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Detroit 3, UAW will ditch hiring caps, sources say

GM, Ford poised to follow FCA plan

Eliminating Tier 2 wages has been the UAW's top priority in contract talks.
UPDATED: 10/26/15 1:32 pm ET - adds GM agreement

DETROIT -- The UAW's new contract with Fiat Chrysler will set the pattern for how first General Motors and then Ford Motor Co. fix the divisive two-tier wage system at their factories, said sources familiar with the negotiations.

The UAW has no plans to resuscitate Tier 2 hiring caps at GM or Ford, aiming instead for the approach taken at FCA US that guarantees lower-paid Tier 2 workers an eight-year ladder of predetermined annual raises until they reach full wages of $30 an hour, the sources said.

Fixing Tier 2 was the thorniest issue in the just-concluded FCA talks. FCA's 40,000 UAW-represented workers were ready to strike the carmaker until it agreed to provide entry-level workers with a pathway to full pay. About 45 percent of FCA's hourly work force is Tier 2.

GM agreement, Ford next

The UAW reached a tentative agreement on a new four-year labor deal with GM Sunday just minutes before an extension expired that could have resulted in a strike.

The UAW said its bargaining committee unanimously agreed to send the tentative deal to local union leaders, who will meet in Detroit on Wednesday to vote on whether it should go to the rank and file for ratification. A vote would occur after that, probably over the course of several days, spilling into next week.

Ford Motor Co. would then be the final Detroit 3 contract negotiation.  

FCA's eight-year ladder to full wages is similar to a 10-year grow-in to full wages that the Detroit 3 have had since 2012 in Canada, where their entry-level workers are represented by the Unifor union.

Under the UAW's new contract with FCA, wages for Tier 2 workers were increased over the eight years from a maximum of $19 an hour to $30 an hour. An example would be a Tier 2 worker with three years of seniority who immediately bumps up to $21 an hour from $18.

Spokespeople at the UAW, GM and Ford declined to comment about specifics of the negotiations.

Sources estimated the new agreement -- with wage increases for legacy workers, better profit-sharing and a signing bonus of at least $3,000 -- would cost FCA an additional $400 million over each of the next four years.

The contract features the first wage increase that legacy Tier 1 workers will have seen in more than a decade. They'll get 3 percent increases in the contract's first and third years, with lump-sum bonuses of $2,400 and $2,500 in the second and fourth years.

The sources said it would be prohibitively expensive at any of the Detroit 3 to have a Tier 2 hiring cap and the wage grow-in program.

Fewer Tier 2s

Ford and GM each has a smaller percentage of Tier 2 workers than FCA, meaning they will be less hard-hit by Tier 2 changes this contract round.

Ford has an effective Tier 2 hiring cap of 29 percent today, while GM's Tier 2 hiring cap of 25 percent was suspended during bailout concessions taken by the UAW.

Ford has promoted about 865 Tier 2 workers to full Tier 1 pay this year after exceeding its cap. That pathway at Ford and GM will be eliminated in the upcoming contract, replaced by the same grow-in approach negotiated at FCA, sources said.

Gary Walkowicz, a UAW bargaining committeeman at Ford's Dearborn Truck Plant, said the only fair way to end Tier 2 is for entry-level workers to attain full pay within the four years of the contract, not eight years.

He said industry conditions could cause the union and carmakers to change contract terms in four years, when the next round of bargaining takes place.

"Most people in the second tier won't get to Tier 1 in four years," Walkowicz said. "And there's no guarantee they'll ever get there." 

You can reach Dave Barkholz at dbarkholz@crain.com

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