- The Washington Times - Tuesday, October 2, 2007

TORONTO — Canada’s automotive manufacturing base took a major hit last week when General Motors Corp. offloaded its retired worker health care costs to the United Auto Workers union.

That, coupled with Canada’s strengthening currency, has Canadian business analysts fearful that Ontario’s auto plant towns like Windsor will look like ghost towns in the years ahead.

For more than 30 years, Canada’s low dollar and nationalized health care system have given Canada’s auto manufacturing and assembly plants a competitive edge over their U.S. counterparts, said Dennis DeRosiers, a Toronto auto consultant. Private health insurance added between $10 and $25 an hour to labor costs for the Big Three in the U.S.

“Those days are gone,” Mr. DeRosiers said. “The dirty little secret” is that the Canadian Auto Workers union, in its last three or four contracts, ate up Canada’s health care cost advantage in higher wages and other benefits.

That and the surge in Canada’s dollar to parity with the U.S. greenback add up to “higher costs for active workers in Canada,” he said.

GM’s agreement in the U.S. transfers its $51 billion retiree health care obligation to a trust run by the UAW. Most business analysts expect that move will cut GM’s labor and benefits costs by nearly $20 an hour to $55 an hour. That puts the U.S. within reach of Japan’s $48-an-hour costs and suddenly much cheaper than Canada’s $70 an hour.

Canadian Auto Workers President Buzz Hargrove has tried to put the best face on the GM deal, arguing it applies only to retired workers. But he admits the pressure is on his membership to boost quality and productivity in the face of a much tougher business environment.

To stay competitive, Mr. DeRosiers said, Canada’s auto workers will have to accept lower wages for some union workers, just as the UAW did in its deal with GM.

“In Canada, a union member in a car plant whether they’re sweeping the floor or building a car is paid the same,” Mr. DeRosiers said. “And that will have to change.”

“The future of the Canadian auto industry lies in the six inches between our ears. We need to invest in our brains, in our research and development and infrastructure,” he explained, or else Canada faces a long-term hollowing out of its industry.

In 1985, when the CAW split from the UAW, Canadian workers enjoyed a number of advantages. But Canada’s auto manufacturing industry has been shrinking for eight years with 20,000 jobs lost in assembly and parts plants.

“In 1999, Canada was the fourth-largest auto producer in the world. Today, we’re probably 10th,” said Canadian Auto Workers economist Jim Stanford. “We have no home-grown auto industry. It’s all foreign investment.”

With production and manufacturing plants running at $1 billion each, Mr. Stanford says the U.S. automakers won’t shut down their assembly lines tomorrow. “But if the contraction is not arrested, it will cost today’s industry jobs in the future,” he said.

Toronto filmmaker Malinda Francis, who is completing a pair of documentaries on the twin Motowns of Detroit and Windsor, said Windsor’s unemployment rate of 10 percent is one of the highest in Canada. With businesses closing every month, people in Windsor now refer to their town as “Flint, Canada.”

“There are only three industries in Windsor — the casino, restaurants and bars, and the area’s auto plants,” she said, “and they’re all in decline.”

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