Canada union, GM spar as automaker cuts U.S. plant output

By Susan Taylor

TORONTO (Reuters) - The union leading a month-long strike at a General Motors Co (GM.N) auto plant in Ontario is refusing to make concessions after GM threatened to move production to Mexico, a move that could cost thousands of Canadian jobs.

The dispute comes at a sensitive time, as the United States, Canada and Mexico hold tense negotiations to modernize the decades-old North American Free Trade Agreement (NAFTA), with all three countries fighting to safeguard their economies.

The biggest U.S. automaker separately said on Thursday that it planned to scale back production and jobs at a Detroit assembly plant producing four poorly selling sedan models, starting Oct. 20, eliminating about 200 jobs.

Contract talks at GM's CAMI plant in Ontario, which stalled over job security and sparked the first strike at a Canadian assembly plant since 1996, have idled production of GM's popular Equinox sport utility vehicle.

The union, called Unifor, will not withdraw its demand that GM pledge to keep Equinox production in Canada, Unifor President Jerry Dias said on Thursday.

"GM, at some time or another, is going to have to make a commitment to Canada, it's going to have to make a commitment to the United States and they can't continue to shift our jobs to Mexico," Dias told Reuters on the sidelines of NAFTA talks in Washington.

It is impossible to compete by cutting Canadian costs below those of Mexico, where workers make $2 an hour, Dias said.

GM Canada was not available for comment.

The issue is escalating just as Canadian Prime Minister Justin Trudeau discusses NAFTA with U.S. and Mexican leaders.

The provincial government of Ontario urged both sides to immediately resolve the high-stakes dispute.

"I feel like we're engaged in a poker game, but the interests of Ontario are sitting on the table right now," Ontario Economic Development Minister Brad Duguid told Reuters.

"We'd really like to urge the parties to find a resolution to this as quickly as possible, before permanent damage is done."

Some 2,500 workers at GM's factory in Ingersoll, Ontario, walked off the job on Sept. 18 after the automaker rejected Unifor's call to have the plant designated as lead production site for the Equinox in North America.

"GM has a capacity issue in North America and they need to close a plant. This could be the path of least resistance. It's no more complicated than that," said Susquehanna International Group auto analyst Matthew Stover.

On Wednesday, GM warned Unifor that it would start winding down production at the CAMI plant and ramp up Equinox output at two plants in Mexico unless workers called off their strike.

'INFLUX' OF AUTOS FROM MEXICO

Canada must discuss the issue with the United States and develop a strategy to stem the "influx" of vehicles from Mexico, Dias told reporters in Washington.

The workforce at GM's San Luis Potosi plant in Mexico grew to 5,000 from 4,000 workers this year, as the automaker invested in production of its Trax line of SUVs, said federal labor delegate Edgar Duron.

Workers at that GM plant, which was the city's first auto factory when it opened in 2007, earn at least four times the national minimum wage, added Duron, who hopes more production comes to San Luis Potosi.

The strike is damaging for CAMI's supply chain, with Dias estimating that some 30,000 workers are feeling the impact.

GM temporarily laid off some workers at three of its plants producing parts for the CAMI plant: a transmission factory in Ontario and two engine plants in Spring Hill, Tennessee, and Flint, Michigan.

Canadian auto parts producer Magna International Inc (MG.TO) suspended its supply of parts to the CAMI plant on Sept. 20, which it said affected the output of "a few" Magna plants in Ontario. The company would not speculate on any impact from a production shift to Mexico.

GM has invested $800 million to retool the CAMI plant and it is projected to build about 210,000 vehicles in 2018, according to forecasting firm AutoForecast Solutions. The two GM Mexico plants are together projected to build 149,000 vehicles next year.

"They made a major investment in this plant, so I would expect that GM is going to want to get their investment back," Dias said. "But is there a long-term threat? The answer is absolutely yes."

Ontario has not provided any funding to CAMI in the last 10 years, a spokesman for the province said.

The Equinox was the second best-selling model in the United States Chevrolet lineup in September, according to Automotive News.

(Reporting by Susan Taylor; Additional reporting by David Ljunggren and David Shepardson in Washington, Paul Leinert and Nick Carey in Detroit and Julia Love in Mexico City; Editing by Susan Thomas and Matthew Lewis)