Chairman and CEO of Chrysler Group Sergio Marchionne.J.D. Pooley/Getty Images
The battle lines are being drawn for negotiations on a new contract between the Canadian Auto Workers union and the Detroit Three car companies and the erosion of Canada's competitive position in the global industry is already emerging as the critical issue.
Chrysler Group LLC chief executive officer Sergio Marchionne outlined the key issue he wants addressed: the higher costs of assembling vehicles at the company's Canadian plants compared with its U.S. operations.
"You cannot have all things. You cannot have a strong currency, you cannot have an uncompetitive wage rate and then expect Chrysler or all the other car makers to keep on making cars in this country and be disadvantaged," Mr. Marchionne said Tuesday in Toronto.
The high value of the Canadian dollar has made Canada one of the most expensive countries in which to assemble vehicles, and long-standing competitive advantages – such as taxpayer-financed health care – were eliminated during the 2008-2009 crisis that drove the old Chrysler and General Motors Corp. into bankruptcy protection.
Hourly labour costs in Canada that are now higher than those in the United States will have to be addressed in the negotiations with the CAW, he said.
Productivity, the number of hours needed to assemble a vehicle, and all the other factors that go into Canadian costs versus U.S. costs will be put on the table so Mr. Marchionne can say: "This is what it costs me to make a car [in Canada]and this is what it costs me to make it in the U.S. We need to find a way to make those two numbers coincide."
He said he doesn't care how the Canadian labour costs are adjusted to meet the U.S. number: "I'm willing to talk about anything. I mean anything."
CAW president Ken Lewenza responded that he needs "to educate" the Chrysler CEO about how Canadian labour costs stack up against U.S. costs.
When productivity and CAW members' willingness to adopt the company's world-class manufacturing system are factored in, the differences in costs between the two countries are insignificant, Mr. Lewenza said.
"I think we're already in the ballpark ... and the difference even if it's a little bit either way, isn't going to determine the future of the Canadian operations."
Another key issue identified by Mr. Marchionne and other senior executives at the Canadian units of the Detroit Three auto makers is pay for workers that is based on profit, which is also an idea that Mr. Lewenza rejects, as the union has done since it split off from the United Auto Workers in 1985.
Mr. Marchionne made his comments at a Canadian Institute of Chartered Accountants conference in a speech that ranged from the European debt crisis to the gridlock at the Canada-U.S. border crossing at Windsor-Detroit and the Occupy Wall Street movement.
He noted that he understands why executive compensation is a key issue in the movement's criticism of bankers and Wall Street.
"It's very, very difficult to have discussions with organized labour about pay packages when you've got fundamental inequalities in the system," he said.
He said he has seen "an incredible amount of corporate greed" while sitting on various boards of directors. "If it doesn't stop the movement will continue and it will continue to get stronger."
Mr. Marchionne, who receives no salary from Chrysler, but was paid €3.74-million or about $4.9-million (Canadian) in 2010 by Chrysler's parent Fiat SpA, said the root causes of economic and social inequality need to be addressed.