Last week’s threat by Chrysler to close Canadian plants if it doesn’t win big concessions from the CAW is possibly one the most troubling announcements since the beginning of the auto industry meltdown.

Tom LaSorda, Chrysler president, said the company needs to lower its labour costs by about 25%, reducing wages from the current estimated to $75/hour to $55/ hour. LaSorda also said the company would require $2.3 billion USD in government bailout funds for Chrysler to continue manufacturing in Canada.

Currently, Chrysler directly employs an estimated 10,000 people in Canada. This number does not factor in the parts suppliers, dealerships and distribution centres who deal with the auto giant. The withdrawal of Chrysler would possibly force some parts companies and distributors to close entirely. And since suppliers usually sell parts to more than one auto maker, it would send other car makers clambering to find parts, eventually slowing production lines to a halt.

Some argue that over the long term, the loss of Chrysler might not be the worst thing to happen and prove advantageous for Ford and GM. The two remaining companies could theoretically pick up the slack for Chrysler in their absence.

Many are shaking their heads, calling it an idle threat. Shutting down operations in Canada would cost millions of dollars, not to mention a lot of time. While the auto industry as a whole would likely endure such a move, the move could potentially have severe impacts and pose countless problems across the board. Chrysler would have to shift production lines from Windsor and re-open their US minivan plant, should the current Windsor plant (where approximately 4,000 Canadians are employed) face closure. This would be an extremely costly endeavour.

And what of the effect this would have on the CAW, the very people Chrysler is demanding the concessions from?

Pundits and industry analysts say the threat is very real and not to be taken lightly, as Chrysler could very well transfer Canadian production to plants in the U.S. in a matter of months.

But historically, Chrysler has also made similar threats before (to varying degrees), and yet, are still here. CAW president Ken Lewenza has also recently asserted that Chrysler will not pull out just yet, anyway, as they have a three-year collective agreement with terms that prevent them from selling or closing plants for the duration of the agreement.

Readers: what are your thoughts?