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AUTO INDUSTRY REPORTER


TORONTO -- Canadian Auto Workers president Buzz Hargrove has effectively delayed choosing a target company in 2005 contract talks by starting negotiations with Ford Motor Co. of Canada Ltd., but warning that he could jump to DaimlerChrysler Canada Inc. if there's no quick deal with Ford.

If the CAW and Ford -- the weakest of the Canadian units of the Detroit-based auto makers -- are not close to a deal by late Tuesday, those talks will be discontinued and the union will switch its focus to DaimlerChrysler, Mr. Hargrove said yesterday.

The decision to focus on Ford but continue talks with DaimlerChrysler gives the union leader five more days to decide which of the two companies to choose as a final target ahead of a strike deadline of Sept. 20. The union traditionally reaches a deal on key economic issues such as wages and -- in this round -- pension improvements with one company, then applies it to the other two in what is known as pattern bargaining.

But Mr. Hargrove has set himself up for a major strategic gamble, because if he continues past next Tuesday with Ford and those talks bog down close to the Sept. 20 deadline, he risks a strike at the auto maker least able to afford increases in wages and improvements in pensions.

Mr. Hargrove said he chose Ford as the initial company for negotiations in part because it's the auto maker that has the best relationship with the union and partly because proposals put on the table by DaimlerChrysler would have caused a strike.

General Motors of Canada Ltd. was rejected because its parent company is preoccupied with a crisis at Delphi Corp., its former auto parts subsidiary, and is seeking major cuts in the health care benefits it provides to U.S. workers.

Reaching a new deal won't be a cakewalk at Ford or any of the companies, Mr. Hargrove told union leaders and media packed into a downtown Toronto hotel room.

"We find ourselves in probably one of the most difficult bargaining situations we've had in a good many years," he said. "Certainly it's not business as usual."

There are tough issues to be solved at Ford, he said.

Among them is the future of Essex Engine Plant in Windsor, Ont. It's one of two Ford engine plants in that city, but its assembly plant customer will disappear later this decade when Ford phases out Freestar and Monterey minivans made in Oakville, Ont.

Two new sport utility vehicles to be assembled in Oakville will contain engines made in Cleveland instead of Windsor, putting 1,600 jobs at risk.

In addition, parent Ford Motor Co. plans to announce a restructuring this fall that involves the closing of assembly plants and other operations in North America.

The Canadian operations will share in the cuts, which increases the danger at Essex and puts a cloud over the St. Thomas Assembly Plant near London, Ont.

Mr. Hargrove may have to choose between a new investment commitment for St. Thomas and the shutdown of the Essex plant, said Sean McAlinden, director of the economics and business group of the Center for Automotive Research, an industry think tank in Ann Arbor, Mich. "They [the CAW] will save one of them for sure and I presume it will be St. Thomas," Mr. McAlinden said.

It's a tough time for Detroit, he noted, with a drop in market share sustained by Chrysler, Ford and GM and heavy losses at Ford and GM's automotive operations. "Both GM and Ford have fallen off the cliff and Chrysler's on the edge," he said.

Stacey Allerton Firth, Ford Canada's vice-president of human resources, noted that "the two negotiating teams face a difficult task."

There are about 11,600 CAW members at Ford's Canadian operations. The base wage rate for assembly line workers is $31.54 an hour.

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