-tiered wage system introduced in the Ford contract with the
United Auto Workers union in the U.S. last fall, but means that
Ford's Canadian auto manufacturing operations will remain much
higher cost than elsewhere.


2. (SBU) CAW President Buzz Hargrove held meetings early in the
spring with all three of the Detroit auto makers in hopes of
jump-starting negotiations (ref (A)). The CAW has never reached a
deal or even chosen a target company with which to negotiate this
early in the process; negotiations typically begin in July.
Hargrove said this so-called master economics offer will be the
centerpiece of CAW-Ford negotiations to finalize local plant issues
later this week, and will likely be voted on next weekend. If a
deal is reached and approved by the union membership, the CAW will
move on to negotiate with the Canadian units of GM and Chrysler, in
what the union believes will follow the traditional pattern of
bargaining in Canada, where a deal with one auto company becomes a
model for contracts with the other two.


3. (SBU) A contact at Ford told us on April 28 that the company was
pleased with the tentative agreement with the CAW. Demand for the
Ford Edge and Lincoln MKX crossover utility vehicles, built at
Ford's Oakville, Ontario assembly plant, along with the new Ford
Flex CUV, which will be added to the production lineup in July, has
been hot, and the company is ramping up to meet production goals
(ref (A)). Hargrove told us on April 28 that he is relieved that a
tentative deal has been reached with Ford.

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Details of Tentative Agreement
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4. (U) The CAW has agreed to the wage freeze, co-payments for
prescription drugs, and a progressive pay system for new hires over
three years (starting at 70% of base wages, but by the third year,
new hire compensation will match that of existing employees). The
union has also agreed to a cost of living adjustment (COLA) freeze
for all workers until December 2009, when COLA increases will
resume. Ford has agreed to pay employees a C$2,200 "productivity
and quality" bonus if the agreement is ratified next week, as well
as compensate workers for reducing their vacation pay by 40 hours
per year, with a C$3,500 cash payment in January 2009. Pensions
will be indexed to inflation for retirees in the second and third
years of the agreement. Ford's assembly plant near St. Thomas,
Ont., which was scheduled to be closed in 2010, and has been
operating on one shift since last year, will be kept open another
year. The company has agreed to work with the CAW to find a new
product to replace the full-sized cars produced in St. Thomas (Crown
Victoria, Mercury Grand Marquis, and Lincoln Town Car).


5. (SBU) Comment: While the CAW-Ford negotiations are running
smoothly, CAW deals with GM and Chrysler are expected to be more
difficult to reach. On April 28, GM announced more shift reductions
at its North American truck operations, reducing its Oshawa, Ontario
truck production to one shift and slashing 900 jobs. With
slackening demand for larger vehicles, the CAW will not be able to
use the production demand card it could play with Ford as a
bargaining chip with GM or Chrysler. The Detroit Three also had
hoped to narrow the C$30 per hour cost gap with U.S. operations of
Japanese automakers, and the deal fails to do that. End Comment.

NAY