By Roger Annis
August 23, 2012–Meeting in convention this week in Toronto, the Canadian Autoworkers union welcomed Bank of Canada Governor Mark Carney to its speakers podium yesterday. The union is hoping that Carney will do something to lessen the pressures on the Canadian dollar keeping it high in relation to its U.S. counterpart and therefore harming the international competitivity of manufacturers in Canada, including those of automobiles.
For his part, Carney made headlines during a media scrum following his talk when he criticized top Canadian companies for hoarding too much liquid assets. He said if they aren’t prepared to invest, they should be giving higher returns to shareholders.
The CAW is engaged in a merger process with the Communications, Energy and Paperworkers Union (CEP). The merged union will count 320,000 members. Leaders of both unions say they hope the merger will give them more clout in their dealings with governments. They also plan to introduce innovative measures to win new members to the union. Union density in private industry in Canada is just below 20 percent, according to CBC Radio News. That compares to seven percent in the United States.
A CEP representative attending the CAW convention told Radio Canada television news that he hopes Carney’s appearance and speech at the CAW convention will be the beginning of a fruitful relationship by the merged union with the central bank.
On the podium following Carney’s speech, CAW President Ken Lewenza presented the bankster with copies of recent policy papers by the union on the future of auto industry and the aerospace industry in Canada. These papers have received zero attention in left circles in Canada. They call for more active intervention by the Canadian government to promote the products of the two industries and the modes of transport they represent. In the case of aerospace, the CAW also encourages the expansion of the “defense” (military) component of that industry. The CAW represents workers at many aerospace manufacturers, including small numbers that perform sub-contracting work on the vast armaments program on which the Canadian government is embarked, including the Lockheed-Martin F-35 fighter aircraft boondoggle.
In a press conference last week announcing the opening of negotiations with the Big Three automakers in Canada, CAW President Ken Lewenza said that the auto companies should be looking to cutting jobs in Europe before entertaining further cuts in Canada.
Below are three news articles from mainstream press reporting on this week’s CAW convention.
High-flying loonie looms over auto talks
CAW says it is being unfairly blamed for high production costs
Dana Flavelle, Toronto Star, Aug 22, 2012
The last time the Canadian Auto Workers negotiated a contract with the Detroit Three automakers three years ago, the Canadian dollar was trading around 80 cents U.S. Today it is worth more than the U.S. greenback (it fell 0.13 of a cent to close trading Tuesday at $1.0104 U.S.).
That’s made Canadian autoworkers appear less competitive relative to their U.S. counterparts, the automakers say. It’s one of the reasons GM, Ford and Chrysler all say they need a better deal from Canada’s 20,600 autoworkers in this round of talks. GM’s chief executive Dan Akerson has even gone so far as to say Canada is now the most expensive place in the world to build cars. CAW president Ken Lewenza has called that statement ridiculous.
The high-flying loonie hurts Canadian exports of all kinds, particularly since so many of Canada’s exports go to the U.S. But when combined with concessions the United Auto Workers have granted in the U.S., Canada’s autoworkers looking increasingly out of whack.
Canadian labour costs are between $2.50 and $10 an hour higher than in U.S. auto plants, according to the Center for Automotive Research in Ann Arbor, Mich. (The difference depends on the automakers being compared and whether legacy costs, such as retirees’ benefits, are included in the calculation.) Ford of Canada says its all-in labour costs are $79 in Canada compared to just $64 in the U.S. That’s partly due to the UAW’s decision to accept a lower wage structure for new hires and profit-sharing in lieu of wage increases.
But the high Canadian dollar doesn’t help. The CAW says it’s being blamed for a problem that’s beyond its control. The loonie has soared in part because of higher global demand for oil, the country’s image as a safe haven in troubled economic times, and a corresponding decline in the U.S. dollar. Canadians’ purchasing power is also lower than for Americans, the auto union’s economist Jim Stanford notes. In other words, Canadians pay more to buy the same goods.
In any case, Stanford says what the automakers lose on the production side they gain on imports into Canada, because while about 80 per cent of the cars made in Canada are exported to other markets, about 80 per cent of the cars bought in Canada are imported. Indeed, many cars are priced higher in Canada than in the U.S. regardless of where they’re made. U.S. automakers should be focusing more of their attention on the problems in Europe, where they’re losing billions of dollars, says the CAW’s Lewenza. In fact, the automakers are overcapacity in Europe, partly due to the financial crisis in the eurozone; but closing plants in highly unionized countries like Italy is difficult.
For Canada’s autoworkers, the current round of contract negotiations isn’t just how much they’re paid, but whether they’ll have a job in the future. An increasingly global auto industry can pick and choose the cheapest places to make its products for sale around the world. A rising dollar doesn’t just make labour costs look more expensive, it also increases the cost of investment in new production.
Critics say Canadian policy-makers could be doing more to bring the dollar down to more realistic levels. The Bank of Canada could sell more Canadian dollars into foreign exchange markets, a strategy adopted recently by the central banks of Japan, Switzerland and Brazil to depress their overvalued currencies, said Erin Weir, an economist with the Canadian Centre for Policy Alternatives. Or the Canadian government could raise taxes and royalties on the highly profitable resource sector to make it less attractive to foreign investors, Weir said.
Mike Moffatt, an economist with the University of Western Ontario’s Richard Ivey School of Business, disagrees. “There’s nothing wrong with having a higher dollar. We just have to recognize there are winners and losers. And one of the losers is clearly Canadian manufacturing.
“There are a lot of winners, too,” Moffatt adds. “We’re all wealthier. Our dollars go further when we purchase goods from other countries.”
Indeed, Canadian companies have been investing large sums in just the sort of technology and equipment that will ultimately make them more competitive in the long term, he says. But will that create more of the relatively well paid and low-skilled jobs the auto industry used to generate? In recent years, auto production has been growing faster in lower-wage Mexico and the Southern U.S. than in Canada.
CAW talks tough, as GM cuts pensions
Reduction for salaried staff sets stage for battle with hourly earners
Dana Flavelle, Aug 21, 2012, Toronto Star
While Canadian Auto Workers president Ken Lewenza delivered a fire-and-brimstone speech calling for greater worker solidarity in the face of corporate greed, GM Canada delivered a warning shot across the union’s bow. The country’s largest automaker confirmed Monday it plans to move its salaried staff to a lower-cost pension plan and also make changes to pensioners’ health care benefits, setting the stage for more demands from its hourly workers as well.
The decision comes as the CAW enters what are expected to be tough talks with all three Detroit-based auto companies for a new contract this fall.
“There’s no doubt GM would like to get our members out of the defined benefit plan. But we’re not going down that road,” Chris Buckley, chair of the CAW’s GM bargaining committee, said in an interview at the Sheraton Centre in Toronto, where nearly 1,000 people are attending the union’s policy and collective bargaining convention.
GM advised its salaried employees in an internal memo that it plans to convert them to a lower-cost defined contribution plan as of Jan 1. As well, salaried employees who take retirement after 2014 will receive a lump-sum payment instead of specific health care benefits.
Many CAW pensioners say they’ve already seen enough cuts to their benefits and want some back. A few blame the union for agreeing to concessions three years ago when the federal and Ontario governments contributed $10.5 billion in 2009 to bail out a struggling GM and Chrysler. “Because we don’t have the right to vote, the union decided we’ll just take it away from the retirees,” said Russ Rak, who retired in 1994 after 42 years with GM in Oshawa. “We’ve lost $200 a month since they took away our cost of living increases and we now pay $15 a month for health care benefits.” Active workers also took pay and benefit cuts in 2009.
Lewenza confirmed the union’s determination to share in the gains the Detroit Three have made since then. “The companies should be grateful. Instead they are complaining and demanding more,” he said.
But while the auto industry remains one of the country’s most critical economic drivers, Lewenza used most of his speech to rally the wider labour movement to a bigger cause. “There’s no doubt GM would like to get our members out of the defined benefit plan. But we’re not going down that road.”
The CAW is about to gain new clout if its proposed merger with the Communications, Energy and Paperworkers union goes through. The combination will create the country’s largest private sector union, with more nearly 325,000 members in most key sectors of the economy.
Noting the rise of right-wing governments and corporate greed, Lewenza said unions need to combine forces with other groups committed to social change. The time is ripe for renewed debate on things like free tuition for students and the need for a national development bank, he said. Earlier this summer, GM confirmed plans to close its older consolidated line in Oshawa and move some of the production south of the border. The line employs 2,000 Canadians, or roughly half GM’s remaining Oshawa workforce.
‘This is dead money.’
Central banker’s blunt message to companies with $526-billion in their coffers: stop waiting, start spending, spur growth
By Kevin Carmichael, Richard Blackwell, Greg Kennan, Globe and Mail, page one, Aug 23, 2012
[Corporations’] job is to put money to work and if they can’t think of what to do with it, they should give it back to their shareholders’ Mark Carney Bank of Canada Governor, in his first address to a labour unionBank of Canada Governor Mark Carney has taken a rare swing at corporate Canada, accusing companies of sitting on huge piles of “dead money” that should be used to expand or returned to investors. Mr. Carney acknowledged that companies are wary about the global economy’s prospects because of debt problems in Europe, but he said Canadian executives are underestimating the resolve of the central bank and other authorities to guard against a financial crisis.
Answering questions after a speech to the Canadian Auto Workers, Mr. Carney suggested that with hundreds of billions of dollars in their bank accounts, Canadian firms aren’t doing enough to drive economic growth and create new jobs. “The level of caution could be viewed as excessive,” he said. Referring to corporate managers, he added, “Their job is to put money to work and if they can’t think of what to do with it, they should give it back to their shareholders.”
It’s unusual for a central banker to criticize the country’s corporations and the executives who make the key decisions. But the blunt comments from Mr. Carney, who has long tried to encourage Canadian businesses to spend more on equipment to become more competitive, show his frustration with what he perceives as a lack of investment in some sectors of the economy. That, in turn, is leading to a slow recovery in the job market and an unemployment rate that remains stubbornly higher than it was four years ago, at 7.3 per cent.
Statistics Canada numbers show Canadian non-financial corporations with a cash hoard of $526-billion at the end of the first quarter of 2012, an increase of 43 per cent since the recession ended in 2009.
Some firms have staggering amounts of cash on hand. Suncor Energy Inc. has $5.2-billion, Teck Resources Ltd. has $3.6-billion, In met Mining Corp. has $2.7-billion, and Bombardier Inc. has $2.5billion, according to figures compiled by Bloomberg. Every company’s situation is different, and some are preparing to build new mines or factories or to dole money out in research and development. Others are spending aggressively as cash pours in. Magna International Inc., for instance, which has about $1.4-billion (U.S.) in cash on hand, has increased capital spending to record levels this year.
“I don’t see cash on our balance sheet as ‘dead money’ at all,” said Magna’s chief financial officer, Vince Galifi. “We intend to deploy cash as the appropriate opportunities arise. And we are a strong cash generator, so we expect to be able to put cash to use and still be able to maintain our balance sheet strength. …”
Some executives said it is no surprise that their compatriots are cautious about spending, especially since many companies had near-death experiences in the recession – or thought their sources of financing might collapse.
“Corporate guys have come through such a frightening scare in 2009, where they were getting out of bed every day not knowing if they were going to have a bank,” said Matt Campbell, CEO of Rocky Mountain Dealerships Inc., a Calgary-based chain of construction and agriculture equipment dealers. “A lot of people are still pretty concerned that a second shoe might drop with Europe….And what happens if the U.S. goes back into recession? These people are just being prudent.”
Mr. Campbell said it is odd that Mr. Carney, who has a reputation as a conservative central banker, is pushing companies to spend more freely. “Canada survived through this crisis because [companies] had reserves and equity,” he said. “The last I checked, the best equity is cash in the bank.”
Others say Mr. Carney is right, although returning money to shareholders through dividends or share buy-backs should take a back seat to investing for growth. “I would agree that Canadian companies need to spend more and invest more on productivity to become more globally competitive,” said David MacDonald, CEO of Toronto technology services firm Softchoice Corp. Part of the problem he said is that many Ca nadian institutional investors are very conservative, and encourage companies to pay dividends or buy back shares rather than investing in growth.
Andrew Snelgrove, CFO of Halifax-based investment company Clarke Inc., said many undervalued acquisition targets are available for companies that have cash and are willing to spend it. “There are opportunities out there to take advantage of,” he said. “Sitting on cash is not a great idea right now.”
Mr. Carney’s remarks reflect his broad worry that Canada is doing too little to become a competitive force in the global economy. He reiterated his view that Canadians are spending money on houses that should be used for more “productive” purposes, and that the country trades too little with the fast-growing emerging markets. “We cannot grow indefinitely by relying on Canadian households increasing their borrowing relative to income,” Mr. Carney said in his speech.
The central bank chief dismissed the CAW’s contention that the Canadian dollar’s strength is hurting exports. On the contrary, Bank of Canada research suggests that the dollar’s appreciation accounts for only about 20 per cent of Canada’s export decline. The main reason Canada is running a trade deficit is that it is “overexposed” to the United States, Mr. Carney said.
“We cannot devalue ourselves to prosperity,” Mr. Carney said in his speech, his first address to a labour group.
