NDP-Liberal Coalition and the Vulnerable Auto Industry

It appears that the NDP is poised to promise stronger support to the Liberals to help prop them up. Jack Layton stopped short of demanding cabinet posts for NDP members, but says he wants to use NDP clout to extract further concessions from the Liberals, especially on issues like electoral reform, pensions, and the environment.

Even so, their clout may only take them so far. The Globe and Mail reports that the auto industry in Ontario is hurting because of its diminishing competiveness with the US. Higher labor costs, compounded by a 81 cent Canadian dollar, give American auto manufacturing plants a huge competitive edge:

DaimlerChrysler Canada’s assembly plants are operating at a disadvantage of $8.81 (U.S.) an hour, compared with U.S. plants operated by the three largest Japan-based auto makers, company data show. Labour costs are $51.05 an hour in U.S. dollars at Canadian plants versus an estimated $42.24 at Honda, Nissan and Toyota plants and compare with an advantage Canada held from 1998 to 2002.

“Our Canadian labour costs, including time off, health care and wages have been rising 5.8 per cent annually for a decade,” DaimlerChrysler Canada spokesman Stuart Schorr said yesterday.

“For Canada to maintain or grow its auto export industry, the manufacturers and CAW have a shared responsibility to keep labour costs from growing even more uncompetitive.”

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The average wage for CAW members assembling minivans in Windsor was $51.05 (U.S.) last year and it took 27.43 hours on average to put one vehicle together, DaimlerChrysler data show. That gave the Windsor plant a labour cost of $1,400 for each minivan.

Honda, by contrast, paid $42.24 an hour to workers at its minivan plant in Lincoln, Ala., and it used 22 hours to assemble one vehicle. That put Honda’s labour cost at $929 for each minivan, a $471 advantage over Chrysler.

The amount of time off that workers get in Canada virtually wipes out the advantage of taxpayer-financed health care, said industry analyst Felix Pilorusso.

The Liberal government then has 2 options: 1) send more of Alberta’s money to Ontario to subsidize tax breaks for car manufacturers, or 2) find ways to convince auto labor unions to accept decreasing labor costs.

Option 1 is attractive in the short run, but even the most dim-witted and Ontario-centric federal policy maker must realize that such band-aid solutions only slow the momentum of jobs going south.

The NDP-Liberal coalition will be inclined to take Option 1, but that won’t prevent them from feeling the crunch in their own backyard when Ontarians still suffer job losses.