King Arthur Movie Tristan

Last night I posted that the effects changes to Employment Insurance in the mid-90's had a dramatic cost on the auto Industry, the payments for which have now come due. Mere hours later, The National Post hit the street with a front page comment by John Ivison that expands on my thesis.

Significantly about federal government plans to add stimulus through the EI system, Ivison notes:

...he expects the government to create a more level playing field across the country when it comes to who qualifies for EI, so that an unemployed auto worker in Southern Ontario can access the same amount of benefit, for the same length of time, as an unemployed fisherman in Newfoundland. At the moment, Ontario workers are disadvantaged when it comes to coverage and benefit period.

Lets be clear, when Ivison talks about Ontario workers, he means the auto industry.

Now here's what I had to say on EI, just last evening:

Paul Martin balanced the budget in part... on the back of the auto companies, who every party now seems to agree need a bailout...

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.

So you see Mr. Harper, I write tomorrow's headlines, today. The perfect candidate for team Harper up in Ottawa. Why would you give a red velvet seat to some Toronto Red Tory?

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've noted before that bad management is the auto industry is real. My out of the house life, like most people, is run by idiots: supreme, extreme idiots. I build cars for a living and yes, that does have a hemi in it.

That said, at least the people who run Chrysler have 1) experience in the industry & 2) a personal stake in the companies success. Unlike, say, Elizabeth May who if given the choice would tell Chrysler from Ottawa what cars they will build:

"Building things is not something Greens are against, it's just a question of building the right things," said the 54-year-old American-born May, who noted her party's policy ideas are often overlooked. "The plants that are building the muscle cars and the trucks should be building small, energy efficient vehicles."

Yea, yea, yea... and politicians who can't even get a seat in Parliament should concentrate on getting a seat instead of touring the country FDR style and promoting a competing party. But politics is not my business and while I might offer suggestions to Elizabeth May, et al. I wouldn't dare tell her how to do her job.

I'll know it's time to jump all over those buy-outs when activists/politicians are deciding what cars we should build.

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.

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.

Bad news tends to reign in the Canadian auto industry, and it's easy to be pessimistic. Today, however, I am going to allow a little optimism to run it's course.

Chrysler's Brampton Assembly has had it's share of tough news in the past few years, not the least of which is a shift cancellation later this month. Yesterday at the Chicago Auto Show Chrysler was showing off the new Dodge Challenger, which will be built at the Brampton Plant. I won't go into the parts of the article relating to fuel efficiency and long term prospects for the car, although they are fair comment. As I said, today I'm running with optimistic. So instead, here's some pictures of the nice looking Dodge Challenger.