By GREG KEENAN
Friday, September 16, 2005

General Motors of Canada Ltd. is warning that it could be forced to reject the new labour deal the Canadian Auto Workers has won with Ford Motor Co. of Canada Ltd. -- a development that would spark a strike at the largest auto maker in Canada.

"While the settlement may seem modest in some areas, when you look at the translation to GM from the pension side of it, it really provides substantially higher costs to us than what we think it does with Ford," GM spokesman Stew Low said in an interview. "We're concerned that our gap to our competition -- the cost disadvantage -- will continue to widen."

GM negotiators have taken the same position at the negotiating table, CAW president Buzz Hargrove said yesterday.

The prospect of GM not matching a pattern agreement -- which is the way things have worked since the union was created in 1985 and since its predecessor the United Auto Workers was founded -- leaves him both angry and worried. Under pattern bargaining, the union strikes a deal on wages, benefits and other issues with one auto maker then applies those terms to the other two companies.

"I'm not going to be the president who goes down in the history of our union [as] shifting from pattern bargaining," he declared. "That's not going to happen."

The union is already facing a potential strike next Tuesday at DaimlerChrysler Canada Inc. over that company's demand to slash 2,500 jobs. A strike at GM, where there are 17,200 CAW members, could follow. (Daimler employs 11,400 CAW members.)

"There'll be a lot of people looking back and wondering how the hell it ever happened, but that is a strong possibility today," he said.

Pattern bargaining is a fundamental principle of the union. "It's an absolute," Mr. Hargrove said. The union went on strike against GM for three weeks in 1996 when the company refused initially to accept the pattern.

GM has not said publicly that it intends to break the pattern, which Ford set with wage increases of 1.5 per cent, 1 per cent and 1 per cent annually, plus improvements in employee pensions and other benefits.

But many in the industry and some officials of the Detroit-based auto makers have said privately that adhering to pattern bargaining is increasingly difficult when the competition in North America is no longer a battle between Chrysler, Ford and GM, but a vicious street fight between seven global players.

The stated goal of GM in the 2005 talks is a freeze on labour costs.

"That is clearly where we need to go in order stay competitive," Mr. Low said.

The company will be able to meet pattern, he said, if the two sides can find other ways to reduce costs "to account for the dramatic increase in pension costs."

The deal reached with Ford increases the pension payment for a retired production employee to $68 a month (multiplied by the employee's years of service) in October, 2007 from $60 now.

GM has 24,000 CAW retirees, more than double the number of Ford, which has about 10,000. There are approximately 9,000 at Chrysler.

CAW economist Jim Stanford has already made a presentation to GM officials pointing out that the increase represents the smallest rise for current and future retirees so far in the CAW's history.

He also pointed out that GM has a benefit the other two companies don't, which is an exemption from making solvency-deficiency payments that the Ontario government set up in the early 1990s.

If the auto maker was forced to finance its pensions on a solvency-deficiency basis today instead of using the going-concern method, it would be required to make $500-million in additional contributions annually, he said.

"We can make pattern as long there's offsets in other areas of the agreement or within the whole manufacturing operation that the CAW can help us with," Mr. Low said.