DETROIT -- UAW President Dennis Williams said today he expects members to emerge from this week’s bargaining convention with a unified voice after a full airing of worker concerns about “inequity” in pay and benefits that are a product of a two-tier system.
Interviewed this morning before the start of the convention, Williams said today and Wednesday are about listening to delegates and shaping a strategy for upcoming collective bargaining with the Detroit 3. The current four-year labor contracts with the Detroit 3 expire in September.
“Right now I want to hear from the leadership and the membership at the convention,” Williams said. “Everybody’s concerned with the inequity. Our goals are to show that we’re listening, we’re unified and we’re going throughout bargaining with an objective.”
Meanwhile, General Motors and Ford Motor Co. are considering asking to create a new tier of lower-paid UAW workers, people familiar with the matter told Bloomberg.
When the UAW agreed to entry-level Tier 2 wages to automakers in 2007, many auto workers had no idea the system would become entrenched so deeply in Detroit 3 factories, says Harley Shaiken, a labor expert at the University of California-Berkeley.
A Tier 2 worker earns about half the wages and benefits of legacy workers. When the system was instituted, it was viewed by the union as a stopgap measure to help the Detroit 3 create jobs and compete with overseas automakers, Shaiken said.
How did Tier 2 grow so rapidly? The auto industry rebounded much more strongly from the recession than experts anticipated, which enabled automakers to hire lower-paid workers at a rapid clip.
All of the nearly 33,000 auto workers hired by the Detroit 3 since mid-2011 have been Tier 2. The group now represents 29 percent of the Detroit 3’s hourly U.S. work force. At the end of the last contract in 2011, there were only a handful of Tier 2 workers at the Detroit 3.
“It [Tier 2] was meant as a temporary, painful expedient in the minds of many of the UAW members,” Shaiken said. “It was not meant to be a permanent way of doing business.”
A UAW source active in the 2007 negotiations echoed Shaiken’s views.
In 2009, U.S. auto sales dropped to 10.4 million. In 2014, they reached 16.5 million.
Tier 2 violates the UAW ideal of equal pay for equal work, said Gary Walkowicz, a delegate to the convention and bargaining committeeman at Ford’s Dearborn Truck assembly plant.
In a letter to delegates and workers published this weekend, Walkowicz called on the UAW to eliminate it.
He said the prevalence of Tier 2 workers is the reason the Detroit 3 have been able to avoid paying a wage increase to legacy workers for a decade. His solution is to immediately move all Tier 2 workers, who earn wages of between $15 and $19 an hour, to the nearly $28 an hour earned by Tier 1 workers.
At Ford, the cost for the company’s 14,685 Tier 2 workers would be $335 million -- a fraction of the $6.9 billion in North American profits posted by Ford in 2014, he said. Walkowicz also believes that all workers should have Tier 1 benefits.
But the Detroit 3, which have kept their overall U.S. labor costs from rising above the rate of inflation for more than a decade, will be loath to allow Tier 2 to be rolled back, let alone eliminated.
“The entry-level plan is easy to get into and very difficult to get out of,” said Kristin Dziczek, director of the labor and industry group at the Center for Automotive Research.
Ford and GM are still at about a $10-an-hour cost disadvantage compared with U.S. operations of the German, Asian and Korean automakers, said Dziczek in an interview this month.
The two U.S. automakers pay about $59 an hour vs. the high $40s for the transplants and Fiat Chrysler Automobiles, she said. FCA’s costs are low, too, because about 42 percent of its work force is composed of Tier 2 workers.
The Center for Automotive Research held a debriefing about the Detroit 3’s 2011 contracts with the UAW shortly after those contracts were ratified that September. CAR estimated at the time that by 2015, Tier 2 would be 17 percent at GM, 12 percent at Ford and 23 percent at FCA. Today, the figures are 20 percent at GM, 29 percent at Ford and 42 percent at FCA.
Shaiken said that uptake leaves UAW leadership in the tough position of negotiating a new deal that doesn’t stunt job growth while narrowing the pay gap that today exists between Tier 1 and Tier 2.
He said whatever is negotiated the rank and file “will want a path” whereby Tier 2 workers will have a chance to eventually reach the top pay scale.
The elimination of Tier 2 is clearly the UAW’s preference. The union last September lauded a new four-year contract at a Lear Corp. plant in Indiana. The contract features a path, if certain conditions are met, to allow all 730 workers at the supplier's plant to advance to a Tier 1 wage by contract’s end.
Asking for a lower-wage third tier could be a tough sell with union negotiators at a time of growing disparity in U.S. incomes.
The automakers “are putting forth what they would want if they could just write a new labor agreement on their own,” said Art Schwartz, a former GM negotiator who is now president of the consulting firm Labor and Economics Associates in Ann Arbor, Mich.
A third tier of workers may not be all bad news for the union, because some of those employees could do work that has been outsourced to parts suppliers and it would bring that work back inside GM plants. But since the UAW argues that the second-tier wage isn’t really enough to support a family, members don’t want to encourage even-lower pay or more divisions among workers on the factory floor.
GM already has some employees who are making less than the second-tier wage at sites in Michigan where the union agreed to exceptions to the master collective-bargaining agreement. Those union members don’t assemble cars. Nor would future Tier 3 employees, said one of the people.
“We’re committed to working with our UAW partners on solutions that will benefit employees and improve GM’s competitiveness,” said GM spokeswoman Katie McBride.
UAW spokeswoman Sandra Davis declined to comment.
Second-tier workers were supposed to do only non-assembly work when the union agreed to the lower entry pay in 2007. But older workers wanted to leave the assembly line and do less physical work as they got closer to retirement age, Dziczek said, so eventually there were employees doing the same jobs side by side for very different wages.
“With the companies showing strong profits, it would be difficult for the union membership to have employees making even less than Tier 2,” she said.
Bloomberg contributed to this report.