Most readers will recall the public reaction last month when executives at the American International Group Inc. treated themselves to a week-long luxury spa retreat just days after receiving an $85-billion bailout from the U. S. It wasn’t pretty, and Americans who were watching their jobs, homes and life savings rapidly disappear rightly demanded strict accountability from companies receiving corporate welfare.
There’s nothing more insulting to taxpayers than having their hard-earned money (in this case, money that was deemed germane to rescuing America’s insurance industry) arrogantly—and ungratefully—tossed away to cover massages, golf dates and manicures. If taxpayers have to sacrifice to fund the bailout, those receiving it are expected to sacrifice even more.
It’s something for Ken Lewenza, president of the Canadian Auto Workers, to carefully consider before he spouts out any more refusals to make concessions for a government bailout for Canada’s auto industry. His union members aren’t executives, but auto workers are known as the manufacturing industry’s “gold standard” in terms of pay and benefits.
Union concessions may be key as the Big Three are standing on the brink of bankruptcy. In the U. S., they have asked the federal government for a $25-billion bailout; in Canada, a similar request to the federal and Ontario governments is estimated to be between $2.5 billion and $3.5 billion. In both countries, it has been made clear that any subsidy would be contingent on massive changes and cutbacks in the industry. The general economic downturn, corporate salaries, management mistakes and high labour costs have all been implicated as reasons for the critical state of the automakers, as well as a general failure to size down the manufacturing of gas-guzzling cars and the broad range of vehicles.
But even as discussions are underway, the CAW leader-ship has made it clear it will “absolutely not” make any labour concessions because “we don’t see this as us being the problem.” This isn’t exactly surprising, as unions have long worked to foster an “us versus them” environment in any unionized workplace. This obviously isn’t a helpful strategy under normal conditions, but it’s going to produce even more negatives now as industry leaders need absolute co-operation in developing new business strategies for a bailout.
Six months ago, Frank Stronach, head of the industry’s primary auto-parts supplier Magna International, predicted that labour costs could not be sustained and would make Canada’s auto industry non-competitive—and that was months before the economic crisis.
Stronach claims unionized workers receive compensation packages 40 per cent higher than non-union international competitors making cars in North America. Workers can earn a whopping $75 an hour just to carry out their one task on an assembly line. As such, most autoworkers are in the top third of Canadian income earners. Perhaps that’s why it’s cheaper to make cars anywhere else than North America.
I hate to mention it, but if that’s what union members get—can you imagine what kind of salaries and perks union leaders must be pulling down?
As often happens with union leaders, Lewenza is missing the big picture in his refusal to compromise. If he isn’t willing to get on-board with a new, long-term strategy, there won’t be any bailout, any auto industry and, eventually, any auto workers’ union. Is Lewenza really intent on paving the road to the destruction of the industry and even his union?
John Mortimer, president of the Canadian LabourWatch Association, wonders how CAW members feel about Lewenza’s claims, saying, “This isn’t a decision for only union leaders to make to feed their union agendas.” Chances are workers would rather have jobs than go job hunting in the midst of a possible recession.
Getting labour to make concessions isn’t going to save the auto industry alone. But without them, a bailout is unlikely. The industry adds $25 billion to Canada’s GDP and employs roughly 500,000 workers, directly or indirectly. So it’s worth saving if it can be viable.
If it can’t, other manufacturers will move in quickly to fill the void. Canadians will still want their cars and there will always be some company that is willing to provide them.