General Motors Co (GM.N) will produce the next generation of Chevrolet Camaro in Lansing, Michigan, not at the plant in Oshawa, Ontario, where it currently assembles the sports car, the company said on Wednesday.
While the move is a fresh setback for workers at GM's Oshawa operation, where employment has dwindled over the last decade, it's a win for Michigan's hard-hit auto sector.
The Canadian Auto Workers union said the Camaro accounts for 25 percent to 30 percent of GM Oshawa's current production. At a press conference, Local 222 President Chris Buckley estimated the move could affect 1,000 jobs at the plant, along with an unknown number of positions at parts suppliers.
There are just over 8,000 unionized GM workers in Canada, including more than 4,000 in Oshawa.
"It's too early to accurately predict what any employment impact might be," said GM Canada spokeswoman Faye Roberts during a call with reporters.
Roberts said the decision was a matter of improving efficiency and reducing capital investment. The Camaro is the only rear-wheel-drive vehicle built in Oshawa, and the move will consolidate rear-wheel-drive assembly at the Lansing Grand River plant, which already produces rear-wheel-drive Cadillacs.
GM has not said when it will launch the new Camaro, but an industry source familiar with the company's plans said the current model is expected to remain in production in Oshawa through 2015.
The next-generation Camaro, due in early 2016, is expected to share its underpinnings with the Cadillac ATS, so the same line in Lansing could assemble both models, the source said.
Kristin Dziczek, director of labor and industry at the Center for Automotive Research, said labor costs may also have played a role. In the United States, new hires make a lower wage than their veteran unionized peers.
"There's a considerable number of entry-level people and a lot of the older workers have already retired or taken retirement incentives," said Dziczek of GM's U.S. workforce.
There is no permanent lower wage tier in Canada. In their current contract, negotiated in the fall, the Canadian Auto Workers union agreed to a longer "earn-in" - the time it takes to reach the top of the pay scale - and concessions on benefits for new workers. But with no new hires on the horizon, those changes will not reduce costs any time soon.
Dziczek said the relatively strong Canadian dollar, which has dragged on the broader Canadian manufacturing sector, was another issue: "The loonie at par is a big factor in this."
But union leaders said GM management had assured them in writing that the new contract would not discourage future investment.
The news comes just over a week after Michigan enacted a ban on mandatory union membership. The "right to work" legislation was a blow to organized labor in the state.
But Dziczek said she did not see the new law driving the Camaro decision, as union membership is still very high at GM plants in other right to work states.
UNION TAKEN BY SURPRISE
Union leaders said they were shocked by the news, and particularly frustrated because their members made concessions in 2006 to bring the Camaro to Oshawa in the first place.
"Frustrated is an understatement," said National President Ken Lewenza. "We are outraged by this decision."
The current generation Camaro will remain at Oshawa's "flex" line, which is still set to gain a third shift as GM works towards a 2013 launch for the new Chevrolet Impala.
The latest contract for GM Canada workers came with the promise of new shifts and an extended life for the "consolidated" assembly line in Oshawa to 2014. When the deal was announced, union leaders said they expected that no one with seniority would be on layoff at GM by the end of the contract.
Separately on Wednesday, GM said it would buy back 200 million of its shares from the U.S. Treasury, and the U.S. government plans to sell its remaining stake within 15 months.
GM shares jumped 7.8 percent to $27.50 in New York trading on Wednesday.
(Additional reporting by Susan Taylor in Toronto, Paul Lienert in Detroit; Editing by Leslie Gevirtz)