Ford Canada vice-president human resources Meredith Keenan, left, and Unifor national president Lana Payne shake hands to mark the opening of bargaining between Unifor and Ford Motor Company, in Toronto, on June 22.Sammy Kogan/The Canadian Press
Unifor’s new collective agreement with Ford Motor Co. was meant to provide Canadian auto workers with certainty in an increasingly uncertain world.
The three-year deal, ratified by union members on Sunday, includes wage increases, improved job security and commitments by Ford to invest hundreds of millions of dollars in its Canadian operations.
Unifor was attempting to set the bar for its coming labour negotiations with Detroit’s other Big Three automakers, General Motors and Stellantis (formerly Chrysler). Talks with GM are scheduled to begin on Aug. 10.
The reality is that U.S. President Donald Trump’s trade proposals for the auto sector – should they stick as part of the renegotiations of the United States-Mexico-Canada Agreement – would topple the financial assumptions of any labour deal.
Mr. Trump has no compunction about creating chaos.
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With the ink barely dry on the Ford labour agreement, Mr. Trump escalated his trade war with Canada by threatening to impose 50-per-cent tariffs on a slew of exports starting Aug. 19.
Although Mr. Trump is not planning to increase existing Canadian auto tariffs, this latest move was payback for various trade disputes, including one involving motor vehicles.
He is apparently irked that Ottawa didn’t just roll over after his administration imposed 25-per-cent tariffs on the non-U.S. content of Canadian-made cars. Instead, Canada rightly imposed retaliatory tariffs on U.S. vehicles.
Any other response from Ottawa would have been daft. But intellectual honesty in Washington is as scarce as hen’s teeth.
So, like any imperialist, Mr. Trump is attempting to divide and conquer the Canadian business community with punitive tariffs on other goods.
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Those levies constitute a flagrant violation of the USMCA, but American auto manufacturing is one of Mr. Trump’s pet issues.
Based on what we already know about his trade proposals, the worst is yet to come for Canada’s beleaguered auto sector.
Mr. Trump plans to monkey around with USMCA’s rules of origin for autos, which are the criteria used to define the national source of a motor vehicle.
The current North American content requirement for automobiles is 75 per cent to qualify for preferential tariffs under USMCA. Washington wants to increase it to 82 per cent.
But that’s not all.
The U.S. government also wants a new stipulation that 50 per cent of a vehicle must be made of American parts.
This is no empty threat.
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Mr. Trump has called USMCA “irrelevant” and wants more vehicles manufactured in the U.S., much to the chagrin of automakers and Unifor alike.
(Disclosure: Unifor represents some employees of The Globe and Mail, including yours truly.)
That brings us back to Unifor’s labour agreement with Ford.
“This agreement is about investing in our people and Canada’s future,” said Ford CEO Jim Farley in a statement after it was ratified.
“With this agreement and our continued investments in Oakville, Windsor and Essex, we’re building on more than a century of manufacturing leadership in Canada.”
Specifically, the deal includes a promised US$500-million investment for Ford’s Windsor, Ont., operations and another US$400-million outlay for its Oakville, Ont., assembly plant.
The agreement also includes the renewal of a “no closure agreement” and plans for a new shift to be added at its Essex, Ont., plant by 2029.
Trouble is, the business case for those investments will be toppled if Mr. Trump gets his way on increasing U.S. content for autos as part of the USMCA renegotiations.
Moving production to a U.S. plant could take years, but this agreement is only valid for the next three.
Automakers will naturally shift their strategies if there are fundamental changes to their cost-benefit analysis.
In December, for instance, Ford took a massive US$19.5-billion writedown on its electric-vehicle investments, pulling the plug on plans that had been in the works for years. It did so after determining there was more money to be made by manufacturing gas-powered and hybrid vehicles amid waning consumer demand for EVs. A pullback of U.S. government support for EVs contributed to that shift in consumer demand.
There is no reason to think that Ford wouldn’t also pivot on pickup truck assembly in Ontario, for instance, if a renegotiated USMCA shifts the economics in favour of manufacturing those vehicles in, let’s say, Kentucky instead.
Auto production in Ontario has fallen in recent decades.
Although this problem predates Mr. Trump’s first presidency, his tariffs are giving automakers yet another reason to look south of the border.
GM and Stellantis have also scaled back production in this province despite government support.
Let’s not kid ourselves. Labour agreements offer no insurance against Mr. Trump.