TORONTO - The Canadian Auto Workers union has reached a tentative labour agreement with General Motors of Canada Ltd. that calls for a freeze on base wages as part of the automaker's restructuring, the union said Sunday.
The deal comes three days after Canada's biggest industrial union began talks with GM Canada in a bid to help the automaker cut operating costs and remain competitive with U.S. plants to secure future car and parts assembly work in Canada.
The proposed agreement, which would run to September 2012, also suspends quarterly cost-of-living adjustments for wages and scraps annual increases to pensions among other things.
"These changes represent a major sacrifice by our active members and retirees," said CAW President Ken Lewenza.
"They will reduce active hourly labour costs by several dollars per hour, reinforcing Canada's investment advantage relative to U.S. facilities."
At the same time, Lewenza called on governments to confirm financial assistance packages for the industry and urged consumers start buying vehicles again.
The union's 10,000 members who work for GM at plants across Ontario will hold ratification votes Tuesday and Wednesday.
The CAW entered talks with GM Canada with the automaker's Detroit-parent facing the very real prospect of having to seek bankruptcy protection in the United States and Canada.
The move reflects the dire straits of the North American auto industry, which is going through its worst period since the Great Depression, with plunging sales, plant closures and massive layoffs because of the global recession, changing consumer trends and the credit crunch that has made it harder to finance a car purchase.
The union had said it was willing to help the company cut costs in its bid to qualify for Canadian government loans.
GM Canada is eligible for loans of up to $3 billion under a government aid package. It submitted a restructuring plan last month.
With the GM deal behind it, the CAW will now turn to Chrysler Canada and Ford Canada to negotiate similar deals ahead of a March 31 deadline for GM and Chrysler to finalize restructuring plans to get access to Canadian government financial aid.
Ford, which has much better finances than its North American rivals, has not asked for any government assistance in Canada or the United States.
Last week, GM Canada's parent, General Motors Corp. (NYSE:GM) filed an annual report with the U.S. Securities and Exchange Commission revealing that auditors have raised "substantial doubt" about its ability to continue operations.
At the time, Lewenza said the Canadian auto industry is in a depression that has been exacerbated in recent days by the announcement that Chrysler will eliminate the third shift at its minivan plant in Windsor, Ont., costing 1,200 jobs.
The southwestern Ontario factory is the last auto assembly plant in Canada to employ a third shift.
U.S. Steel, which counts the auto industry among its most important customers, also announced last week that it will shut down its Hamilton operations and most of its Lake Erie Steel operations, costing 1,500 jobs.
Ahead of the beginning of talks with GM, Lewenza said it was impossible to guarantee jobs in the current climate, but one condition of the negotiations would be that the automaker must maintain its proportional manufacturing footprint in Canada -- estimated to be about 20 per cent of its U.S. manufacturing capacity.
GM employs just over 10,000 CAW members at an assembly complex in Oshawa, the company's Canadian headquarters, and parts plants in St. Catharines and Windsor, in southern Ontario. The average GM blue-collar employee makes $34 an hour.
The company, which has fallen to third place in Canadian auto sales from decades as the leader, has cut about half its workforce over the last four years in a series of streamlinings and plant shutdowns.
The Canadian and Ontario governments have attached conditions to the money, including that the companies get their labour costs down.
Last spring, the union signed a three-year deal with the Detroit Three carmakers in Canada, which imposed a wage freeze that provided GM, Ford and Chrysler $900 million in concessions over the life of the deal.
GM Canada has said previously that it's in discussions with the federal and Ontario governments and the CAW about setting up a health-care plan similar to a union-owned and directed system for GM workers in the United States.
The company also said reducing pension costs and wages would be an important part of the automaker's discussions with the CAW.
There is widespread disagreement about the true hourly cost of a CAW employee to the Detroit Three automakers. Some analysts argue their all-in cost, including benefits, wages and pensions, is substantially higher than their counterparts in the U.S., while the CAW says it's lower, particularly when the productivity of Canadian plants and the exchange rate are factored in.
GM and Chrysler have asked the U.S., Canadian and Ontario governments for billions of dollars in aid to stay afloat amid slumping sales.
On Feb. 17, GM submitted a restructuring plan to the U.S. Treasury Department that included laying off 47,000 workers worldwide by the end of the year.
The 47,000 jobs to be cut around the world include about 4,000 that will be cut in Canada over the next year -- 2,600 at a truck plant in Oshawa, Ont., that will shut down this spring, and about 1,400 jobs with the closure of a transmission plant in Windsor next year.
