TORONTO - Members of the Canadian Auto Workers union voted 87 per cent in favour of a new cost-cutting contract with General Motors, the union said Wednesday.
The deal reached between the union and the struggling automaker last weekend includes a wage freeze to September 2012, the elimination of an annual bonus and a reduction in paid time off, among other concessions.
"These changes are difficult for our members and retirees, but CAW members at GM agree that accepting these changes is the best choice under the circumstances," said CAW national president Ken Lewenza.
The deal is contingent on GM winning federal and provincial support
GM has also promised workers that Detroit-based parent General Motors Corp. (NYSE:GM) will keep 20 per cent of its total North American manufacturing volume in Canada.
Many workers who voted on the deal said they supported the agreement only reluctantly, calling it "painful" but "realistic."
"Our labour costs did not cause this global crisis, and labour concessions - no matter how deep they go -- cannot solve that crisis," Lewenza said.
"However, our members understand that the CAW must be part of the solution, and we have done that."
GM welcomed the ratification of the agreement.
"This demonstration of leadership and shared sacrifice by CAW members provides a very significant positive boost to GM Canada's business restructuring progress in Canada," the company said in a statement.
GM said it will now work to conclude support agreements with the Canadian and Ontario governments that are needed to complete the company's restructuring.
Without government aid from Canada and the United States, GM has warned it could go bankrupt.
The contract freezes wages until 2012 and suspends cost-of-living adjustments for both wages and pensions. It also reduces paid time off by 40 hours a year, scraps an annual $1,700 bonus and cuts company contributions to union-sponsored programs by a third.
Under the agreement, active workers and retired members under 65 will also contribute $30 a month to their health and other non-wage benefits, while retired members over 65 will contribute $15.
Analysts have variously described the deal as "trivial" and a "wet noodle," and many say it fails to address GM Canada's pension issues.
GM has warned the cost of its pension plan will balloon as the ratio of active to retired workers is expected to grow to five to one by next year once its previously announced plant closures are completed.
However Lewenza challenged the union's critics to provide credible economic evidence that even deeper labour concessions would make any meaningful difference to the future of the auto industry.
"Our labour costs constitute seven per cent of the cost of producing a vehicle. The critics who demand deeper wage cuts know full well that they are economically irrelevant -- they just see this as an opportunity to attack unions, no matter what we do," he said.
The company will close its truck plant in Oshawa, Ont., this spring and its transmission plant in Windsor, Ont., in 2010, paring the company's Canadian workforce to 7,000. This is down from about 20,000 in 2005 and about 12,500 today.
The labour contract is part of a broader plan by GM to restructure its global operations with the help of tens of billions of dollars in loans and other aid from the U.S. and Canadian governments.
The company hasn't specified how much it needs from the federal and Ontario governments, but has said it will be more than the $3 billion originally requested.
GM has been hit particularly hard by the slump in auto sales. The company's Canadian sales were down by a startling 56.7 per cent in February compared to a year earlier.
The CAW will now turn to negotiations with Chrysler Canada and Ford Canada. Pattern bargaining dictates that any agreements reached with these two companies will be very similar to the union's deal with GM.
Both GM and Chrysler need to submit their finalized restructuring plans, including labour agreements, to the Ontario and federal governments by the end of March in order to receive billions of dollars in emergency loans.
Ford Canada will also renegotiate its contract with the CAW, although the company has said it doesn't need financial assistance from the government. Instead, Ford has asked for incentives to bring consumers back to the showroom floor.
All three companies have been hit hard by declining sales and are struggling to remain viable in the weak economy.
Industry Minister Tony Clement said the agreement is another step in the restructuring of the auto industry.
"This is a time for all stakeholders to work together and, frankly, to give a little in the interest of keeping a sustainable industry in Canada," he said in a release.
"My officials and I continue to work closely with GM Canada as we continue our due diligence."
