DAVID BARKHOLZ

UAW talks will turn on Tier 2 resolution

David Barkholz covers labor for Automotive News.

When delegates to the UAW national bargaining convention returned in solidarity to their locals last March, the question on every tongue was whether President Dennis Williams could deliver on his vow to roll back Tier 2 wages in this year’s bargaining with the Detroit 3.

Now, less than a week before current contracts expire on Monday night, a little fog has descended on the negotiations.

Williams himself has floated the notion that pooling active workers in a purchasing co-op would constitute a breakthrough in these talks. That suggestion has generated a lot of press coverage over a very tangential issue.

Ford Motor Co. made waves after the official start of bargaining in July by announcing that the Focus compact and C-Max would be pulled from the Michigan Assembly plant in suburban Detroit and built elsewhere in the future. That bit of drama caused some worker angst for about a month until word leaked out that the Ford Ranger midsize pickup is probably coming as a replacement.

Folks, let’s get down to brass tacks, shall we? These new issues are side shows. Distractions.

The main event is happening on wages, and specifically, whether the UAW can deliver a path out of Tier 2 to full wages for all workers and whether veteran or Tier 1 workers can expect their first wage increase in 10 years. Repeat, 10 years.

Williams’ legacy as a one-term UAW president -- he’s limited by age -- will stand on what he achieves on Tier 2. And it should.

Tier 2, which pays entry-level workers a little more than half the $28.50 an hour earned by veteran workers, is anathema to the ideal of equal pay for equal work.

Gary Walkowicz, a UAW bargaining committeeman at Ford’s truck assembly plant in Dearborn, Mich., says in a letter to co-workers this week that lower Tier 2 wages have depressed wages for veteran workers as well.

The Detroit 3 say losing Tier 2 would make them less labor-cost competitive compared with foreign carmakers here, whose labor costs are $10 an hour lower than the $57 an hour that Ford and General Motors already pay.

Put that together and it means that if there’s a UAW strike against one of the Detroit 3 during this year’s contract negotiations, Tier 2 will likely be the trigger -- not a few hundred jobs at Michigan Assembly, which never truly were in jeopardy.

Nor an impasse over a nebulous health care pool, the details of which have hardly been shared with the automakers. If anything, that item is likely to be only a footnote in the new contracts with the proviso that the two sides will work together to formulate opportunities for saving on future health care.

No, Tier 2 is where the action is. And Fiat Chrysler has the most to lose on that front. It is financially weaker than GM and Ford, thus CEO Sergio Marchionne’s serial efforts to enlist GM in a merger.

And FCA’s hourly work force is about 45 percent Tier 2. That’s far higher than the 28 percent at Ford and 20 percent at GM.

Consequently, any rollback of Tier 2 will hit FCA the hardest. That rollback could take a variety of forms. One way would be to mimic the Canadian auto worker “grow-in” through the creation of stepped annual raises until Tier 2 workers achieve full pay.

Another approach would be to reinstall caps at each of the Detroit 3 that would limit the hourly workers that could receive the lower wage at about 25 percent. After the cap is reached, any new hires would cause the highest-seniority Tier 2 workers to be promoted to Tier 1 pay. That has happened at Ford.

In the next seven days, the UAW will pick one of the Detroit 3 as its first target to settle on a contract.

Don’t expect it to be FCA. The carmaker’s heavy reliance on Tier 2 workers is going to make those negotiations the most difficult.

So look for either GM or Ford. The nod will likely go to the one that’ll be the most generous to the UAW to set the pattern for the others.

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

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