NEWS ANALYSIS

UAW, Detroit 3 will talk about wages, not jobs, this time

UAW President Dennis Williams and General Motors CEO Mary Barra talk before the opening of contract negotiations on Monday, July 13. Barra assured the union GM has no plans to move Chevy Sonic production out of its Michigan plant. Photo credit: JEFFREY SAUGER FOR GM

DETROIT -- For the first time in a decade, workers' wages are taking center stage at the UAW-Detroit 3 contract negotiations.

With stable auto production and flat factory employment predicted through 2018, jobs and future product commitments will assume a secondary role, industry experts say.

"Job security was a big deal in prior years," said Dave Cole, chairman emeritus of the Center for Automotive Research. "Not so much this year."

So the UAW will use its negotiating muscle to press for higher wages. But that will collide head-on with the Detroit 3's desire to keep labor costs at the inflation rate.

Stable hourly jobs
Detroit 3 hourly employment has nearly plateaued despite strong sales.
2013135,000
2014142,000
2015*147,000
2016*147,000
2017*145,000
2018*145,000
  
*Estimate
Source: Center for Automotive Research

A key friction point will involve so-called Tier 2 entry-level employees, who earn about half what veteran UAW members make, experts say. 

Over the previous two contract cycles, job and product promises were crucial to winning rank-and-file approval for concessionary contracts. 

In 2007, for instance, General Motors ended a 40-hour UAW strike that was called over the off-loading of retiree health care into an independent trust and other concessions by promising in its UAW contract a detailed laundry list of product commitments. 

Many of those job prospects were lost when the Great Recession hit in 2008. But neither side knew that in 2007. 

In the approach to this year's negotiations, the Center for Automotive Research estimated the Detroit 3 won't create net new jobs. Total hourly employment will drift down slightly from 147,000 later this year to 145,000 by 2017, CAR estimated. 

That means a key bargaining chip in prior negotiations, jobs, will take a back seat to pressing wage demands, Cole said.

Fiat Chrysler CEO Sergio Marchionne, left, and UAW President Dennis Williams embrace before the start of negotiations on Tuesday, July 14.

Also, Detroit 3 assembly plants are running above 90 percent of capacity so there isn't much room for new workers, Cole said. 

And many future product plans through 2018 have already been announced. A notable exception is what will be produced at Ford's Michigan Assembly plant outside Detroit. Ford announced on the eve of the negotiations that it will move the next-generation Focus compact and C-Max out of Michigan in 2018. The UAW said production could move outside the United States. 

A product commitment for Michigan Assembly could be ironed out in these negotiations, Cole said. Ford has its ceremonial handshake with the UAW Thursday, July 23. 

At this week's UAW handshake ceremony, GM CEO Mary Barra went out of her way to assure the union that GM has no plans to move production of its subcompact Chevrolet Sonic out of its Orion Assembly plant in Michigan. 

In fact, GM has announced $5.4 billion in new U.S. plant investment over the next three years, much of which has already been detailed by factory. In other words, GM has already laid out its future product plans outside the UAW negotiations. 

CEO Sergio Marchionne said this week that Fiat Chrysler is open to bringing additional jobs in-house that are now being done by suppliers. 

But the number of jobs for sequencing parts arriving from suppliers, subassembly and, perhaps, maintenance are modest, said Art Schwartz, a former GM labor negotiator and president of Labor and Economics Associates in Ann Arbor, Mich. "Companies can't promise jobs growth independent of industry growth," Schwartz said. 

At this week's ceremonial handshake to kick off negotiation with the UAW, Marchionne said FCA US would attack the pay disparity between long-time and entry-level workers. 

He said there's better than a 50 percent chance Tier 2 can be ended in the current round of bargaining. Entry-level workers today start at $16 an hour and top out at a little more than $19. Tier 1 workers earn wages of $28.50. The Detroit 3's current four-year contracts with the UAW expire Sept. 14. 

But Marchionne did not say how the two sides could end the pay disparity and not trample a company goal of keeping raises pegged to profit-sharing and other flexible compensation rather than straight wage increases. 

His counterpart at the ceremony, UAW President Dennis Williams, repeated that Tier 1 workers, who haven't had a wage increase in 10 years, should share in the newfound prosperity of FCA, Ford and GM. 

Cole said industry job growth since 2011 is topping out. The combined UAW work force in 2011 was 114,000, CAR reports. It is about 142,000 today and headed for 147,000, the center estimates. All those new jobs went to lower-paid Tier 2 workers. 

Now, the UAW and Detroit 3 will spend a good portion of this year's talks bargaining about whether to equalize pay.

You can reach David Barkholz at dbarkholz@crain.com -- Follow David on Twitter: @barkholzatan

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