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Chrysler threatens to pull out of Canada

Thursday March 12, 1:21 pm ET
Chrysler threatens to pull out of Canada if it doesn't get labor concessions, government aid

OTTAWA (AP) -- A top Chrysler official issued a grim threat to Canadian lawmakers, warning the struggling U.S. automaker may shut down its plants in Canada if it doesn't get significant labor concessions and government aid.
"Chrysler LLC cannot afford to manufacture products in a jurisdiction that is uncompetitive, relative to other jurisdictions," president Tom LaSorda told a Parliamentary committee Wednesday night.

Chrysler's labor costs in Canada work out to about $20 an hour more than automakers like Toyota Motor Corp. and Honda Motor Co., LaSorda told the committee.

"Currently Chrysler CAW (Canadian Auto Workers) are not competitive," he said.

The automaker also asked for roughly $2.3 billion from the Canadian and Ontario governments and demanded relief in a tax dispute with Ottawa.

"Failure to satisfactorily resolve these three factors will place our Canadian manufacturing operations at a significant disadvantage relative to our manufacturing operations in North America and may very well impair our ability to continue to produce," LaSorda said.

The company has about 9,000 employees in Canada, where it operates assembly plants in Windsor and Brampton, Ontario, and a casting plant in Toronto.

Rick LaPorte, president of CAW Local 444 in Windsor, said Chrysler's threat to pull out of Canada is a slap in the face to workers. Union officials met with Chrysler on Wednesday, but there has been no progress toward concessions and no further talks are scheduled, LaPorte said.

Ontario's economic development minister downplayed Chrysler's threat, saying the automaker was simply laying out its worst-case scenario.

"I know Tom LaSorda, he's a great Canadian and he's not somebody who wants to be known as they guy who shut down Chrysler," Michael Bryant said Thursday. "It was a ham-fisted way of expressing the reality that, in the absence of an agreement, Chrysler's going to face critical challenges."

Chrysler LLC and its Canadian subsidiary have been hit particularly hard by the slump in auto sales. Chrysler's Canadian sales were down 27 percent in February compared with a year earlier.

General Motors Canada, which has also asked for billions in government aid amid slumping sales, reached a new agreement with the Canadian Auto Workers union last weekend, providing labor cost concessions. Workers approved the deal in voting on Tuesday and Wednesday.

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 Canadian dollar ($1,319) bonus and cuts company contributions to union-sponsored programs by a third.

However, the agreement does little to address health and pension costs that both Chrysler and GM say are growing at an unsustainable pace due to an increasing number of retired or laid-off workers, said Tony Faria, an auto expert at the University of Windsor.

Because the CAW follows pattern bargaining with the Canadian branches of the Detroit Three -- Chrysler, General Motors Corp. and Ford Motor Co. -- it's unlikely Chrysler will be able to negotiate a better deal, he added.

However, Joe D'Cruz, a professor at the University of Toronto's Rotman School of Management, said wages only account for 7 percent of the company's costs, and Chrysler has bigger issues to deal with if it hopes to become financially viable again.

Both GM and Chrysler need to significantly cut their operations and brands and improve consumer perception, and even that may not be enough, he said.

Chrysler has examined several alternatives to help it stay afloat, including an alliance with Italian automaker Fiat Group SpA and a merger with GM.

D'Cruz said if Chrysler does declare bankruptcy, it's likely that another company will buy the company's minivan business and Jeep brand. That's good news for the company's minivan plant in Windsor, but means the future of Chrysler's car plant in Brampton remains "a big question mark."

Ford Canada also plans to 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.