(Repeats story that ran late Friday)
By John McCrank
TORONTO, March 13 Chrysler [CBS.UL] cannot
afford the same labor agreement General Motors (GM.N) signed
with the Canadian Auto Workers union and if the deal cannot be
sweetened, it would be more cost effective for Chrysler to pull
out of Canada, a source with direct knowledge of the situation
said on Friday.
The CAW said the GM agreement, ratified Wednesday, shaves
several dollars an hour off labor costs for active employees
and significantly reduces the costs for retirees.
Chrysler said it needs to cut C$20 an hour from a total
C$76 an hour in labor costs if it wants to stay viable in
Canada. Estimates are that the CAW-GM deal offers slightly over
C$7 an hour in savings.
"The pattern cannot be met," said the source, who asked not
to be named because of the sensitivity of the situation.
"If Canada says we don't want to be competitive, OK, fine,
the costs that (Chrysler) would incur in today's current labor
agreement versus the one negotiated with the UAW would put a
penalty that's huge, in the hundreds of millions of dollars...
so, for a few hundred million, it's easy to move the product,"
the source said.
A deal in the United States between Ford and the United
Autoworkers union brings total labor costs down to $55 an hour,
and to $50 an hour by 2011, in line with those of foreign
automakers with U.S. plants.
Chrysler has applied for emergency loans to the governments
of Canada and the province of Ontario. It has also appealed to
the U.S. government for aid, as the recession has led to a
brutal downturn in the auto sector, with North American sales
at their lowest levels in decades.
The company has received $4 billion in emergency funding
from the U.S. Treasury and has requested up to an additional $5
billion more. It requested $3.2 billion in Canada, but the
Canadian government has yet to say whether or not the financing
will be approved.
General Motors of Canada has also requested loans in Canada
and the United States.
In order to help both companies qualify for the aid, the
CAW agreed to reopen the three-year collective agreements
reached with them, as well as Ford Canada (F.N), last May.
Ford is not seeking government aid, but it too said the
CAW-GM deal was too weak.
At current exchange rates, Chrysler's total Canadian labor
compensation would be around $59.38 an hour, based on the C$76
figure, and would be around $42.97 an hour at C$55 -- well
below UAW compensation and that of the foreign automakers in
the United States.
But Chrysler has said a deal based on the exchange rate
would make bad business sense, because the rate always
fluctuates. In November of 2007, the Canadian dollar rose to a
record high of $1.10 versus the greenback, but then quickly
fell to more historically normal levels.
In labor talks, the company counts one Canadian dollar for
one U.S. dollar.
Total labor costs include base wages, payroll taxes, paid
time off, pension costs, and union-sponsored programs, among
Chrysler is not looking to cut employees' wages, the source
said, saying it had presented the CAW with a list of areas
where it could make cuts to achieve the target, largely based
on the UAW deal.
Some of those areas include giving up tuition
reimbursement, foregoing childcare payments, lowering maximum
vacation time to five weeks from six, and bringing active and
retired workers' shares of the costs for healthcare coverage
into line with those of UAW members, which are around two and
three times higher, respectively.
Chrysler makes large sedans in its Brampton, Ontario,
plant, which could be moved to U.S. plants with more capacity.
Its Windsor plant makes minivans, production of which could be
moved to its recently mothballed plant in St. Louis.
(Reporting by John McCrank; Editing by Gary Hill)