Chrysler CEO Sergio Marchionne's recent observation that a two-tier wage structure with the UAW isn't viable as a long-term practice is right on the money.
The UAW agreed to a two-tier system in 2007 to help bring labor costs in line with the competition by paying new hires about half as much as regular workers. Now Marchionne, who is also Fiat CEO, says the two-tier wage system undermines efforts to get Chrysler and Fiat working in unison.
One of Henry Ford's early competitive advantages was to pay his workers $5 a day. He created a vast pool of willing workers who also could afford to buy the automobiles they built. That advantage has been eroded by the two-tier wage system.
Eventually, the Detroit 3 and the UAW must revamp wage plans to maintain competitiveness while boosting the pay and purchasing power of newer employees, reducing dissension and wage disparity by tying more of a worker's compensation to productivity and profitability.