GM's decision to build trucks in Ontario concerns UAW workers
In a rare reversal, General Motors Co.'s plans to return truck production to Canada under a three-year tentative agreement reached with labor union Unifor is causing a stir among United Auto Workers members at the Detroit automaker's truck plants.
The $1.1 billion investment mostly into Oshawa Assembly in Ontario is part of the $3.6 billion total commitments Unifor obtained from Detroit's three automakers during contract talks. The plant's transition to a stamping and sub-assembly operation in December 2019 was a devastating blow to the Canadian auto industry.
Now, with the two-month novel coronavirus pandemic shut down striking a swift blow to GM's inventory, it plans to shell out $1 billion for a new Chevrolet Silverado and GMC Sierra assembly line and updated paint and body shops to start manufacturing in January 2022.
"The Canadian auto industry has been shrinking," said Kristin Dziczek, vice president of industry, labor and economics for the Center for Automotive Research in Ann Arbor. "And they’ve not been getting their proportional share of investment even over the last decade or so. This is a firm reversal. Bringing a plant back is a reversal and getting this much investment is a reversal of those trends."
That change in plans has made some American auto workers nervous: "It's not a concern today or tomorrow, but in the next year and a half," said Rich LeTourneau, UAW Local 2209 plant chairman in Fort Wayne, Indiana. "It’s when the market is not peaking anymore. ... I know how this works when you have too many plants budgeted the same. There has to be a volume reduction somewhere. Where does that hit?"
With Fort Wayne plant management, the local submitted in recent weeks a proposal to the automaker for what LeTourneau calls an "expensive Band-Aid" of $15 million into the paint shop to help increase production from 64½ trucks per hour to closer to 70. That still, however, would remain below the 74 trucks per hour it produced before 2015 when GM announced a $1.2 billion investment into the plant.
"We couldn’t keep up with supply and demand based on us losing 14 trucks per hour," LeTourneau said. "And they don't want to shut down the plant (to upgrade it)."
Eric Welter, UAW Local 598 plant chairman for Flint Truck, shared a similar sentiment: "People work very hard, a lot of weekends to make all of this product. To have it sourced somewhere else, we don’t know what that means for the future. It's not doom and gloom, there's solid production, but it's a little disappointing they didn’t give us a chance at increasing our line speed vs. retooling another plant."
GM struck a deal with Unifor around 3 a.m. Thursday after it extended its contract past the 11:59 p.m. Wednesday deadline, averting a strike. The agreement is similar to those ratified with Ford Motor Co. and Fiat Chrysler Automobiles NV and covers 1,700 employees at GM Canada’s St. Catharines Propulsion Plant, Oshawa Stamped Products and Service Operations and a parts distribution center in Ontario. Ratification votes begin Sunday.
"The pandemic threw a curve into everything," Unifor President Jerry Dias said during a news conference. "Showrooms are sitting at less than 50% of what they would like to be. The pandemic has thrown a curve into the auto industry, so they are looking for opportunities to maximize the capacity."
GM spokesman Dan Flores said all of the company's production decisions are based on market demand: "We're behind the eightball when it comes to inventory, and we're looking at all opportunities to maximize full-size production.
"We are building everything we sell, and we need more. Certainly, our U.S. full-size Fort Wayne, Flint and our all-new SUVs we are building in (Arlington, Texas,) are very important plants that are basically running at maximum capacity right now. We see that demand continuing into the future."
GM's investment in Oshawa would create up to 2,500 jobs. Hiring would begin in August 2021 with heavy-duty pickups rolling off the line the following January. A second shift is expected to start in March 2022 followed by the launch of light-duty trucks that May. GM could introduce a third shift by July 2022.
Oshawa previously had built light-duty GMC Sierra and Chevrolet Silverado double cab trucks as a part of a program with Fort Wayne where panels from the body shop there were stamped and then sent to Oshawa for paint and full assembly. The move to a stamping operation in Oshawa saved just 300 of 2,600 jobs. There are 175 auto workers still on layoff who weren't severed, Dias said.
In September, GMC said inventory levels were tight with less than 30 days supply for both light-duty and heavy-duty trucks. A healthy supply of trucks is typically 90 days. U.S. sales in the third quarter of the Chevrolet Silverado heavy-duty were up 9% compared to a year ago, while they rose 11% for the GMC Sierra heavy-duty. Overall, the Sierra had its best third quarter ever with more than 67,800 sold. Days-to-turn for GM's full-size trucks was the fastest of its rivals, according to auto information website Edmunds.com Inc., that the lack of inventory was hurting its sales.
"We will move very quickly," GM CEO Mary Barra said Thursday on an earnings call. "We expect construction to begin on the new body shop and flexible assembly module at Oshawa immediately upon ratification. When the plant comes back online in early 2022, we will see a significant increase in our full-size pickup production capacity."
The automaker will invest almost $84 million into St. Catharines to build transmissions for those trucks as well as more Chevrolet Equinox SUVs. Unifor negotiated for a new propulsion program for the Corvette sports car, too.
"There was a genuine concern and a legitimate concern that up to half of our members may be laid off during the life this agreement," Dias said. "There is no question what we've negotiated has stabilized the plant."
GM also is likely to invest around $383,000 to keep up its parts distribution center in Woodstock, where it employs 74 Unifor members, Dias said.
In September, Canadian employees at Ford ratified a three-year contract with 81% support. The deal included $1.5 billion in investment to build electric vehicles in Canada, two 2.5% wage increases, ratification bonuses, premiums for afternoon and midnight shifts and a reduced eight-year grow-in period to reach top wages, down from 11 years. Unifor members working for Fiat Chrysler in October ratified by 78% a similar agreement that included $1.2 billion in investment.
Like with Ford and FCA, the federal and provincial governments likely will provide incentives to support the investments, Dias said. The federal government told Ford it would provide up to $376 million to bring electric vehicles to its Oakville assembly plant near Toronto.
"We have demonstrated that we are prepared to support the future of our auto sector," John Power, representative for Navdeep Bains, Canada's minister of Innovation, Science and Economic Development, said in a statement, noting support for the U.S.-Mexico-Canada trade agreement and the build-out of an electric-vehicle supply chain.
Dias added: "The auto industry in Canada is certainly on its way up. The demise of the auto industry is absolutely incorrect. We’re a sunrise industry, not a set sunset industry."