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U.A.W. & BIG THREE AUTO COMPANIES COMPLETE NEW CONTRACT NEGOTIATIONS

October 27, 2011

With yesterday’s approval by Chrysler Group and its union workers for a new four year labor contract, it marked the successful completion of labor negotiations between the “Big Three” automobile companies (General Motors (GM), Ford & Chrysler) and the United Automobile Workers (U.A.W.) union. This contract is very significant because it sets the pay for not only the more than 100,000 union workers at the Big Three, but also workers at auto parts suppliers and non-union workers at U.S. plants owned by foreign automakers.

To many industry analysts, this also marks the comeback of the American car industry which was on the brink of collapse only a few years ago. After going through falling sales, bankruptcies and a government bailout, the industry is now in hopes of a new era where productivity and competitiveness may be improving as well as jobs returning to the United States.

Overall, the new contract helps with controlling fixed costs. Although the Big Three automobile company’s wages and benefits are still higher than their foreign-owned competitors with factories in the U.S., the new contracts do begin to close the wide gap that has existed for the last three decades. Base wages will be very much under control for the next four years with a majority of workers receiving no base wage increases. In addition, the old programs of uncapped cost-of-living adjustments and profit sharing were replaced by much more realistic and sober-minded programs that match our current tough economic times.

The following are some of the main highlights of the contract negotiations:

  1. Four Year Agreement. G.M. was the first company to conclude the new four-year agreement with its 48,000 union membership during late September. This was followed by Ford’s 41,000 members by mid-October and finally by Chrysler’s 23,000 members on October 26.
  2. Continuation of Two Tier Wage System. The biggest feature of the new contract is the continuation of what is called the two tier wage system which began in 2007. This has created a Tier 1 or “older” worker who makes $28.00 per hour in wages without benefits included and a Tier 2 or “entry” worker who, before the new contract was making between $14-16 per hour. Note: Although it’s been reported in the last few years that the average union auto worker makes roughly $70/hour with base pay and benefits combined, a more realistic number of between $56-58 per hour is currently reported.
  3. Base Wage Increases. All three contracts provide for no wage increases for the Tier 1 workers. However, the Tier 2 workers in all three contracts get wage increases. In general, the Tier 2 workers will be moved up to between $16-19 per hour in wages.
  4. Bonuses.  All three contracts provide signing bonuses to all workers upon ratification of the contract. Ford is providing the highest signing bonus of $6,000 per worker, and GM providing $5,000 per worker. Chrysler’s new contract gives the smallest signing bonus of the three to its workers with it giving $1,750 to each worker upon contract certification and another $1,750 to be given in 2012.
  5. Inflation Protectors & Quality Awards.  Gone are the old days of the old cost-of-living increases that were pegged to inflation. With the new contracts, both GM and Ford are providing something called “inflation protectors.” At GM, all workers receive a flat $1,000 inflation protection payment during June 2012, 2013, & 2014, and a $250 per worker quality award paid each December if quality targets are met. At Ford, all workers will receive $1,500 for inflation protection each for 2012, 2013, 2014 & 2015 plus a $250 per worker competitive award paid out in December each year. Chrysler’s new agreement will not provide any inflation protection payment to its workers. However, it will provide an annual bonus of $1,000 to each worker for meeting performance and quality goals along with up to $1,000 for meeting metrics associated with Fiat’s manufacturing system.
  6. Profit Sharing.  Also gone are the old days of uncapped profit sharing. At GM, all workers will receive $1,250 if GM earns profits of $1.25-1.5 billion dollars in the North American region. After that, workers receive $250 for every $250 million the Company earns up to a maximum of $12,500. At Ford, the average profit sharing payment to workers is estimated to be $3,700 for 2011 based on Ford’s Q1 and Q2 financial reports. Chrysler currently is not profitable.
  7. Buyout Packages. Both GM and Ford have announced buyout packages. At GM, the Company is offering buyout packages worth as much as $75,000 to its almost 10,000 skilled trades workers and $10,000 to other workers to stop working within two years. Ford is offering $50,000 buyouts to production workers and $100,000 buyouts to skilled-trade employees, who are the highest paid hourly employees.
  8. Investments into Industry & New Jobs. All three companies have made promises to invest in new plants and add jobs. Ford has agreed to create 12,000 jobs and invest $6.2 billion in factory upgrades. GM will add 6,400 new jobs as well re-open its Spring Hill, TN plant and add new programs in Warren, Romulus and Saginaw, MI, Wentzville, MO, and Fort Wayne, IN. Chrysler has agreed to add 2,100 new jobs and make $4.5 billion in industry investments.  10.27.2011.