Given the turmoil in South Africa and the breakdown in formal collective bargaining structures it is interesting to read about a new collective bargaining agreement in Ontario.   The auto companies claimed that the employees were too expensive relative to international peers.

Ford and the Canadian Auto Workers (CAW) signed the agreement after members of the Toronto-based union voted 82% in favour.   There are about 4,500 CAW-represented employees in Ontario.

According to this report – Ford workers ratify new contract – that first appeared in Business Day today, Ford and CAW concluded a very interesting collective agreement.

From a South African perspective there are some very interesting aspects, more particularly as the pension rights have been split and Ford eliminating many future obligations by not sticking with a defined benefit scheme.   In addition Ford will pay lump-sum amounts instead of cost-of-living adjustments.

Here are some of the main points of the new agreement between Ford and CAW:

  • Four-year contract
    • eliminates most cost of living raises in favour of bonuses;
    • extends the time it takes for a new employee to reach full pay; and
    • adds 600 jobs.
  • Employees to receive lump-sum payments in the second, third and fourth years of the contract in lieu of cost-of-living raises.
  • A ratification bonus.
  • Hourly rate for new employees falls by 14.3% (C$23.80 to C$20.40).
  • It will take 10 years, instead of 7, to reach a base hourly rate of C$34.
  • Retirement plans for new staff will be changed with 1/2 the pension being paid into a defined contribution plan and employees are guaranteed only what they pay in.
  • The rest will come from CAW’s defined benefit plan, which guarantees a certain amount at retirement, and obliges Ford to make up any shortfall if the pension fund underperforms.
  • Ford to add 300 jobs by adding a third shift and bringing some work in-house.