Week of October 14, 2002
  Project Watch
Canadian Auto Workers union at Quebec rally last year
This is the first year in which the Canadian Auto Workers union (pictured above at a Quebec rally last year) has negotiated separate labor agreements with the U.S. Big Three.
New Union Pacts with Big Three
Spawning Multiple Canadian Expansions

By JACK LYNE, Site Selection
Executive Editor of Interactive Publishing

TORONTO – Like so many bricks-and-mortar dominoes, major Canadian expansions by the U.S. Big Three are fast falling into place with the signing of new labor pacts. This year marks the first in which Ford Motor Co., General Motors Corp. and DaimlerChrysler are negotiating separate agreements with the 47,000-member Canadian Auto Workers (CAW).
        GM, as part of its agreement with CAW's union, unleashed the first of Canada's contract-driven expansion wave. The union specifically targeted GM for its maiden bargaining voyage, owing to the automaker's bottom-line results, far and away the best among the Big Three. The GM-CAW contract negotiations, in fact, began on the same July day on which GM announced a $1.3-billion second-quarter profit.
        GM has 20,000 CAW members in its plants in five Ontario cities: London, Oshawa, St. Catharines, Windsor and Woodstock. That number was higher until late August, when the automaker shut down production at its 1,400-worker assembly plant in Ste-Therese, Quebec. Union job losses, however, were partially mitigated by GM's adding 1,000 workers for a third shift at one of its two Oshawa plants.
Hargrove (center)
"There was a lot of hard work to make this look easy," CAW president Basil Hargrove (center in photo above) said after the union reached agreement with GM, whose initial offer Hargrove called "offensive."

        Nonetheless, the Ste-Therese shutdown spurred the CAW to make job creation a major plank in the GM contract talks. And job creation was what it got in the final agreement.
        "We have a deal, [and] I'm elated," CAW president Basil Hargrove said as the union reached accord with GM. "There was a lot of hard work to make this look easy."
        Things weren't riding so easily, though, in the negotiations' earlier stages, which featured the usual spasms of saber-rattling. Hargrove called GM's first proposal "offensive." Hargrove's line softened a bit with the automaker's second offer, but he still noted, "We need to put a lot more meat on the bones."

Pact Spurs Expansion in Oshawa and St. Catherines
The meat on the final GM agreement's bones included two expansions:
  • The automaker will add some 330 new manufacturing and assembly jobs at the St. Catharines, Ontario, components plant. GM also committed to adding a new line at the St. Catharines facility that will manufacture a new transmission gear set. The new line will be added sometime in 2005 or 2006, GM officials said.

  • GM will add 120 jobs at its Oshawa, Ontario, truck factory to assemble a new full-size pickup that will debut for the 2004 model year. The automaker is also going to build a paint facility at the Oshawa plant, which will increase production, GM officials said. In addition, GM named Oshawa assembly plant No. 2 as the lead assembly operation in developing the next-generation Buick Regal, which should hit the market in early 2005.
The new labor agreement will enable GM "to continue the momentum that we have gained here in Canada," said GM of Canada President Michael Grimaldi (pictured).
        With the CAW agreement, GM will invest a total of $530 million in its Canadian plants, company officials said. GM hasn't released capital investment estimates for individual expansion projects.
        Michael Grimaldi, GM of Canada president, said his company was "pleased with the agreement," which, he added, will enable the company "to continue the momentum that we have gained here in Canada.
        "This extensive investment in new capital and technology builds on an impressive investment history," Grimaldi said. "In the last decade, GM of Canada has invested $3.8 billion in new product programs and technology."

$322-Million Ingersoll Expansion Also in GM's Plans
The CAW-spurred expansions in Oshawa and St. Catharines came only some three weeks after GM, along with co-owner Suzuki Motor Co., announced a $322-million expansion of CAMI Automotive in Ingersoll, Ontario. The expansion will ready the 1,750-employee joint-venture plant to build a new compact sport utility vehicle.
        The capital infusion won't create any new jobs at the Ingersoll operation. But the expansion will likely save a considerable number of jobs, given CAMI's anemic production numbers. Opened in 1989, the CAMI plant has never met its co-owners' expectations. The plant has a full production capacity of 200,000 vehicles a year. Last year, though, the plant produced only 79,961 vehicles, a 34 percent drop-off from 2000. And CAMI's production dropped another 25 percent, to 32,743 vehicles, for 2002's first seven months.
        Grimaldi, however, called the expansion "a clear demonstration of our continuing commitment to Canada and CAMI's future."
        That commitment seems grounded in the new game plan for CAMI. The plant was initially set up to assemble compact SUVs and subcompact Suzuki Sprints and Chevrolet Metros. The subcompacts, however, never found a market, going out of production last year. And Honda and Toyota filled CAMI's hoped-for SUV niche.
        GM and Suzuki's $322-million investment will rebuild one CAMI line to assemble the Equinox compact SUV. Equinox production will begin in 2004, with the vehicle hitting the market for the 2005 model year. CAMI will be the only plant assembling the Equinox, Grimaldi said.

Contract Kindles Ford's $402-Million Ontario Expansion
Like GM, Ford also entered CAW negotiations with a plant closing shadowing the talks. And, like GM, Ford came out of negotiations talking expansion.
        Ford in January announced that it would close its 1,400-employee F-150 pickup plant in Oakville, Ontario, in 2003. The announcement was part of Ford's $4.1-billion cost-cutting plan, which will eliminate some 22,000 North American jobs. Ford, Hargrove charged, chose the Canadian plant for closure to protect its U.S. jobs.
        But with the new CAW-Ford contract, far fewer of those Canadian jobs are going away. Some 900 workers from the Oakville F-150 plant, in fact, will stay on the job - only at Ford's Oakville minivan plant.
        Those 900 jobs will stem from the $402 million that Ford agreed to invest in the Oakville minivan plant. Those funds will ready the operation to produce the next-generation Windstar minivan and a new Mercury minivan.
        Besides the added jobs, the CAW-Ford negotiations also produced a one-year postponement of the Oakville F-150 plant's scheduled shutdown next year. With the new contract, Ford will now keep the facility open until July of 2004. By then, with the minivan plant expansion complete, the 900 F-150 workers will shift facilities.
        Hargrove described negotiations over the F-150 plant's closing as "one of the toughest issues we've ever faced in our collective bargaining with Ford." The settlement, along with the automaker's retirement incentive packages, will likely mean no layoffs for Ford's union workers, Hargrove said.
        Ford and GM's expansion commitments weren't the only similarities in the two's new CAW pacts. The two agreements also both included wage increases, extra vacation time, enlarged health-care benefits and signing bonuses.

Daimler Chrysler Pacifica
But how many jobs can you get into it? DaimlerChrysler's Windsor minivan assembly plant in January 2003 is adding the Pacifica, a hybrid SUV (pictured above at the 2002 Canadian International Auto Show). But the addition likely won't offset job losses from the automaker's scheduled shutdown of its Windsor Dodge Ram plant - which will be a major negotiating point in CAW talks.
DaimlerChrysler Faces Same
Dilemma, Doesn't Have Same
Options, Officials Say
But will all those elements - particularly the expansions - be part of CAW's new pact with DaimlerChrysler?
        Like the other two Big Three members, DaimlerChrysler enters CAW talks with a plant closing in the works. The automaker's 1,200-employee Dodge Ram plant in Windsor, Ontario, is scheduled to shut down in July of 2003. The closing is part of the plan that DaimlerChrysler announced in
        January of 2001 to eliminate 26,000 North American jobs.
        Like Ford in Oakville, DaimlerChrysler has another plant in Windsor - a 5,500-employee minivan assembly operation. But the Windsor situation, company officials say, doesn't offer the same employee-switching options that Ford had in Oakville.
        DaimlerChrysler's Windsor minivan plant is undergoing a previously announced $290-million expansion, which will add a new product, the Pacifica SUV, in January of 2003. But even in the best-case expansion scenario, the Pacifica addition would add only 400 Windsor minivan workers, company officials said.
        With no easy resolution in sight, CAW's strike deadline for DaimlerChrysler was looming as this issue went to press.
        Talks were at a logjam on Tuesday, prompting Hargove to say, "They're going to get a hell of a lesson before we're done here."

Motorola's $3B Virginia Fab Cancelled,
but Project Still Produced Positive Impact
By JACK LYNE, Site Selection Executive Editor of Interactive Publishing

. . . but not in the planned Virginia fab. Even so, Motorola's cancelled project leaves behind a number of significant pluses.
RICHMOND, Va. – It is, at long last, official: Motorola has formally ditched its plans for a $3-billion, 5,000-employee semiconductor fab in the Richmond metro, which the company initially announced all the way back in late 1995. Motorola officials recently traveled to Richmond to deliver the news in person to local and state officials.
        That news certainly wasn't cheery for the Old Dominion State. Nonetheless, a lot of enduring positives have accrued since Motorola's high-profile announcement seven years ago, Virginia officials emphasized.
        Moreover, the cancellation of the 1.5-million-sq.-ft. (139,350-sq.-m.) Richmond fab was hardly a surprise. Motorola is going through a rigorous and very public restructuring, steadily slashing its worldwide work force from 1996's 140,000 employees to about 90,000.
        In addition, worldwide semiconductor demand has been dropping for the last four years.
        Also boding badly for building a Richmond fab was Motorola's outsourced chip-making strategy, which the company adopted in late 1997. Since then, the Schaumburg, Ill.-based firm has steadily offloaded existing fabs. By the end of this year, the 44 fabs that Motorola owned in 1997 will have been whittled down to 10.
        "It has nothing to do with the region or the people," Sean Hunkler, the Motorola Semiconductor Products Sector vice president who was in charge of Richmond-area operations, said of the canceled plans. "It has everything to do with the market and our business model moving forward," Hunkler told the Richmond Times-Dispatch.

Announcement Sparked Infineon's
1,750-Employee Richmond-Metro Fab
The fab project, in contrast, hasn't seemed to move at all in years.
        Motorola in September of 1998 canceled work on clearing the 362-acre (146.5-hectare) site and installing infrastructure on the acreage in West Creek Business Park. By March 2000, company officials were saying that Motorola might need to bring in partners to still build the Richmond plant.
        Even with the cancellation, however, Virginia officials were upbeat. The Motorola project announcement, they said, put the state on the map for both chip-making in particular and high tech in general.
        Motorola's focus on Virginia specifically sparked the creation of the 1,750-employee Infineon Technologies' Richmond operation in Henrico County. A joint venture between Motorola and Siemens AG (Infineon's former parent), the operation originally known as White Oak Semiconductor went online in August of 1998. By 1999, the Richmond-metro facility had been named "Top Fab of the Year" by trade magazine Semiconductor International.
        And Infineon had more in store: In late 2000, after being spun off from Siemens and buying out Motorola's stake, the company rechristened as Infineon Technologies Richmond took another giant step in Virginia. The firm announced that it had picked a site just outside Richmond for a new $1-billion-plus fab making 300-mm. (12-inch) wafers - the first 300-mm. operation on the U.S. East Coast. (For more details see "$60 Million in Virginia Incentives Fueling Infineon's 300-Mm. Fab," January 2001's Incentives Deal of the Month.)
        Infineon's 300-mm. expansion announcement, in fact, was boosted by state incentives for semiconductor firms that were first created because of Motorola's initial interest in Virginia. (Motorola, however, never collected any of the almost $70 million that the state had allocated in project incentives. The company's subsidies were tied to meeting specified manufacturing targets, and the manufacturing never started.)

Motorola's billion-dollar Virginia plans spurred the creation of Virginia Commonwealth University's School of Engineering (pictured above: a classroom scene at VCU). The company will continue its involvement with the engineering program, Motorola officials said.
Project Spurred Creation
Of VCU School of Engineering
The cancelled project - which then-Gov. George Allen once described as the "best Christmas present in the history of Virginia" - also leaves a positive imprint on Richmond-based Virginia Commonwealth University (VCU).
        Motorola's billion-dollar Virginia plans prompted the state legislature to allocate $11 million to create a School of Engineering at VCU. Motorola in 1998 also announced a $500,000 donation to VCU's engineering program. In addition, the company has donated equipment that's used in VCU's School of Engineering.
        And that VCU-Motorola link will carry on, even with the Virginia fab's cancellation. Motorola, company officials said, will continue its involvement with VCU, including donating surplus equipment (of which it likely has a surfeit, considering its substantial downsizing). Motorola has also reportedly spent million of dollars in preparing the West Creek Business Park site on which it once planned to locate.
        The company hasn't yet announced an asking price for its Henrico County acreage. Motorola spent $20.4 million in two separate land-buying transactions during the 1990s. In 1995, it forked over $12 million for a 230-acre (93.1-hectare) site. In 1997, projecting an even bigger Richmond fab operation, the company laid out $8.4 million to buy another 132 acres (53.4 hectares).
        All told, Motorola spent some $50 million on its Richmond project since the 1995 announcement, local officials estimated.

Editor's note: The new November Site Selection includes a special Spotlight Section detailing more on corporate location strategies in Virginia. Another related item of interest in the November issue is "High-Tech Executives Ponder the Brave New World of Corporate Real Estate," a feature including a look at Motorola's strategic outsourcing initiative, which the company described at Jones Lang LaSalle's recent California roundtable.


©2002 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.