How a major corporation intends to coopt unions: Magna

Magna opens doors to unions

Development is considered a huge win for CAW, but it's unclear yet just how it will impact Stronach's company

Nicolas Van Praet, Financial Post

Published: Friday, October 12, 2007

Magna International Inc. was once so scared of unions in Canada choking its successful business that it deliberately set up small factories and encouraged plant managers not to put company signs out front that might attract labour organizers.

Now, it is set to announce a deal with a labour group it previously spurned that will open the doors to a widespread unionization of its Canadian factories.

On Monday at Magna's headquarters in Aurora, Ont., Magna and the Canadian Auto Workers union will announce that the union will be allowed to start organizing Magna's Canadian plants, sources say.

Frank Stronach, Chairman of the Board of Magna International Inc., in the photo.

(Photo: National Post File)

A deal on American plant unionization could come later.

The development is considered a huge win for the CAW, which has seen its blue-collar membership decline as a strong loonie has claimed thousands of manufacturing jobs over the past several years.

For Magna, it is yet another major shift, coming just one month after shareholders approved a deal to let Russian billionaire Oleg Deripaska buy into the business.

"This is pretty big," said Wayne Lilley, author of Magna Cum Laude, a recent biography of Magna founder Frank Stronach.

"It's certainly a departure from Magna's long-time culture and belief."

With annual sales last year of US$24-billion, the Aurora, Ont.-based auto-parts giant, founded by Frank Stronach, is one of the country's largest manufacturers without a unionized workforce.

Despite public claims by Mr. Stronach that he would not be opposed to reasonable labour representation, Magna has consistently resisted attempts by the CAW to organize its plants.

Its non-union culture is widely considered to be one of the major drivers of its growth.

One reason the CAW never broke into Magna, despite numerous attempts, is that employees were happy with Magna's deferred profit-sharing plan, recreation areas, and daycare facilities, Mr. Lilley said.

For more than a year however, Mr. Stronach has been talking about letting both the Canadian Auto Workers and the United Auto Workers unions in as a way to put aside old management-labour divisions in the North American auto industry and ensure its survival. The hope is that the newfound cooperation

could foster a new work model - and keep auto parts and auto making jobs that might otherwise move to other continents. As Dan Luria, an analyst at the Michigan Manufacturing Technology Center put it, Mr. Stronach "wants to be able to say he remade labour relations in North America."

Buzz Hargrove, CAW president, declined Friday to comment. Earlier this year, he said CAW representation at three Magna plants in Ontario, covering about 1,000 employees, has worked well for both sides. Seeing that success may have provoked the switch in Mr. Stronach's thinking, Mr. Hargrove said at the time. Mr. Stronach could not be reached.

Magna officials have been in talks for more than a year with labour leaders with the CAW and United Auto Workers union about further unionizing its North American workforce. The company had 21,050 employees at 70 manufacturing plants and engineering centres in Canada as of Dec. 31, 2006.

It employed 18,150 people at 72 sites in the United States, including eight plants organized by the United Auto Workers Union.

Unions like the CAW have become more pragmatic by promoting productivity and other business goals at the same time Magna has warmed up to organized labour, one analyst said yesterday.

"There have been changes in philosophy on both sides that I think made it possible," the analyst said, adding that investors will look at the development in a "very concerned" way because it potentially harms the company's long-term flexibility. On the flip side, it could help Magna win new contracts with manufacturers like General Motors Corp. because the unions have significant leverage with carmakers, the analyst said.

In a message to shareholders contained in Magna's 2006 annual report, Mr. Stronach said the biggest handicap hurting the North American auto industry is the gap between business and workers. He said North American auto manufacturers have to find a way to get greater flexibility in their costs if they want to better compete with companies in China, Korea and India, which pay workers less.

"I strongly believe that one way to achieve a more competitive cost structure would be through the development of a comprehensive 'framework of fairness' based on social economic justice," Mr. Stronach wrote, adding that such a framework would define the rights of workers and responsibilities of management, and give employees a profit-sharing plan. Workers at each Magna plant not yet unionized would still have to vote to accept representation.

Financial Post