Auto union, government lack innovative solutions

Benj Gallander and Ben Stadelmann
Tuesday, April 14, 2009

Want to avoid a depression? The absolutely critical component is to save jobs. And quite simply, government, business and unions have been slow in adopting innovative approaches to do so.

One company that has been ahead of the competitive game for years and does understand the importance of saving jobs — and loyalty — is Toyota.

Once again, when it comes to treating employees well, they are the pace-setter (not to be confused with the Pacer, arguably the worst car ever). Rather than ejecting workers to the unemployment sidelines, the firm has been focusing on cutting back by using work-sharing at its plants in Britain and the United States. The recent accord scales back workload and salaries by 10 percent. Staff not willing to accept the terms can apply for early retirement.

In the United States, even General Motors is getting into the job-sharing game, albeit in a plant shared with Toyota. Workers voted 86.5 percent to take Fridays off without pay and thereby reduce production. This means that employees in the US and Britain, who already receive less compensation than GM workers in Canada, are taking another hit to retain their jobs.

Meanwhile, Canadian Auto Workers union leader Ken Lewenza seems to be living on another economic planet. He pats the union on the back for coming to an early agreement last May with GM and more recently another to lower wages by about 10 percent. It is undoubtedly hard to have your wages and benefits cut, but given the times, this package, under which compensation remains above $60 per hour, is still generous. And work-sharing does not seem to be entering the union lexicon.

Mr. Lewenza recently stated, “Re-opening our contract yet again would make no difference whatsoever to the situation faced by the industry.” Well sure it would, Ken, if your people would agree to a more realistic package that reflects the financial situation.

Lewenza also had this to say about legacy costs, which are for people who have retired: “The legacy cost problem cannot be solved at the bargaining table.” Considering that those legacy costs originated from retirement packages negotiated with the union, and that heavy millstone is a big part of the problem, it would be appropriate to make them part of the equation of a negotiated solution.

Chrysler prefers layoffs to work-sharing, having given notice that the third shift at its minivan plant in Windsor, which runs around the clock, will be purged. This will impact 1,200 employees, all of whom will be placed on indefinite leave. What if, instead of laying those workers off, the plant went to three six-hour shifts instead? Under this scenario, employees could lose up to 25 percent of their package, but the pain would then be spread out amongst all the workers.

While such a hit to the pay packet would be difficult to absorb, it is far more surmountable than the plight faced by those who lose their jobs. Let the brethren share the pain. Chrysler has cut 32,000 jobs throughout the enterprise, and plans are for another 3,000 this year. Work-sharing would have been part of a better solution. In fact, it should be looked at by any businesses and governments considering eliminating jobs.

A goal of the North American auto manufacturers has been to lower costs to compete with the Japanese. While that is admirable, new competition is not far awa,y with Chinese and Indian producers likely to make major inroads in the North American market within a decade. Obviously, their labour costs are way lower, something the corporations here might want to be considering now.

One area that never seems to be talked about these days is profit-sharing. One partial solution to become competitive is lower wages and benefits for all, but if profitability is achieved, the workers then share in the spoils.

The Canadian government has offered $4 billion in bridge financing to Chrysler and GM, but has been reluctant to attach strings to the money. Our elected reps should make certain that any funds offered require guarantees, both in terms of production remaining in this country and assets that the governments can claim if the businesses fail or do not pay back the money on time.

The government is also giving $300 per car to scrap old vehicles, to get the “big” polluters off the road. The car companies would like to see this amount increased tenfold. While the program might smell good at first sniff, it does not take into account the energy and resources needed to assemble the new replacements. Yes, making stuff creates pollution too. While running older vehicles does not create demand for new cars, it does keep mechanics occupied.

Venturing further into this field, this week the government agreed to guarantee warranties of cars sold until restructuring efforts are complete. This adds a new definition to a government lube job.

Would we invest in Toyota or GM? The former can expect a few speed bumps in the short term, but over the longer term it will continue to be successful, as competence and adaptability are integral parts of its corporate culture. While its debt load is not as heavy as others in the field, it is not insignificant given current economic conditions. So for this reason alone, we’d take a pass right now. GM? It could go bankrupt any day, or eventually be a ten-bagger. Either way, it will not be making an appearance in the Contra the Heard portfolio.