The Canadian Auto Workers opened contract talks with the big three Detroit automakers Tuesday in what is expected to be the most difficult negotiations in years.

The companies want to cut labour costs they say are the highest in the world.

The union, which agreed to concessions when the automakers were struggling, wants a share of the payoff now that the firms are making healthy profits for the first time in a decade.

"GM and Ford are earning record profit margins on their North American business and Chrysler's have come back to profitability far faster than anyone dared to hope for in 2009," CAW national president Ken Lewenza said.

"The companies have learned to make money even at low volumes. Workers' sacrifices have been a big part of that success."

In a statement, GM said it was optimistic that it will be able to reach a deal.

"The North American auto industry today faces extremely challenging competitive conditions and there is no finish line for improving our products, our processes and building the company we want for the future," the company said in a statement.

"Achieving a competitive agreement with our CAW labour partners is one important element of many as we continue moving forward."

Earlier in the day, a Chrysler Canada spokesman warned that although the company has returned to profitability, it is not out of the woods.

"While the industry and Chrysler have demonstrated some improvements to date, those gains have been modest and it is critical that we not return to an uncompetitive situation," said Todd Bested, Chrysler Canada Inc.'s director of labour relations.

Topping the companies' agendas, according to Carlos Gomes, a senior economist at Scotiabank, will be keeping costs under control, particularly because changes to how workers' health care is covered have made production at Canadian plants more expensive than in the U.S.

'It is critical that we not return to an uncompetitive situation.'—Todd Bested, Director of Labour Relations, Chrysler Canada

"The reality is that Canada's auto sector has an overall cost structure that's higher than what we were seeing in the United States," said Gomes.

All of the capacity expansion in the North American auto sector in the past several years has gone to the southern U.S. or Mexico, Gomes says, something which “just highlights the fact that companies are seeking to try to go wherever the cost structure is more favourable for them."

Lewenza countered that argument in his press conference by saying more auto assembly plants have been closed in Canada than in all of Europe.

"Every one of these companies is making a strong profit in North America and every one is losing billions in Europe," Lewenza said.

"We've taken more than our share of hardship and adjustments."

Lewenza said GM talked about reducing hourly compensation for workers, but the company provided no details.

The CAW says wages have been essentially frozen since 2008 – resulting in a decline in real wages of about eight per cent during that time.

A production worker at the top of the pay scale currently earns slightly over $34 per hour. Add in benefits, it says, and a top worker gets compensation of about $40 per hour.

The negotiations come amid a double-digit increase in North America car sales over last year, lifting purchases to the highest level since 2007.

Light vehicle sales in North American have jumped 13 per cent so far this year, Scotiabank says, led by a 21 per cent surge in purchases by U.S. businesses, governments and rental car agencies.

"Purchases in Canada have been stronger than we expected this year, prompting us to increase our 2012 forecast to 1.68 million units, the second-highest annual total on record," said Gomes.

Union blames high loonie

"Automakers are currently offering both '0 per cent' financing and 'employee pricing', providing discounts up to $14,000."

The union says Canada was considered a low-cost manufacturing jurisdiction in the auto industry, until recently; blaming the rise in costs on the increase in the exchange rate for the Canadian dollar which is up 60 per cent since the mid-2000s.

The CAW blames the rise in the loonie on growing American demand for Canadian oil.

The union met with General Motors Canada on Tuesday morning in Toronto after a brief photo opportunity and was to meet with Chrysler Canada later Tuesday after a press conference and with Ford Canada on Wednesday.

But detailed bargaining won’t happen until August 27, after the union’s collective bargaining conference from August 20-24.

The CAW typically announces a lead company it will negotiate with to come up with a three-year contract intended to be a template for deals with the other firms — and that news is expected in early September.

The CAW is also calling for capital investment in Canadian plants, something union president Ken Lewenza says would increase productivity, improve profits and make workers' jobs more secure.

Ontario has seen the Detroit Three carmakers — GM, Ford and Chrysler — cut thousands of jobs in the last decade as their parent companies restructured in the United States.

Canadian Auto Workers' National President Ken Lewenza says Chrysler has come back to profitability 'far faster than anyone dared to hope for in 2009.' (Michelle Siu/Canadian Press)

Last month, GM said it would invest $850 million in research and development in Oshawa, Ont. However, the company is also going ahead with a plan to close its consolidated plant, a move that will eliminate 2,000 jobs.

Besides the consolidated plant, GM also has a flex assembly plant in Oshawa that is getting a share of the production of the new Chevy Impala, which is also being built at GM's Detroit-Hamtramck assembly plant in Michigan.

The consolidated plant, which produces the Chevrolet Impala and the Equinox, was originally scheduled to close in 2008, but due to demand for the two vehicles, it has remained in business.

The closure follows the shutdown of a GM truck plant in Oshawa and a transmission factory in Windsor, Ont.

During the global financial crisis, the federal and Ontario governments helped bailout Chrysler and GM with a rescue package that totalled about $13 billion — with the majority, $10.5 billion, going to GM.

The union reluctantly gave concessions to General Motors and Chrysler in its last round as the two automakers teetered on the brink of insolvency. Pattern bargaining meant Ford got the same deal.

The union represents approximately 4,500 workers at Ford, 8,000 workers at General Motors and another 8,000 at Chrysler.

With files from The Canadian Press