Pinstriped suits and power lunches. These probably aren’t the first images to come to mind with the Canadian Auto Workers Union or labour negotiations. But in the current round of union talks for a new contract with the Big Three car companies, both elements play a key role.
In coming weeks, CAW president Buzz Hargrove and the union’s economist, Jim Stanford, will take their message from the bargaining table to the boardroom. They are making presentations to some of Bay Street’s top investment dealers and bankers, opening the lines for questions in subsequent conference calls. “We are doing exactly what companies do when they want to sell something to the Street,” Hargrove explains. “We want to sell them on our story, to dispel the idea that we are greedy and unreasonable. Perceptions are crucial.”
Shareholder perceptions have never mattered more. Arbitrageurs, mutual fund and pension fund managers now wield considerable clout with company executives and they have shown their willingness to use it. In recent months, their demands have brought major changes at Spar Aerospace Ltd., Jannock Ltd., and Call-Net Enterprises Inc.
By making his case directly to investors and analysts, Hargrove hopes they will exert pressure on Big Three management to accept the CAW’s principal contract demands—and avoid a strike. Specifically, he wants broad backing for his push to organize workers in the automotive-parts sector—something the vehicle manufacturers are reluctant to support. Jeff Rubin, chief economist of CIBC World Markets, which is participating in the CAW road show, says: “In Canada, auto-sector negotiations tend to be trendsetting. If there’s going to be a breakout issue that affects other sectors, that’s going to have implications for the fixed income and the equity sides of the equation.”
Although the U.S. car companies do not have shares trading in Canada, the investment community here still has a big stake in avoiding another costly auto strike: the Ontariobased parts business includes several publicly listed companies, such as Magna International Inc., Linamar Corp., Budd Canada Inc. and Meridian Technologies Inc., which have prospered because of the recent boom in North American vehicle sales.
Employment in the sector increased by eight per cent last
year and is on track to grow by another seven per cent this year. Still, within days of last year’s 7V2-week labour disruption at General Motors, auto-parts companies were laying off workers and trimming back production. “There are devastating macroeconomic implications from a protracted auto strike,” notes Rubin. “And you get a better sense of how likely it may be from the horse’s mouth.”
The union’s shrewd campaign to develop a consensus with investors and to influence the corporate agenda is significant for several key reasons.
First, it marks an attempt to depart from the blunt, confrontational approach that has characterized auto industry negotiations in the past. The strategy has come about, in part, as a result of the CAW’s deliberate efforts to broaden its appeal to include a younger, non-industrial membership. The bulk of the new jobs created in the Canadian economy are in the high-technology and service industries, and the CAW has aggressively moved to organize them. Although the certification at the first unionized McDonald’s restaurant was recently revoked, the CAW has organized workers at Starbucks, The White Spot and KFC restaurants.
To attract this younger, more mobile workforce, the CAW has learned to refocus its rhetoric and its tactics—a process personified by Hargrove and Stanford. Although he has become increasingly polished, Hargrove still represents the union’s core, its roots in assembly lines and industrial shop floors. But Stanford, 38, has a hip style and laid-back demeanour. According to Hargrove, it was Stanford s idea to meet Bay Street on its own turf.
Second, the CAW initiative marks a watershed in the evolution of the stakeholder rights movement. As investors have ousted executives and enforced performance targets, they have made managers heed outside voices. That has given other outside stakeholders, such as unions and community activists, a new point of leverage—one that the CAW leaders have identified early, and moved to exploit.
But even before the CAW gets to test-drive its new strategy, one key hurdle lies ahead. This week, so-called probing sessions, a round of informal off-the-record talks, begin between the union and the car companies. Soon, the CAW will decide which automaker to target for a strike. Whatever the outcome, however, Bay Street will be braced for it.
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