Tom Lasorda, Chrysler’s president and vice-chairman, states, "We have to close the gap. As a corporation with manufacturing operations in multiple jurisdictions, we cannot afford to manufacture products in jurisdictions that are not competitive."
Mr. Lasorda, who delivered his comments before Canada's House of Commons industry committee on Wednesday, warned that if Canada and its workers do not deliver big concessions it will leave the country according to the Montreal Gazette. This would result in the loss of thousands of Canadian jobs. The comments are made perhaps more ironic by the fact that Chrysler recently passed fellow struggling automaker GM to become Canada's top seller.
Chrysler wants a $2.3B USD loan from Canada's federal government as a concession. It says the government must additionally drop a tax dispute and that the Canadian autoworkers must accept pay cuts. If its terms are not met, it says, it can't be profitable and all Chrysler's Canadian manufacturing plants will have to close.
According to Chrysler, it feels that its Windsor and Toronto plants would be sufficient collateral for the massive loan. It says it is willing to accept as high as 6 percent interest and will actively work to repay it.
Chrysler is also struggling with the Canadian Auto Workers (CAW) over wages and benefits. Canadians, like those in the U.S., have high expectations on their standard of living. They expect, in exchange for hard work a good income, medical care, and a pension. However, according to Chrysler, these expectations are not realistic in the modern economy and concessions must be made.
Chryslers claims that its average cost per Canadian plant worker including benefits, retirement, income, etc. was $75 (USD) an hour in Canada. This figure is $20 more than in the U.S. and much higher than in countries with low labor costs like India and China. In the U.S., auto factory workers typically make approximately the same, with benefits and retirement factored in, as a professional engineer with several years of experience.
The Canadian government says that these figures may be made up, though, as senior executives from Ford, Toyota, and Honda, as well as the Canadian Auto Workers union released contradictory estimates on Chrysler's cost per employee. In total, 9,400 people are employed at Chrysler manufacturing facilities in Canada, with another 26,000 employed and dealerships and Canadian distribution networks.
GM recently signed a deal with CAW which agreed to some cuts in wages and benefits, but offered more moderate cuts than Chrysler wants. In the past, if one automaker brokered a deal, typically the others in the Big Three signed it as well. Chrysler is refusing to agree to a similar deal. Says Mr. Lasorda, "It’s unacceptable to us, and we have to break that pattern."
Chrysler's situation is also rather unique as it’s in serious tax trouble. The Canada Revenue Agency -- Canada's IRS equivalent -- says Chrysler owes hundreds of millions in back taxes. It is has taken a $500M USD lien on Chrysler’s Brampton factory and says that it won't deliver the $300M USD it owes the state in tax refunds. Mr. Lasorda said that repaying the taxes would take six years, and delivered a thinly veiled threat that if Canada doesn't back off the tax issue, his company will leave.
The loans Chrysler is seeking still pale in comparison to the $7.7B USD that GM wants from the Canadian government. Toyota, Honda and Ford have also expressed concern about the economic downturn, but have not yet asked the Canadian government for loans. All of the companies complained that the credit market is virtually gone, making leasing cars impossible. According to Chrysler, two years ago half of all its cars and trucks acquired by Canadian consumers were acquired by lease. Chrysler Canada has now closed its leasing business for lack of loans, losing even more money on top slumping sales.
Chrysler's rival GM is facing a similar situation in the U.S. It recently spun off its largest European brand, Opel, and is asking for billions from the U.S. government in new loans. GM says that if doesn't get the loans, it will be forced to liquidate, closing its US plants.
In the U.S., Chrysler recently paired with Fiat, virtually giving away a 35 percent stake in its company in exchange for the support.
quote: I don't see how the two are related. Quality control dictates how safe the end product is, not the 'skill' of the line worker.
quote: Quality control is about designing systems that can be assembled properly, but it still requires workers to do their jobs properly in order to make that happen.
quote: And $2100 per week is far more than someone doing a menial task should be making.
quote: Most of these people probably have no schooling beyond high school and some are probably high school drop-outs. Even if they made half that (about 1200 a week and I'm going to call that take home and leave out all the overhead), that's still 2x what I make a week.. and I have an associates degree and work for the state. UAW and CAW way overpay these people.
quote: These are not 'menial' task and most of them are harder work than the jobs you do on a daily basis. I'll be blunt: people who are doing REAL PHYSICAL LABOR deserve more pay than the people who are only using their brains to do their jobs.
quote: 8.35 million cars, times $2,800 (7% of $40k) is $23.38 billion. Labor costs...twenty three billion dollars. For labor that is unskilled and can be done by essentially anyone.
quote: 1. Labor is vastly overpriced in auto plants
quote: 2. Other costs may no be addressable at all...at least not by the automakers themselves. Labor is, realistically, about the only cost they can exercise any control over.
quote: As for where I came up with 7% from, I quickly perused a number of Google hits when the previous thread was going on. Here's one from the UAW just as a quick example:http://www.uaw.org/barg/07fact/fact02.php
quote: Since when does education triumph over hard work?
quote: Screw the auto workers. It pisses me off when a bum that dropped out of high school makes more money than me and I've got a 4 year degree that I worked my balls off to get.
quote: I think that's completely ridiculous given that I'm only looking at maybe $40/hour wages when I graduate from the University of Waterloo and Wilfrid Laurier University...
quote: I don't disagree, but at the same time, anyone is free to dispute the facts and figures presented by the UAW. Until that happens, we have to take what they state as being true.And for the record, I didn't pick that source intentionally. It just happened to come up in some google searches I was doing to try to get facts and figures about autoworker pay.
quote: I think that's completely ridiculous given that I'm only looking at maybe $40/hour wages when I graduate from the University of Waterloo and Wilfrid Laurier University with a bachelor of mathematics and bachelor of business administration respectively
quote: GM/Chrysler/Ford has been making garbage for years
quote: GM/Chrysler/Ford has been making garbage for years.
quote: I say no more. The only possible salvation would be the Gov getting a non-controlling share with the current upper management shown the door and replaced by other with monitoring.
quote: I would love to see money / bartering abolished in favour of a system where you get what you need provided you contribute sufficiently.
quote: That already exists, it's called communism, and it hasn't exactly been a runaway success so far, has it?
quote: Hippies did the commune thing in the 60's, but that was in small groups, where it was semi-practical.
quote: 1. Did Stalin "dictate" over the Soviet Union in 1975, for example?
quote: 2. Is Mao still running China?
quote: 3. Is the (single) ruling party in China not the Communist Party?
quote: There will always be lazy, worthless parasites taking from the hard working as long as we have society. Whether it is welfare and that crap in capitalism or pure communism. I think communism that requires you to work to get the benefits would work at least as well as a capitalism that doesn't give hand outs.
quote: What about those who refuse to contribute? I know someone like that.
quote: TextIf everything is provided to you by simple "contributing sufficiently," what kind of society do you think that would lead to?
quote: TAnd you misunderstand capitalism completely. The point is that there is opportunity for all to participate and succeed economically as much or as little as they desire. This motivates people past mediocrity because they can achieve a good living and wealth by working hard.
quote: Otherwise, what motivation do companies have to pay you?
quote: There are many flaws with capitalism.
quote: Capitalism cannot deal with poverty.
quote: Neither can socialism nor communism, as history has proven.
quote: Capitalism cannot deal with poverty.
quote: I can work really hard but not get ahead for many reasons that have nothing to do with motivation.
quote: How about poverty, 3rd world countries (minus corruption)?
quote: ...will create a good chunk of new job openings thus allowing those out of work to take the new openings...
quote: In the U.S., auto factory workers typically make approximately the same, with benefits and retirement factored in, as a professional engineer with several years of experience.
quote: Seriously, this kind of thinking is dangerous and destructive to America . I can only hope that you are not a US citizen .
quote: Regardless of what they're asking for, there is no reason for anyone to have confidence in Chrysler. They are in position to demand anything.
quote: trend is to go for smaller, more fuel efficient vehicles
quote: ...why the vehicles with a lower percentage change are the Corollas, and Mazda 3s
quote: If your assertion was correct, then you'd also see the Prius in the same category. After all, that car is the poster child for fuel efficiency. But that dropped by a lot, too. The real reason for the trends you see is simply the recession and its effect of causing consumers to prefer cheaper cars.
quote: According to Chrysler, it feels that its Windsor and Toronto would be sufficient collateral for the massive loan. It says it is willing to accept as high as 6 percent interest and will actively work to repay it.
quote: That's real collateral
quote: Also, too many people lease cars. Leasing is the most financially idiotic thing possible. You pay higher than loan payments and end up owning nothing.