Canadian Auto Workers Ratify 10-Year Two-Tier

As negotiations with the Detroit 3 automakers began, Canadian Auto Workers President Ken Lewenza said, "Workers deserve to share in the benefits of the auto sector recovery they helped achieve." Labor costs, CAW leaders argued, constituted only 5 percent of the cost of vehicle production, so there was no need for workers to concede more. All three companies are making a profit.

On the other hand, leaders also spoke just as clearly about their desire to “avoid adding fixed costs” to the companies and their concern about the fragility of the employers’ competitive situation. As time went on, it was clear which story they really meant.

At the GM ratification vote last week in Oshawa, Ontario, for CAW Local 222, the spokesperson for the national bargaining committee ended his presentation with a claim that “we resisted concessions.”

But looking at the four-year contracts, it is easy to see, through all the self-congratulation, that the CAW has negotiated its own “made-in-Canada” concessionary two-tier agreements.

New hires will now have a 10-year “grow-in” to regular pay, starting at 60 percent of the current rate of $33.85 an hour. This is a step backwards from an earlier “non-concession” (given up before the bankruptcy era) which had new hires starting at 70 percent and moving to full rate in six years. As well, new hires will have to contribute to their pensions (also conceded in the earlier contract), and those pensions will be “hybrid” mixtures of defined-benefit and defined-contribution plans.

Wages for existing workers will be frozen for four years. They will get a lump-sum signing bonus of $3,000 and three yearly payments of $2,000, said to replace cost-of-living increases. The COLA will be reinstated in June 2016.

In the U.S., the first post-bankruptcy auto contracts were signed a year ago. The second-tier wage there, which was first instituted in 2007, is permanent and tops out about a third below first-tier workers, with no defined-benefit pension. U.S. first-tier workers also took a wage freeze for four years, with annual bonuses that vary widely among the three companies.

The Canadian agreements do include commitments to maintain some of current production at various facilities at all three of the employers. Bargainers said the GM contract would end arbitrary use of temporary workers.

Union Proposed It

The 10-year two-tier agreement was the union’s proposal, a response to the companies’ demand for a permanent second tier.

Part of a larger effort to lower wages for working people across the North American economies, it will leave a long period where different generations in the workplace, doing the same work, will receive different pay (one of the very things that unions were formed to prevent). What will this do to solidarity and the feeling of collective ownership of the union?

There will be minimal hiring in the short run, however. Retirement incentives may open up some jobs. Ford has committed to create 600 jobs, while GM plans another 1,750. But laid-off workers at the two companies (800 now at Ford and 2,000 by 2014 at GM, when an existing line goes down) will have first dibs, at the current pay rate.

The small number of new hires will mitigate the immediate effect of the two-tier. But in the longer run, it will allow the employers to come back and ask for larger differentials and longer grow-ins in 2016, when the contract ends. For all intents and purposes, two-tier is likely to be permanent.

The pension component is especially troubling; particularly in an era where corporations are united in their assault on defined-benefit plans and appear poised to stamp them out entirely. Pensions have been the major issue in key strikes and lockouts throughout Canada, such as at Vale Inco, US Steel, and Caterpillar (even the NFL referees in the U.S.).

When the CAW, one of the most respected and strongest of the private sector unions in North America, accepts the principle that the next generation of auto workers will move away from defined benefits, it undermines everyone in the working class.

How Could This Happen?



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The CAW has a reputation of being militant and independent of employers. But these concessions are not new: September’s contracts are only the latest in a series of steps backwards, part of the union’s trajectory since the early part of this century.

A generation earlier, an opposite tradition had shaped a union that many in Canada saw as a hope of the working class. The union was originally formed as a breakaway from the U.S.-based United Auto Workers, in 1985. The CAW rejected the UAW’s embrace of concessions, lump-sums instead of wage increases, and partnership with employers. Instead, the new union argued that workers and employers had different interests and that unions had to fight to improve the lives of working people.

But more recently, we have seen “shelf” agreements at GM, where workers at the large Oshawa local agreed to give up workplace rights in order to bring in investment (the agreement was left “on the shelf” until the investment was made). In 2008, the union proposed a “Framework for Fairness” at major parts-maker Magna, which would have permitted new organizing while the union gave up independent shop floor reps in favor of “jointness.” As well, we saw the end of challenges to lean production, and the voluntary offering of concessions to Ford after the 2009 bankruptcies of GM and Chrysler.

This change of direction is the result of complex factors. The auto companies, and thus the union, face the competitive pressures unleashed by globalization and neoliberalism, where markets are deregulated and governments see their role as imposing and policing intensified competition. Relatively successful unionized workers are isolated from the unorganized, contingent workers, and the poor. The left within the union was defeated. In such a context, unions tend to become defensive and further reinforce their isolation. All this is compounded by the lack of collective experience of struggle and the consequent tendency of working people to seek individual survival strategies.

Internal factors play a role, too, in the CAW, such as highly centralized control by the leadership, lack of organization and activity by the membership, and the tendency of leaders to avoid analysis and instead rest on the reputation of past glory.

The union’s entire approach to the auto sector is based on the acceptance of workers’ dependence on the competitive success of the companies. But the auto industry will only get more and more competitive in coming years. Canadian branch plants of the Detroit companies, Toyota, and Honda compete for markets, mainly in the U.S. but also in Canada and around the world. Companies from other countries will join the competitive fray, adding to the pressure to constantly lower costs. Lower costs are achieved by continuous productivity increases, meaning fewer plants and fewer workers, and by seeking cheaper places to invest.

When the next set of bargaining happens in four years, what will be the likely situation? Do the new contracts put the union in a position to win back the current concessions? Or, given the nature of market forces, won’t the demand to keep the companies competitive only intensify?

The auto industry is also, of course, highly destructive of the environment and one of the leading causes of climate change, but this fact does not seem to enter into the union’s calculations.

What Now?

The agreements were easily ratified, with the lowest approval votes at GM. Voting yes makes sense from the point of view of the majority of workers, many of whom keep close tabs both on the industry as a whole and on their individual employers. With the union claiming that the situation allows no alternatives or space for resistance, and without any recent experiences with collective resistance to fall back on, members ratified the contracts in a spirit of resignation.

We can only speculate about an alternative. The union might have demanded that the existing agreements simply be re-signed, without any further concessions. Leaders could have tried to win over the public to the idea that working people need to resist driving down our collective livelihoods—admittedly difficult given the huge disparities that exist today within the working class.

They could have mobilized members to defend what they have—arguing that all working people need decent livelihoods and secure jobs and, in particular, that young people (new hires) have a right to productive and secure futures, producing things that Canadians need. And they could have looked toward a different strategic approach to the auto industry (and still can): demanding conversion of auto plants to the production of mass transit, which would create jobs and slow the emission of greenhouse gases.

Herman Rosenfeld is a former GM worker and education department staffer for the CAW.

A version of this article appeared in Labor Notes #403, October 2012. Don't miss an issue, subscribe today.


George1la (not verified) | 10/06/12

Unions have been and are failing their membership. These auto unions are failing their membership and the teachers unions, except for the Chicago Teachers Union (CTU), are totally selling out their membership. At United Teachers of Los Angeles (UTLA), of which my best friend, Richard Arthur, is a founder, does not even follow the law. UTLA lets teacher be fired without a legally required Skelly Hearing. They let them be falsly charged with child abuse. I have a California State Audit on this. It was Oct. 1997, 96121 for teachers being falsly charged with child abuse for whistleblowing and principals stealing student impress funds. A friend of mine has a data base now 14 years later that has over 400 LAUSD teachers supposedly represented by UTLA that this has happened to and now this issue is in the courts. However, there is a problem in California in which the Superior Court judges since 1988 have been illegally paid by the counties. Richard Fine found that in L.A. County for a period of 3 years no one won a case against L.A. County. For this he was put into solitary confinement for 18 months. As a result of Leslie Dutton from the Full Disclosure Network Richard Fine was released from jail. The judge in his release statements just before he retired stated "I did this to send a message to all attorneys in California to not touch this situation or this could happen to you too." This is what we are really dealing with. Unions were formed for serious reasons and most seem to have forgotten about this to their and societies detriment.