Editor's note: An earlier version of this report implied that Fiat Chrysler may be threatening to pull Jeep Wrangler production out of the United States. CEO Sergio Marchionne has said it would remain a U.S.-made product.
DETROIT (Bloomberg) -- GM and Ford are contemplating building cars with lower-paid workers in Mexico and China, a strategy that would improve their hand in contract talks as the UAW seeks higher pay.
General Motors is weighing a plan to import the Buick Envision SUV, now built and sold only in China, to the U.S., people familiar with the matter said. Ford Motor Co. is shifting production of its Focus and C-Max small cars from Michigan to outside the U.S., a person familiar with its plans has said. Mexico is a possible destination.
The automakers and union are in their final weeks of talks to replace four-year contracts that end Sept. 14. Previous pacts let the companies hire lower-paid workers and spurred U.S. production and jobs after Ford’s restructuring and the 2009 bankruptcy of GM and Chrysler.
Speculation about shifting work abroad may give the companies leverage as the UAW seeks raises for some workers for the first time in a decade.
“It’s a veiled threat to the workers,” said Gary Chaison, a professor of labor relations at Clark University in Worcester, Mass. He said the automakers’ message is: “If you ask for too much, we can take the work out of the U.S. So, give us a reason not to shift more production overseas.”
The contracts cover about 140,000 workers earning about $17 billion a year in wages and benefits, according to the Center for Automotive Research. For the union, the risk is derailing its slow but steady rise in membership as the Detroit 3 rebound. The UAW added 12,000 members last year to a six-year high of 403,466, the fifth straight year of increases. Membership peaked at 1.5 million in 1979.
Wages or jobs
“It comes down to whether the UAW wants higher wages or more jobs,” Chaison said.
Fiat Chrysler Automobiles has potential leverage with the future of its Jeep Wrangler. The company’s U.S.-based unit, the former Chrysler, hasn’t committed to keep making the vehicle in Toledo, Ohio. CEO Sergio Marchionne has repeatedly said that the Wrangler would remain a U.S. product. Spokeswoman Jodi Tinson declined to comment on the UAW talks.
Ford is actively pursuing vehicles to build in Wayne, Mich., when the Focus and C-Max move out of that assembly plant in 2018, spokeswoman Kristina Adamski said. While the topic will be discussed during contract talks, “our decision is related to improving competitiveness and investing where it makes the best sense for our business.”
GM hasn’t decided on plans for the Envision, said a person familiar with the matter who didn’t want to be identified discussing private deliberations. If demand falls in China or if GM increases production there, the automaker could bring the SUV to the U.S., the person said.
Spokesman Nick Richards declined to comment on the Envision. Buick will import the Cascada convertible from Poland starting in the first quarter, he said.
The UAW bristled at the prospect that GM, whose bankruptcy was supported by a $49.5 billion investment from the federal government, may import the Envision from China. Research firm IHS Global Insight estimated that GM will sell 126,000 of the SUVs in China in 2017 and may deliver 38,000 Envisions in the U.S. that same year.
“After the sacrifices made by U.S. taxpayers and the U.S. workforce to make General Motors the profitable quality company it is today, UAW members are disappointed with the tone-deaf speculation that the Envision would be imported from China,” Cindy Estrada, vice president of the union’s GM department, said in a statement. “GM should stand by its declaration that it will build where it sells.”