Yahoo Autos Aaron Robinson: Bolting Together Cars Used to be a Middle-Class Job. That's Changing
Some sympathy is in order for United Auto Workers president Bob King. Here he was last March, about to enter negotiations with the Big Three on labor contracts that were certain to be crap sandwiches for his brothers and sisters on the line, and Ford announces that it’s paying CEO Alan Mulally an extra $56.5 million in stock for doing a good job.
In comedy, timing is everything. At Ford, where 41,000 UAW members have gone without a raise for eight years, timing appears to be irrelevant. “Alan Mulally is a great CEO, but I don’t think any human being in the world deserves that much money,” spluttered King. “It’s outrageous.”
Nobody said a word about executive chairman Bill Ford also being handed $42.4 million in stock for doing nothing more brilliant than firing himself and installing Mulally back in 2006, when the company was headed toward a cliff. Well, Bill’s last name is on the building, which would be the building mortgaged, along with the name on it, by Mulally for the $23.5 billion in loans that narrowly saved Ford.
General Motors and Chrysler missed that money train and, after the banks went bust, collapsed into the arms of the government. As a condition of the federal bailouts, the UAW is barred from striking at GM and Chrysler until 2015. Since a strike is a union’s only real cudgel, and nobody in Detroit wants to jump up and down on ice made thin by the recession, the UAW’s negotiating position this year was just slightly worse than Custer’s at Little Bighorn.
Union priorities included profit sharing when there’s profit and a promise for more hiring later. Also important, though, was securing a wage increase for “second-tier” workers, or those hired in recent years at substantially lower pay and benefits under a two-tier system that has spread through the industry like soybean rust.
The two-tier system guards the wages and benefits of older workers at the expense of newer ones, who typically earn about half that of their graying work mates. Thus, employees making about $29 an hour stand next to those making roughly $15. What automakers euphemistically call “entry-level” employees range from 3.5 percent of the hourly workforce at Ford to 12 percent at Chrysler, but the numbers will climb with retirements. Chrysler says entry-levels will be 25 percent of the force by 2015.
Most automaker suits see the tier system as their salvation from the higher labor costs they’ve long blamed for their lack of competitiveness. Many in the rank and file see it as a sellout by the union. Indeed, only a union over a barrel, as the emasculated UAW has been while Detroit burns, would have accepted two tiers in the first place.
Undoubtedly, King & Co. were hot to get second-tier workers a raise both to reestablish credibility in the disgruntled ranks and to establish it in foreign-owned plants where the UAW hopes to crusade for unionization. In their new contracts, the entry-levels at GM and Ford do get a raise over the four years, increasing to almost $20 an hour. However, the vast majority of hourly staff gets no raise despite having surrendered plenty over the past few years in concessions. Those who voted “yes” voted mainly for job security. What choice did they have?
GM’s 48,500 members ratified their contract first, in late September. Ford’s workers eventually said “yes” despite some shop-floor revolts, especially in the Chicago Taurus/Explorer assembly plant. Chrysler’s skilled-trade workers balked, but the union overrode their complaints and declared the contract ratified on October 26. The issue is still in dispute as of this writing.
Both GM and Ford figure their contracts will contain labor costs to an increase of just one percent per year (though prices of food, gas, clothes, and other necessities of life won’t be so bound). Reuters described the GM contract as the “leanest deal that the company has negotiated in four decades with the UAW.” Hey, nobody says Detroit’s CEOs aren’t working hard for their bonuses.
Some idiots believe the world will end in 2012. For Detroit, the actual year of the apocalypse may be 2015, when the strike constraints fall away. If the industry is raking in profits then, much of it will be because of sacrifices made by the workers, and they’ll want payback. “Just wait till 2015” is a popular refrain on union chat boards.
Then there’s this complication: Fiat-Chrysler CEO Sergio Marchionne wants to put toothpaste back in its tube by ending the two-tier wage. The union would love it but not necessarily by Marchionne’s way, which is to inch up pay for entry-level workers while greatly cutting it at the top. Management and labor will bicker over what yard line on which to place the football as surely as the moon follows the sun. And even if Chrysler scraps two-tier, the tradition of pattern bargaining dictates that the UAW will be compelled to ask GM and Ford to go along.
Oh, yes, just wait till 2015.
Meanwhile, should you find yourself in a checkout line delayed by somebody fumbling with food stamps while the kids whimper, be kind to them. Tomorrow they may be assembling your next car.
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