DETROIT -- To lure a low-profit small car to the United States, the UAW agreed to staff about 40 percent of a Michigan assembly plant with workers who earn $14 an hour -- half the regular UAW wage.
So is this a practice that will spread to other assembly plants, further lowering wages in the industry but making U.S.-made vehicles more competitive?
The experts disagree.
A union dissident suggests automakers will push for the arrangement in next year's contract talks.
But Dave Cole, chairman emeritus of the Center for Automotive Research in Ann Arbor, Mich., wouldn't go that far. He said the provisions are liable to spread to Detroit 3 plants where small cars are planned.
General Motors Co. and the UAW revealed terms of the lower-wage agreement last week for GM's Orion Township (Mich.) Assembly Plant. That's where GM will build the next subcompact Chevrolet Aveo and a new Buick compact called the Verano. The current Aveo is assembled in South Korea.
Cole said small cars' low stickers can't offset the cost of a traditional $28 an hour wage in Detroit 3 U.S. assembly plants. That's why, for example, Ford Motor Co. is building the Ford Fiesta subcompact in Mexico and Chrysler Group plans to build the Fiat 500 subcompact there starting in December.
"I do believe this agreement sets the stage for dealing with small-car plants a little differently," Cole said.
Manufacturing consultant Ron Harbour says the lower-wage workers will generate modest production-cost savings for GM.
His math: The lower-wage workers will account for 40 percent of the work force, or 8 hours of the 20 or so needed to assemble a car at Lake Orion. With lower-wage workers earning $14 less per hour, that's $112 per car. The savings will be slightly higher, because benefits will be lower for some of the lower-wage workers, he says.
"Labor is just one cost," he says. "But it is the contribution that the UAW is making to bring small-car production to America."
Harbour is managing partner of the auto practice of Oliver Wyman Group.
Gregg Shotwell, a leader of the UAW dissident group Soldiers of Solidarity, said the agreement has set a precedent for next year's master UAW negotiations with the Detroit 3.
With GM and Chrysler Group workers unable to strike because of concessions ratified in 2009 just before the carmakers' bankruptcies, the carmakers can argue for similar deals at Detroit 3 stamping and engine plants as well, he says. Bargaining disputes will be resolved by arbitration.
"Any union that can't strike has no leverage," Shotwell said.
Auto analyst Aaron Bragman sees the Orion agreement as a special case. The 2009 GM-UAW contract modifications called specifically for a competitive local agreement to allow GM to build a small car in the United States. That car ended up being the 2012 Aveo. Production will begin in the second half of next year.
Bragman, a senior analyst with IHS Automotive, said that was the price of bringing to the United States a small car that normally would have been built in a low-cost country such as Mexico. GM ranks Mexico as low-cost, meaning it pays workers less than $15 an hour in combined wages and benefits.
Said Bragman: "It was a way to make the business case work."