GM General Motors Company

By Mike Colias 

The leader of the union representing auto workers in Canada said thousands of factory employees will strike at two General Motors Co. plants if the sides miss a Monday night deadline for a new contract, a development that would threaten to disrupt the supply of the brawny engines that go into the biggest versions of GM's lucrative sport-utility vehicles.

Unifor President Jerry Dias said in an interview that several weeks of formal negotiations with GM officials hasn't resulted in "anything meaningful" on the union's No. 1 goal: securing commitments for future production at two of the auto giant's Canadian plants. Canada's largest private-sector union this month designated GM as the target company in talks that will set a pattern for negotiations with Ford Motor Co. and Fiat-Chrysler Automobiles NV.

Unifor's four-year contract with Detroit's three auto makers covers about 20,500 employees and expires at 11:59 p.m. on Monday. Extensions are common in labor negotiations, but Mr. Dias appears uninterested in dragging out talks that he characterizes as being slow-going.

"The reality is we've chosen GM as the target and there's going to be a strike," Mr. Dias said, vowing not to extend the contract beyond the Monday deadline. "'At some time or another, somebody is going to bend. It's not going to be me."

GM's finished vehicle production in Canada represents only a modest slice of the company's sprawling manufacturing footprint in North America, but a strike would be disruption at an engine and transmission plant in St. Catharines, Ontario, near Niagara Falls. That factory cranked out more than a half-million engines last year, delivering power for 15% of the vehicles GM sold in the U.S. last year, making the facility a bit of a choke point if production is suspended long enough.

St. Catherines' output includes V8 engines that go into most of GM's big SUVs -- the Chevrolet Suburban, Cadillac Escalade and others. Built in Arlington, Texas, and typically sold near the higher-end of the market's typical price range, full-size SUVs are among the company's biggest moneymakers.

The 1,400-employee St. Catharines plant also makes smaller V6 engines fitted in several models across GM's brands, including the Chevy Colorado and GMC Canyon midsize pickups that have been hot sellers since they were introduced two years ago. In addition, the factory makes a transmission used in the Chevy Equinox crossover, GM's No. 2 seller in the U.S.

While Mr. Dias is looking for an upfront commitment, GM executives have said they don't intend to decide on any future investment in Canada until after a new contract is signed. GM's shrinking manufacturing footprint in Canada underscores the industry's shift toward investment in the U.S. and Mexico in the years following the 2008 financial crisis.

A GM spokeswoman declined to comment on the strike threat. "We remain focused on working with Unifor to reach a mutually beneficial and competitive new agreement," she said in a statement.

Analysts said GM could scramble to fire up contingency production at other factories -- each engine and transmission produced in St. Catharines is made in at least one other GM plant in North America. Mr. Dias, however, said he believes United Auto Workers in the U.S. would "stand in solidarity" with Unifor and potentially thwart efforts to replace the lost engine production.

UAW officials couldn't immediately comment.

The relatively small volumes coming from the Oshawa plant and GM's redundant supply of engines and transmissions made in St. Catharines gives the company some leverage in the negotiations, said LMC Automotive analyst Jeff Schuster. "It's a risky tone from the union," he added.

GM can't afford a significant kink in production. The company's North American plants are running flat out amid the U.S. market's strong sales pace, and thin inventory of certain models has caused the auto maker to miss out on some sales in recent months. Dealers have complained about tight supplies of the big SUVs for much of the last two years as low gas prices stoke demand.

The second plant covered under the GM contract that expires Monday is a vehicle-assembly factory in Oshawa, Ontario, which isn't as strategically important to GM. It makes several light-selling cars that are expected to fallout of GM's future production plans within the next few years, such as the Cadillac XTS sedan.

Research firm IHS Automotive estimates a strike would cost GM about 2,000 vehicles a day from Oshawa. GM made nearly 140,000 light vehicles at that plant in the first eight months of the year, about 6% of its North American vehicle production, according to WardsAuto.com.

If Unifor and GM can agree to terms, the union will pivot to Ford and Fiat-Chrysler Automobiles. Union officials want fresh product commitments at an FCA assembly plant in Brampton, which makes the Chrysler 300 and other sedans, and two Ford engine plants in Windsor.

Write to Mike Colias at Mike.Colias@wsj.com

(END) Dow Jones Newswires

September 16, 2016 15:37 ET (19:37 GMT)

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