TORONTO - Chrysler is already considering where it could move Canadian operations if it can't get a deal it likes with the Canadian Auto Workers union by the end of the month, sources familiar with the automaker's plans said Tuesday.
A source familiar with Chrysler's labour objectives said the company has begun the process to consider "alternative locations with more competitive cost structures" for its Canadian operations, which employ about 10,000 hourly workers at assembly plants in Brampton, Ont., and Windsor, Ont., and a casting plant in Toronto.
"There is very real and significant risk to good paying automotive jobs in Canada, at least as it stands for Chrysler, if in fact (the CAW) continues to hold onto this 1930s vestige of economic pattern bargaining," said the source.
Chrysler Canada has said it needs to cut its labour costs by approximately $20 an hour to be competitive with foreign automakers such as Toyota.
"We are hopeful that our discussions with the CAW will achieve the objective of closing the CAW labour cost gap -- and ensure our long-term viability," the company said in a statement emailed to The Canadian Press.
" As a contingency measure, however, we are evaluating alternative solutions in the event these discussions are unsuccessful. Chrysler has an 84-year history in Canada, and we look forward to continuing to build and sell great products here."
Currently, the company estimates its all-in hourly labour costs -- which include wages, benefits and legacy costs such as pensions -- to be approximately $76. To be competitive with Toyota plants operating in Canada, it says it needs to reduce those costs to $57 an hour.
Chrysler president Tom LaSorda told a parliamentary committee last week that the company may not be able to continue operating in Canada if it can't reduce its labour costs enough to be competitive.
Tony Faria, co-director of the automotive research centre at the University of Windsor, said that Chrysler could move its minivan production from Windsor to a plant in St. Louis that produced minivans until it was mothballed last year.
And the company could move production of the Chrysler 300 sedan and Dodge Charger and Challenger muscle cars, currently built in Brampton, to plants in Michigan or Mexico that produce similar-sized cars.
However, Faria said the process of terminating all Canadian employees and mothballing its plants would prove a "costly undertaking" for the company, particularly if it factors in the number of Canadian consumers who will boycott Chrysler products if it does pull out of the country.
"It's not an unreasonable threat that Chrysler is making because they can do what they say they might do, but it's something I do not believe they in any way want to do," Faria said.
He added that Chrysler will probably only pull out of Canada if it can't get anything close to what it's asking from the CAW and therefore can't reach an agreement in time to get the government aid it has requested. However, he said that even if the company and the CAW manage to reach an agreement, Chrysler could pare back its Canadian operations if it doesn't feel it got a good deal.
"I think it might not be unreasonable to presume that if Chrysler doesn't get a good labour deal in Canada, we could be seeing the end of any Chrysler future investments in Canada," Faria said.
"We would see no further money going into Brampton and... we'd probably see Brampton close at some point down the road."
CAW president Ken Lewenza has said there is no way the union will give more to Chrysler than it gave to General Motors Canada in negotiations earlier this month.
Chrysler estimates the agreement with GM, which was ratified by CAW members last week, cuts that company's labour costs by approximately $7 an hour -- an amount LaSorda characterized as "unacceptable."
The source said Chrysler Canada believes it can achieve its cost reduction goals without cutting base wages. Instead, the company will look at cutting benefits such as paid time off, unemployment assistance and overtime premiums.
When CAW benefits are compared to those of the United Auto Workers in the U.S., there is plenty of wiggle room, the source said.
For example, CAW employees receive a maximum of six weeks vacation time, while UAW employees only receive five, and CAW workers also receive substantially more break time per shift than their American counterparts.
The source said Chrysler would also consider moving to a two-tier wage structure like that used at its plants in the United States, cutting benefits for retirees and possibly developing a union-administered benefits trust, as well as scrapping other benefits like the company's tuition assistance plan for dependants.
Chrysler Canada must submit a finalized restructuring plan, including a new labour contract, to the federal and Ontario governments by the end of March in order to receive the roughly US$2.3 billion in aid it has requested.
The company has said that if it can't reach an agreement with the CAW it won't receive government aid, thus forcing it to close its Canadian operations.
