CanPol(?) - CAW doesn't see the train coming

[Wezil]

I think barricades around the city would be a prudent step. Kind of like Children of Men. Keep the riff raff in Windsor.

[DanS]

Don't understand this sentence. Please explain what you mean.

In Canada, the relevant benchmark is Toyota's all-in wage. In the US, the relevant benchmark is Toyota/Honda/Nissan/Whatever blended wage. Since Toyota pays the best of the Japanese transplants, the benchmark will be more favorable in the US.

???

Don't understand this. It's not like there's one plant on Canadian side, one on American side, each makes cars from start to finish. The plants are integrated to the extent that Canadian plants make parts for American ones and vice versa.

By splitting the effort, I mean that Chrysler now has to negotiate with two main unions and two main governments. Often, those folks will have divergent interests and ability to make a deal stick (or, alternatively, have a bankruptcy judge impose terms). I can see why Chrysler would seek to simplify all of this stuff.

[Dinner]

I'm sure they see the train but they're determined to play chicken.

[Wezil]

I fail to see the benefit to Fiat in signing a deal in the next two weeks. Seems to me they would be in a better position to pick up whatever scraps they like following a bankruptcy filing.

[DanS]

A bankruptcy filing probably will be part of the deal. We'll have to see.

[Wezil]

I'm sure they see the train but they're determined to play chicken.

Who will the union members blame when they get run over?

[Dinner]

The 1st article mentioned US talks with the UAW. Anyone know the status of this? The Cdn union is apparently not giving enough. What is the UAW position?

They've given some, mostly reductions in benefits and pay for new hires, but not much for current employees or retirees.

[Asher]

I'm pretty sure the CAW saw this coming. If only they were bank employees, then the government would be bailing them out.

The auto industry in Canada got FAR more government funds than our banking system did.

FAR more...

They did get bailed out, but that's not a temporary fix. It needs a permanent fix. Bottom line is the unions have made these companies uncompetitive on costs, they can either lower their costs or go find new work.

In fact, the entire reason there is an auto industry in Canada AT ALL is government meddling and financing.

[KrazyHorse]

In Canada, the relevant benchmark is Toyota's all-in wage. In the US, the relevant benchmark is Toyota/Honda/Nissan/Whatever blended wage. Since Toyota pays the best of the Japanese transplants, the benchmark will be more favorable in the US.

???

a) See above why normalizing to import wages in each country doesn't make any sense

b) If the denominator (import wage) is HIGHER in Canada then ceteris parebus your measure would make Canada more attractive

[Dinner]

Who will the union members blame when they get run over?

I think we know the answer to that.

The basic facts are the union has no real leverage here. They can try to black mail politicians by saying they won't help them unless a bailout happens but I don't think that will be enough so they're basically going to have to give everything while the companies give nothing.

[DanS]

Perhaps I'm not making myself clear. The CAW has to hit the benchmark wage in Canada, which is Toyota -- a high wage. The UAW has to hit the benchmark wage in the US, which is a blended rate -- a medium wage. The US benchmark will tend to be lower in an absolute sense, which is more favorable for Chrysler. Therefore, Chrysler would prefer to put more employees in the US rather than Canada.

[Wezil]

I think we know the answer to that.

I'm not sure we do.

The basic facts are the union has no real leverage here. They can try to black mail politicians by saying they won't help them unless a bailout happens but I don't think that will be enough so they're basically going to have to give everything while the companies give nothing.

Do you really think they will give the concessions being asked? I don't and quite frankly I think they will be unemployed before much longer. When they are collecting unemployment and trying to find new jobs (Timmies hires low skilled/educated) I suspect the concessions asked might not look so bad.

[Wezil]

Perhaps I'm not making myself clear. The CAW has to hit the benchmark wage in Canada, which is Toyota -- a high wage. The UAW has to hit the benchmark wage in the US, which is a blended rate -- a medium wage. The US benchmark will tend to be lower in an absolute sense, which is more favorable for Chrysler. Therefore, Chrysler would prefer to put more employees in the US rather than Canada.

I think I see what you are saying but I'll let KH argue the economics of that.

If I understand your end point you seem to be saying it is in the best interests of Chrysler to consolidate in the US and abandon manufacturing in Canada (yes?). While they can certainly do this they can expect Cdn sales (important as noted in the first article) to crater. Their sales in this country nosedived when Lasorda mentioned the possibility of doing just that.

[KrazyHorse]

Perhaps I'm not making myself clear. The CAW has to hit the benchmark wage in Canada, which is Toyota -- a high wage. The UAW has to hit the benchmark wage in the US, which is a blended rate -- a medium wage. The US benchmark will tend to be lower, which is more favorable for Chrysler.

This assumes that Toyota's wages in the US are the same as in Canada. In fact, total compensation for same-company employees in Canada at today's exchange rates is only ~80% that in the US. (today's exchange rates are a reasonable long-term norm, btw)

[DanS]

I thought Toyota's all-in wages were US $49 -- very similar to CAD $57. Given this, it seems like a fairly good assumption on a long-term basis (agreed on the long-term conversion rate).