Ford’s Early Agreement with Canadian Union a Positive Sign
April 29, 2008

By Michelle Krebs

The news that Ford reached an early agreement with its Canadian union is being overshadowed by Las Vegas billionaire Kirk Kerkorian's purchase of the automaker’s stock, but the Canadian deal is every bit as significant -- maybe even more so.

Talks between Detroit’s three automakers and the Canadian Auto Workers union regarding a new contract to replace the current ones that expire in September appeared as if they could be extremely rancorous. A strike appeared to be a distinct possibility.

But Ford’s announcement Monday that it had reached an agreement with the Canadian union -- especially in an unheard of four months plus ahead of schedule decreases -- lessens the odds.

Canada: Advantages Dissipating

The issues are challenging. Canada had long had advantages over the U.S. for vehicle production. Two of the most significant were the fact that Canada provides national health care to workers, lifting some of the load from the automakers, and the currency advantage.

But the currency situation has nearly evaporated. The value of the Canadian dollar now roughly equals the U.S. dollar, compared to about 60 cents in 2002 and 80 cents in 2005, when the last CAW contracts were negotiated.

Still, the always outspoken CAW President Buzz Hargrove had insisted his members would not agree to a concessionary contract as their U.S. counterparts had. The CAW broke from the UAW in 1985.

Ford Contract: Concessions Disguised

Ford’s three-year agreement, which still must be voted on by the union members likely by late this week and local plant-by-plant details must be worked out, includes concessions from the union -- though they aren't described as such.

Ford’s contract with the CAW keeps wages at the current level and eliminates a week of vacation. Workers will receive a “productivity and quality” bonus of just over $2,000 upon ratification of the contract and a $3,500 payment for their relinquished vacation time.

Ford’s contract with the CAW, which represents 30,000 Big Three members, does not include the so-called two-tier wage structure as the Big Three’s contract with the United Auto Workers union does. Or, at least, it is not labeled as such in the paperwork.

In the U.S., Detroit automakers can hire non-core workers at about half the pay of current assembly-line workers. In Canada, Ford and the CAW have agreed instead to a “grow-in” period whereby new hires, currently brought in at about 70 percent of full wages and benefits, take longer to reach full wages and benefits. The time period increases to three years from two under the new agreement.

Ford also must keep its St. Thomas plant, which builds the Ford Crown Victoria, Mercury Grand Marquis and Lincoln Town Car, open until the contract expires in 2011. The union is continuing its efforts to keep it open even longer, until 2014.

The Ford agreement sets the pattern for contracts with General Motors and Chrysler, which have their own individual issues in Canada. The CAW's Hargrove said Monday he is confident that the union will negotiate similar agreements with the other two automakers.

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