King Arthur Movie Tristan

The last few weeks a couple of things have happened. One is that the Parliamentary opposition, including the Michael Ignatieff led Liberals, have screamed for stimulus, in large part to the auto industry. Another is the Supreme Court ruled that the Liberal run Government of Canada of the 2002, 2003 and 2005 illegally rolled Employment Insurance surpluses into general revenues.

The two stories are connected.

Many years ago the unions negotiated a benefit called Supplementary Unemployment Benefit (SUB). It is, in essence, a guaranteed income supplement, that promises the company will top up EI funds to 85% of the workers wage. Back when it was negotiated it meant a small weekly stipend for the company during lean times and they could maintain their work force for good times.

As an example, the first time I wound up on temporary lay-off, EI (or UIC as it was then called) sent me a cheque for something in the $400's, SUB for less than $100 ($85 I think).

In the 90's Jean Chrétien's Liberal government revamped the Unemployment system, making it more expensive, harder to access and with a decrease in benefits. As an example, somebody who collects EI two years in a row must repay 15% the second, and every subsequent year. When announcing the changes to EI, Finance Minister Paul Martin talked about companies using EI to supplement their workforce.

The result is predictable and generally what was desired. If I get laid off now, the EI cheque is still in the $400's, the SUB cheque for an amount greater than the EI cheque. Furthermore, it didn't take long for the unions to argue that the 15% claw-back meant the employees were making less than 85%, and the companies began reimbursing it.

The result is that for the auto companies to temporarily lay-off their work force for re-tooling or inventory adjustment, it now costs them somewhere in the neighbourhood, and probably in excess of, 50% of the employees wage.

I don't present this as evidence for or against the SUB plans. They are a reality in the automotive industry and the companies themselves used the plans to supplement their labour costs when cyclical demand for their product was low. Paul Martin balanced the budget in part by illegally using the Employment Insurance fund as a tax revenue, and he did so partly on the back of the auto companies, who every party now seems to agree need a bailout. When the companies you built policy on ten years ago can get an all party consensus that they need bailed-out a decade on, your legacy takes a hit.

When Stephen Harper sits down to sort out the EI mess that Paul Martin & The Supremes have just handed him, and Jack Layton calls him to ask what he's doing about the auto jobs, he should look at the changes made to EI that affect the auto companies and consider undoing them.

I have been at two events with union speakers the last month. At the first, an in plant celebration of the launch of the new Challenger, Jerry Dias, assistant to Buzz Hargrove and, I'm told, the next CAW President, spent his time at the mike taking pot shots at Jim Flaherty. This was a celebratory function. Everyone else talked about the great car, the great company, the great workers. Jerry Dias whined about someone who wasn't there. I was standing beside a guy who was the head of one of our locals chapters (i.e. chairperson for one of the companies), and he says to me with a roll of the eyes, "classy guy."

Ten days later I went to the "hurry up, get the vote in during a long weekend, we only have six months to get this done" ratification vote for a new contract. Local bargaining committee is not even in place yet, but we have one day to decide on the contract. So naturally you would assume it would be an informative meeting: you would assume wrong.

Instead CAW economist (and Globe and Mail columnist) Jim Stanford spends over an hour explaining why we had to sign the contract now: note the difference; not why we should like the contract, but justifying the contract they got. The reason they negotiated early, and got us the contract they did: Evil money traders, Stephen Harper, Jim Flaherty. An hour of cheap political shots, very little real information.

I mention these stories to explain to the wife why there's cornflakes all over the kitchen. It's Buzz Hargrove's fault, honey. You see, after these two events, I thought cheap political points where OK, that's what we do. Then I open todays Toronto Sun and voila:

Cheap shots at Premier McGuinty are unfair
By BUZZ HARGROVE

Oh, grow up Buzz!

So when Bob Runciman and Howard Hampton stand in the legislature and question giving money to a company who is laying off a few thousand Ontarians, it's a cheap shot, and unfair to boot (unfair, by the way, is the official whine of the CAW).

On the other hand, attending a corporate celebration, or an unrelated contract ratification meeting, political thoughts are fair game. But doing so in the legislature, not so fair. Or rather, poking Conservatives in the eye, with other peoples money, is fine. Poking Liberals is cause for another bottle to go with the glazed chicken in truffle sauce.

One thing is becoming clear, I was right three months ago, Buzz is running in the next election, and auto-workers got sold down the river to accommodate that ambition.

******

Update: Progressive blogger Mack the Hackistan (i.e. Kevin Wilson) has written a piece for Now Magazine Blowing off Buzz.

If there is any truth to the rumour Buzz Hargrove is running for the next federal Parliament, he should resign as head of the CAW immediately!

The CAW is currently beginning the process of negotiating a new contract for it's members at the Big 3 auto plants. It is going to be a fractious negotiations, with the Big 3 demanding wage concessions, including possibly two tier wages as announced last year in the UAW agreement. I can tell you from the shop floor, workers are expecting an ugly fall. So as this process begins members have every right to expect the person leading the union will be fully committed to the process. It appears, however, that Hargrove is fully committed to something else:

Ottawa is abuzz with rumours that the CAW's Buzz Hargrove will run for the Liberals in the next federal election.. and he plans to take on a big fish....

Rumour has it that Buzz Hargrove will run in Toronto, against NDP Leader, Jack Layton...

If that's Hargrove's plan, fine. But CAW members need him on the job at this critical moment, not eyeing the next job. He can re-pay the members for all the free advertising the CAW has given the Liberal party in the past couple of years, then resign immediately.

As Hargrove himself admits that a strike is possible this fall (and many would say likely), and many observers believe likewise that an election is possible this fall, it beehooves Hargrove to come clean before negotiations begin. I for one don't want to be on strike and having the union's leader resign for his next job in the middle of the strike. Nor do I want to be on strike to prove how tough the next Liberal candidate for Toronto-Danforth is. Finally, as a member in good standing in the CAW, I don't want to be paying for advertising, positive or negative, for Hargrove's political campaign.

So Buzz, to put it in language you union guys understand: I demand you agree, in writing, to finish your current term as President of the CAW, or resign immediately.

The damage locally her in Waterloo Region is drastic. Two weeks ago it was Ledco closing it's doors (here, here and here), now it looks as though Martinrea International Inc. will close it's Kitchener plant, killing 1,200 jobs. For those who ever spent time here, Martinrea is the former Budd Automotive plant on Homer Watson Drive.

What's worse is the Globe and Mail is reporting that once again, the company tried to negotiate with the CAW, once again the CAW refused to discuss concessions of any kind:

...[a] union official said yesterday that in those talks Martinrea wanted to reduce the $50-an-hour wage and benefit costs by 50 per cent.

Mr. Hargrove said the CAW will not agree to pay cuts, noting that his members could work for free at the GM truck plant in Oshawa, Ont., for example, but even that would not have stopped the auto maker from eliminating one of three shifts of production there.

Of course, if the government threw in half-a-billion dollars, that would help. If the employees do, that "would not have stopped" the company from closing the plant.

It's getting hard not to notice that this blood bath seems pretty one sided - CAW plants are getting killed.

A few weeks ago I wrote about the closing of Ledco in Kitchener and the CAWs refusal to negotiate concessions, even though their members wanted the negotiation to occur. The refusal to negotiate directly resulted in Ledco closing it's doors and declaring bankruptcy. The CAW then occupied the plant, blamed Stephen Harper/globilization/the big three. Pithily, I commented:

...you have to wonder if the CAW has no shame: this closing is directly attributable to their refusal to negotiate, and now they are occupying the plant demanding the company do just that.

and

... does the CAW, today, still refuse to negotiate wage and benefit cuts? And if so, what car will GM put in Oshawa when they are done putting 16 cars in US plants?

Yesterday, Peter Shawn Taylor, a "Waterloo based Freelance writer," with quite a resume, has written a piece on Ledco, CAW Kills Jobs, Then Demands Severance, and the unions involvement. Taylor makes a few interesting comments:

The union then picketed the empty building for a while. CAW head Buzz Hargrove dropped by once to blame the factory owners and Ottawa. The CAW's most recent gambit is to demand that Ford, Chrysler and GM ante up for Ledco's missing severance. This is based on the heretofore unknown financial insight that companies have an "obligation" to cover the payrolls of firms they do business with. Of course none of this makes any practical sense.

The real point of the CAW riding off madly in all directions -- casting blame, flexing flaccid muscles and taking nonsensical actions --is to distract everyone from the fact that the demise of the Ledco workers' jobs was a strategic decision on the part of the CAW itself. In short, they were expendable.

He's right too. In order to prove to the big three that the CAW is serious about no concessions, they had to let Ledco die. Taylor then points out the CAW position on concessions

It's worth consider the wording of the CAW's no-concession statement: "We will not cut our wages, pensions, and benefits. That will never save our industry; at absolute most, it slightly defers the inevitable."

While Taylor considers this a fatalistic view, I had a different thought. If the above is true, would it not also be true for government bail outs? Especially when you consider a one time bail out of half a billion dollars would be about one years (give or take a hundred or so million) payroll at a big three assembly plant. In other words, Paul Martin's $200M to GM Oshawa would have equally been saved by now had the union gave a 30% wage concession.

The material point, however, is that an apocalyptic showdown is coming this fall, the big three vs. the CAW. The big three have US concessions from last year in their pocket that may make Canada the most expensive place in the world to build cars. The CAW has it's stubborn refusal to save Ledco as proof, that concessions are off the table. If you think the Ontario's manufacturing has been in trouble up to now, a storm is coming to the Canadian auto industry this fall that will determine the future of the industry in Canada.

Things are now getting ugly at Ledco as the company filed for bankruptcy last night causing workers blocade the plant, both last night and this morning. The CAW is announcing they have now occupied the plant:

CAW members at Ledco Limited tool and die facility in Kitchener have taken over their plant this morning after the company filed bankruptcy last night.
The CAW has been told the workers will not get their much deserved severance pay for their service. The union will continue to occupy the plant until the company agrees to pay the severance.

It's hard to blame the poor guys who just lost their job, but you have to wonder if the CAW has no shame: this closing is directly attributable to their refusal to negotiate, and now they are occupying the plant demanding the company do just that.

With news that Kitchener's Ledco suddenly closed the doors Wednesday after the CAW refused to negotiate wage and benefit cuts, you have to wonder what is up and coming in this falls Big Three contract negotiations.

Reports this week said GM "had scrapped plans to build some rear-wheel-drive sedans in Oshawa, which could reduce planned output at Canada's largest auto manufacturing complex by 250,000 units per year." However, GM employees can relax, as Buzz Hargrove has assured them GM is committed to Oshawa:

I'm confident that they not only want to build there, they're obligated to: Mr. McGuinty's government put $235 million into the Beacon, Paul Martin's government put $200 million in, and our local union bargained a new agreement

And if they don't commit to Oshawa, will taxpayers get their $½ Billion back? Remember last fall, GM committed to 16 new vehicle programs at their US plants, the same plants that gave wage and benefit concessions in a new contract signed in September.

Which takes us back to Ledco:

Elgin Dezell, a 30-year veteran of the plant, said he was in favour of accepting a wage cut to save his job, but his position was at odds with his union.

"The company gave (the union) until 3 o'clock in the afternoon to change their stand," he said. "We were willing to give the company something, but the union would not allow that. That puts us out on the streets."

Dezell organized an employee vote in the hopes of persuading his co-workers to accept a 25 per cent wage cut and 20 per cent benefits cut...

Dezell said 29 of his unionized co-workers showed up for the vote, with 23 voting in favour of the pay cut.

Tim Mitchell, president of Local 1524 [Canadian Auto Workers], said the vote was not authorized by the union and did not reflect the wishes of the majority of the workers...

The CAW has a policy of not negotiating wage and benefit cuts.

Mitchell said he was prepared to discuss a number of cost-cutting alternatives with company managers but they refused to budge from their position.

"They took the position that nothing short of the specific demands they made would be acceptable in that facility," he said. "Then they walked away from negotiations."

Mitchell said he had not had any meaningful discussions with Ledco management since December...

Kim Austin, human resources manager at Ledco, said that when the decision was made to close the plant in the late afternoon, there wasn't even enough time to write individual letters to employees.

So the question for Buzz is, does the CAW, today, still refuse to negotiate wage and benefit cuts? And if so, what car will GM put in Oshawa when they are done putting 16 cars in US plants?

Two days ago Buzz Hargrove was mentioning "Canada's Manufacturing Crisis," which lets face it, is Ontario's Unionized Manufacturing Crisis, and he laid the blame squarely at Stephen Harper and Jim Flaherty. They are the guys who should be losing their jobs, paraphrased Hargrove, not 1,000 GM workers. Interestingly, while Buzz was blaming Harper and Flaherty for not creating enough US demand for pick-up trucks, Dalton McGuinty was making the crisis worse, to stunning unionized silence.

The CAW will tell you they have a very tough round of negotiations coming up with the big three next year, where GM, Ford and Chrysler will all be looking for concessions from their workers. The concessions will be in the form of wages, benefits and paid time off. So in the middle of this crisis, in the middle of a good, the right wingers aren't left wing enough rant, Buzz's left leaning buddies in the provincial Liberals decide to create, one more paid day off.

We can debate the merits of the day off pro and contra until the cows come home, but if we are in the middle of a job-loss crisis, this is not helpful, it's harmful. And, if that is so, shouldn't Dalton be called out on that fact by Buzz, Jim Stanford et al.? And if they don't call Buzz on this one, does this mean there is no real crisis?

Oh, and memo to the CBC: back in September 2005, the CAW lost zero (0, none, nada, zilch, soccer score) "jobs at DaimlerChrysler in Ontario." Many workers, some of whom I knew, worked with, liked, in fact did lose their jobs. But the CAW? They weren't their jobs, they don't own the jobs, thus they cannot have lost the jobs. Just sayin'

I work for Chrysler, and we are always told "buy Chrysler, it protects your job, it's good for your community &tc." We hear it from Chrysler, we hear it from the union. Makes sense, really.

Until now. Since Chinese Chery is going to be building cars that Chrysler will sell in North America, if I buy one of these "Chrysler" cars, aren't I supporting outsourcing my job? And isn't my community better served if I buy a Corolla, which is built here in Cambridge?

It seems the CAW has been awfully quiet on this one. C'mon Buzz, where's the guidance?

Daimler Chrysler has thrown off the Chrysler moniker, selling off it's American arm to Cerberus Capital Management. (What will they call the new company, Cerberus-Dodge?)

What's been fun the past few months, is listening to analysts, and unionists, saying that whoever buys Chrysler will need the blessing of the unions. Talk about letting Buzz control the buzz. But it was always a ridiculous argument, that somehow the union controlled the destiny of the company. And thus it has been proven, as Magna selling out it's own workers wasn't enough to get it the company:

The offer by Cerberus Capital Management for the Chrysler Group is far superior to other bids including one from Canadian corporate titans Magna International Inc. and Onex Corp., industry sources say.

Chrysler's German parent, DaimlerChrysler Group, announced yesterday that Cerberus, one of the largest private equity firms in the world, is taking an 81 per cent stake of the auto maker's North American operations and its related financial services business for $7.4 billion (U.S.).

"It was substantially higher than the others," said one official familiar with the bids.

Under its offer, Cerberus will also assume Chrysler's long-term liabilities for pension and health-care benefits.

One analyst indicated recently that Magna-Onex was a leading contender and would value Chrysler at about $5 billion, excluding Chrysler Financial.

Billionaire Kirk Kerkorian's Tracinda Corp. publicly bid $4.5 billion in cash but industry watchers said DaimlerChrysler was seeking an offer in the $8 billion to $9 billion range. Other equity funds including Blackstone Group in the U.S. also showed interest in Chrysler.

So it was about the money, not who could get along with the unions? Really? After Daimler spent all those years playing nice with it's workers, now the CAW is surprised it wasn't consulted on a $7B deal?

On the eve of what could be an important day in Chrysler's history, the Canadian Auto Workers' union was disappointed Sunday it had yet to hear from Cerberus Capital Management LP, which recently emerged as the likely winning bidder to buy Chrysler Group from DaimlerChrysler AG.

The New York-based private-equity firm has not approached the CAW, said Local 444 President Ken Lewenza, expressing his disappointment over reports that Chrysler's fate could be sealed today.

"(Cerberus) has never, ever talked to the CAW," Lewenza said. "All I know is what I've seen and heard in the media, but I would be very disappointed if an equity firm came in and took over."

The United Auto Workers union in the U.S. and CAW have objected to Chrysler's sale to a private-equity firm, saying they fear such a buyer would try to return the company to profit by wringing savings from labour.

"Whoever buys Chrysler is going to have to respect our collective bargaining agreement," CAW president Buzz Hargrove said.

UAW spokesman Roger Kerson couldn't be reached for comment.

Lewenza said he was not surprised by Cerberus' sudden move into the spotlight.

"By hiring (former Chrysler Chief Operating Officer) Wolfgang Bernhard, they put themselves on the map and got people's attention," he said. "The focus on Magna was mostly because (CEO) Frank Stronach made his bid public."

Hargrove said Bernhard has a strong personal relationship with DaimlerChrysler Chief Executive Officer Dieter Zetsche.

"From DaimlerChrysler's standpoint, it's purely about who could put the most cash in their pockets the fastest," said Dan Luria, an analyst for the Michigan Manufacturing Technology Institute in Plymouth, Mich. "Cerberus clearly has deep pockets."

Note this bad habit Buzz has: he bad mouths the guy with power. He spent an election saying anyone but Harper. When Harper wins, of course, he's shocked and surprised to find himself on the outside. They did the same thing with Mike Harris. Now, the ink isn't dry on the sale, and Buzz is bad mouthing a) the new company and b) the new guy in charge. So here's a prediction. Sometime in the next year, Buzz will be publicly complaining about how the new owners are not respecting/not listening to/not concerned about the CAW and the workers.

And then he'll wonder why.

Today, the CAW is calling on all members to "bring public awareness of manufacturing job losses." They are marching in Kitchener, Ingersall and Oakville. The latter group will bus themselves to a Scarborough Town Centre and march to the Collins and Aikmen plant scheduled to close in July.

One of the CAWs bugaboos is the high Canadian dollar, which they claim is driving out exporters. I would argue their problem is the opposite, the low dollar of the Cretien era. While exporters and the unions loved the low dollar, and claimed it was driving growth through the 90's, it was really driving the present manufacturing contraction.

Money's value is determined, like any commodity, through supply and demand. If demand goes up for money, the price of it rises. Demand goes down, supply increases and price goes down. If you go to Florida, before leaving you go to the bank and convert some Canadian money to American money. You have added to the supply of Canadian funds and to the demand for American funds, thus lowering the value of the Canadian dollar vs. the American dollar. Now your $2,000 is insignificant, (remember the Bank of Canada trying to stave of dramatic decreases - and failing - by selling $50M US?), but what if you are a manufacturer?

Manufacturing plants spend hundreds of millions investing in their plants. They do a cost benefit analysis for a project and, if they see a future in a given location, they upgrade/improve/invest in their plant. In the 90's everybody was building like mad, but not investing. Canada's manufacturing facilities have fallen behind the rest of the world. Changes to manufacturing have been drastic the last 20 years, and manufacturers have not been investing in Canada. The result: loss of jobs now.

So to Buzz and the CAW. Before you blame the strong currency on your woes, understand that the low currency you so love is the long term root cause for the present problem.

Quick question. If traditionally union-bashing Magna is buying Chrysler, and negotiating with the CAW to unionize Magna's 30,000 workers, what is the CAW giving up in return?

Frank Stronach's recent overtures to let North America's auto unions organize Magna International Inc. may lead to a high-stakes swap whereby the unions agree to co-operate in Magna's potential takeover of Chrysler Group in exchange for a much-needed boost to their membership.

Mr. Stronach, Magna's founder and controlling shareholder, began discussions several months ago with leaders from the Canadian Auto Workers and the United Auto Workers unions on a new work arrangement for Magna's North American employees that would involve unionizing Magna's plants. He has said the current labourmanagement model in the auto industry is broken.

Magna's recent efforts toward reconciliation with the labour unions may be the first step in what could be a lasting partnership, should Magna take a stake in Chrysler," Fadi Chamoun, an analyst at UBS Investment Research, said in a new research report. While Magna is looking for flexibility from the unions on work terms, the unions see the potential for adding 30,000 Magna workers to their ranks. "It is this potential that is influencing the unions to favour Magna as an acquirer of Chrysler," Mr. Chamoun wrote. "Inevitable concessions may be exchanged with a possibility to organize Magna's non-unionized plants.

Isn't this collusion? Is Buzz selling out Chrysler workers to gain unionization of Magna? Sure sounds like it. At least, this would be what in the real world of governance laws and conflict of interest guidelines, very questionable. But in the world of Canadian labour law, just another day. Question, what if those Magna workers don't want to be unionized?

Oh, and where is the NCC on this? Workers rights were once one of their signature issues.

Update: I e-mailed Gerry Nicholls about this post, and in the process made a few more points. Here's part of what I wrote:

I can't think of another area in life where it would be OK for a middle party like the CAW to be negotiating two different, and so conflicting deals. Magna workers look like their about to get screwed - unionization whether they want it or not - and us Chrysler workers are going to be asked to take concessions from the same guy who's handing his workforce over to the CAW. Martha Stewart went to jail for less.