Excessive demands won’t help workers

In coming weeks, unionized workers at the Canadian operations of General Motors Corp. and Chrysler parent Stellantis N.V. will be asked to ratify new collective agreements negotiated by their union, Unifor.

They would be well advised to vote for those new contracts. They are unlikely to see better offers.

Last week, Unifor secured probably the best new contract for autoworkers in the history of the Canadian industry at Ford Motor Co. of Canada.

But the more than 5,600 workers covered by that contract ratified it with only 54 per cent of their votes.

That could signal to Unifor workers in contract negotiations with GM and Stellantis that they should hold out for something better.

They won’t get it, though, even after lengthy strikes, if it comes to that.

Full disclosure: I am represented at the Star by Unifor and having toured unionized Ontario auto plants I’ve seen first-hand the dedication of Canadian autoworkers.

In negotiating the biggest wage increases in the history of Canadian auto bargaining, Unifor national president Lana Payne doesn’t exaggerate in calling the Ford deal “incredibly strong.” More later on why that’s true.

First, it’s necessary to knock down the errant belief that the Detroit Three are hugely profitable.

That’s an assumption of almost everyone in this round of bargaining by Unifor and, in the U.S., by the United Auto Workers, currently striking at all the Detroit Three automakers.

It’s a belief held by Joe Biden. The U.S. president told UAW picketers in Michigan this week that with the industry doing “incredibly well … you should be doing incredibly well, too.”

The Detroit Three can and will pay their workers more, and Ford Canada has just done so, after decades of autoworkers falling behind in pay, benefits, pensions and other compensation.

But there’s a limit to what the automakers can pay.

The Detroit Three reported combined total profits of $91 billion (U.S.) in the last five years.

But those profits equal a mere five per cent of their total revenues in that period. That’s a bare minimum of profit required to reinvest in the business, one of the world’s most fiercely competitive and capital-intensive.

And the auto sector is, of course, engaged in a historic transition to electric vehicles (EVs) that will consume tens of billions of dollars of investment capital by the Big Three.

In a more precise measure of profitability, return on capital, the Detroit Three badly trail other industries and the non-union Tesla Inc., their chief rival in the race to win the electric vehicle market that Tesla continues to dominate.

Return on capital (ROC) — that is, return on money invested in the business — was only 10.5 per cent on average at the Detroit Three last year. Tesla’s ROC last year was 30 per cent.

Leading companies in other industries also did much better than GM’s 5.7 per cent ROC in 2022 and Ford Motor Co.’s mere 3.5 per cent.

They include a cross-section of North American industry, such as Walmart Inc. (16.7 per cent), Caterpillar Inc. (16.8 per cent), McDonald’s Corp. (23.7 per cent), and Lockheed Martin Corp. (34.3 per cent).

Unifor’s Payne says her bargaining team “successfully pushed Ford of Canada on all fronts.”

Yes.

Unifor’s contract at Ford Canada provides a 15 per cent general wage increase over three years, including a 10 per cent hike in the first year, two per cent in the second, and three per cent in the third.

There are bigger pay raises for skilled trades workers. Many workers will get $10,000 (Canadian) bonuses.

Arguably most important, the new contract restores both cost of living adjustments (COLA), paid quarterly, and defined benefit pensions that were lost long ago.

There is income assistance for workers whose plants are being retooled. And the time required to reach the top of the pay scale has been cut in half.

A distinction between Unifor and the UAW is that Unifor knows how hard to push.

By contrast, Shawn Fain, the fiery new UAW president, has already seen his demands for a 40 per cent pay hike over four years, and a 32hour work week for 40 hours of pay, fall by the wayside as unreasonable.

The Detroit Three will hold out against remaining grandiose UAW demands rather than permanently increase a cost structure that already diminishes its competitiveness.

In a worst-case scenario, Detroit Three firms that cave to excessive UAW demands will relocate more jobs to lower-pay jurisdictions in Mexico and the largely non-union U.S. South.

At its newest Mexican factory, GM pays workers a range of $9 (U.S.) to $33 per day.

By comparison, in the third year of the new Unifor contract at Ford, skilled trade workers will earn $56 an hour (Canadian), up from $44.77 now, a 25 per cent increase.

At Ford Canada, Unifor got most of what it sought for its members, and labour economists have praised the deal.

Among them, Jim Stanford, former staff economist at Unifor’s predecessor, the Canadian Auto Workers (CAW), told the Star that Canadian autoworkers’ level of compensation, taking Medicare into account, was superior to the U.S. going into this round of bargaining.

When the dust settles, it is likely to remain that way.