Lear Corp.’s Matt Simoncini wants the supplier to be the bellwether of manufacturing success in the city of Detroit.
That comes at a cost -- a lower cost, if Lear gets the labor deal it wants to make the economics work.
The CEO of Southfield, Mich.-based Lear aims to create 500 to 1,000 new union-represented manufacturing jobs in Detroit, potentially under a new classification at a lower hourly rate than at its other plants.
Simoncini said it could create new jobs in the city instead of Mexico if it could attain a new wage tier with the UAW that pays in the mid-teens per hour with some benefits. A specified pay rate and benefits would need to be negotiated and are subject to moving up or down, the company said.
Lear currently pays $35 per hour, which includes the cost of benefits, at its just-in-time seating plants and upward of $25 per hour at its component plants, Simoncini said.
“Right now, we (the UAW and Lear) are in agreement on the goal, but we need to get to an acceptable wage solution,” Simoncini said. “The UAW wants to put their name on a fair deal, so it’s a balancing act, and I wish I could pay everyone at the highest end of the market. I believe in organized labor, but with the caveat that we need to stay competitive.”
In Mexico, labor rates sit at under $8 per hour, including the cost of benefits, according to recent reports.
“More cars are being assembled within 100 miles of Detroit than anywhere in the world, yet the vast majority of components are manufactured in Mexico,” Simoncini said. “No one wants to subsidize this, whether it’s the UAW, suppliers or OEMs, but wouldn’t we all rather make parts where they used to be made?”
But Kristin Dziczek, director of the industry and labor group at the Center for Automotive Research in Ann Arbor, Mich., said the plan only works if it’s subsidized by low wages and tax incentives.
“There are plenty of companies that employ people in the city and outside who are providing thousands of jobs in the suburbs and across the country at the same exact rate,” Dziczek said. “Unless this is aimed at really being a training program, why does it come with a lower wage?”
Simoncini said the low-wage tier would be based on an apprentice-like structure, where those workers would have a path to growth, which includes first rights to higher-paying openings within the organization. That classification would apply to new jobs only, not as a replacement to current jobs, he said.
The UAW declined to discuss any talks about working with Lear toward its goal. The city of Detroit didn’t respond to requests about whether tax incentives or other incentives are being discussed for the plan.
Fred Hubacker, managing director at Birmingham-based advisory firm Conway MacKenzie Inc., said the UAW’s need for membership could drive the acceptance of a lower wage.
“I think the UAW will accept this, and they should, because it’s good for their membership numbers, which is a high priority, and it’s good for the city of Detroit,” Hubacker said.
Conway MacKenzie served as the financial adviser to the city’s recent Chapter 9 bankruptcy and worked on nearly every supplier bankruptcy during the Great Recession.
Lear already operates a joint venture in the city, Integrated Manufacturing and Assembly LLC, that employs as many as 700, Simoncini said, at a lower wage rate than its fully owned plants.
“We know we can find qualified candidates,” Simoncini said. “We’ve proven we can succeed in the city, so we want to open another plant to encourage others to follow us.”
Lear could reopen a shuttered 100,000-square-foot plant it owns in the city or continue to push a city-led effort to redevelop the I-94 Industrial Park near the junction of I-94 and I-75 near the American Axle & Manufacturing Holdings Inc. headquarters.
“To me, the investment here is consistent whether we put a plant in Mexico or Detroit,” Simoncini said. “This could be a huge winner.”
A new plant in Detroit would double down on Lear’s investments in the city last year.
In July, Lear bought the 50,000-square-foot Hemmeter Building on Centre Street in Detroit for nearly $6 million. Then in September, it acquired a building on State Street in Detroit’s Capital Park to house an innovation and design center.