D1

By Kristine Owram
The Canadian Press

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TORONTO - In a series of meetings across Ontario last week, the Canadian Auto Workers told its members that union wages aren't to blame for the thousands of jobs that have bled from the Detroit Three automakers' Canadian operations in recent years.

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THE TORONTO STAR/Toronto Star-Pawel Dwulit

Members of the Canadian Auto Workers Union and Toronto and York Region Labour Councils march through downtown Toronto Tuesday, Oct. 7, 2008 in a funeral procession to mourn the loss of manufacturing jobs across the country since the Stephen Harper Conservatives came into office.

But some industry analysts say they've crunched the numbers and there's no denying it costs the North American automakers substantially more to set up shop in Canada and that in turn hurts the competitiveness of the Canadian industry and could lead to massive layoffs as General Motors, Ford and Chrysler seek to streamline their operations.

Tony Faria, an auto industry specialist at the University of Windsor, said that once new contracts negotiated by both the CAW in Canada and the United Auto Workers in the United States. come into effect, Canadian employees of the Big Three will cost their employers about $27 an hour more than their American counterparts.

Despite union arguments to the contrary, this represents a substantial cost to the Big Three automakers, which are struggling to stay afloat amid slumping U.S. vehicle sales and turmoil in financial markets, Faria said.

Before the last contracts were negotiated, the total cost of compensating a CAW employee for an hour of work - which includes wages, benefits and the so-called legacy pension costs of supporting retired employees - was approximately $77 an hour, according to both GM and the CAW.

UAW costs were slightly less, averaging approximately $73 an hour.

At that time, the U.S. and Canadian dollars were around parity.

However, UAW workers made several concessions in their latest contract, including the implementation of a two-tier wage system.

Under this system, current employees will keep their current compensation rates, but new workers will make significantly less in benefits and wages. These new workers will only cost their employers $47 an hour all-in, while non-assembly line workers will only cost $26 an hour.

In another concession, the UAW will take control of health-care benefits as of 2010, meaning the all-in cost of the workers who were hired before the two-tier system was implemented will fall to $62 an hour.

Given these changes, by 2012 the average all-in cost of a UAW employee will be approximately $52 an hour, Faria said.

In comparison, the all-in cost of a CAW employee will stay fairly stagnant, at approximately $79 an hour.

"So you could be talking a $27-an-hour labour cost difference between Detroit plants in the U.S. versus Canada," Faria said.

CAW economist Jim Stanford called Faria's calculations "terribly wrong."

Legacy costs shouldn't be included in any calculation of all-in costs because they have no impact on a company's investment decisions, Stanford said.

"The company could close all of its plants in Canada and they'd still have to pay those legacy costs. That's a promise they made to people 20, 30, 40 years ago," he said.

In addition, it's important to remember that the Canadian loonie and the U.S. greenback are no longer at parity, meaning labour is cheaper in Canada once the exchange rate is factored in, he said.

And the concessions made under the new UAW contract will actually end up costing the automakers more, not less, Stanford said.

The automakers have agreed to fund the new health-care trust with billions of dollars in one-time contributions under the theory that if they pay now, they will save later. But the companies, which are bleeding cash at an alarming rate, can't afford to make the payments, Stanford said.

"So they are now paying interest to the UAW, interest at nine per cent, on the delay in paying into the plan. This (health-care trust) thing is not working, and it's actually costing the companies," he said.

Stanford acknowledged the two-tier wage system agreed to by the UAW could save the Big Three approximately 10 per cent of their labour costs if they were able to replace 20 per cent of their workforce with new hires.

"But here's the problem: the Big Three aren't hiring anybody," he said.

Stanford argued that once you factor in the exchange rate and the irrelevance of legacy costs and discount the UAW's recent concessions, CAW workers cost their employers approximately US$53 an hour all-in while UAW workers cost approximately US$60 an hour all-in.

"The reality is, our contract, which is still coming into effect, is saving more than the two-tier system would. Our contract delivers actual savings right now," he said.