Trouble Ahead For Auto Industry’s Two-Tier Wage Structure

LIVONIA, Mich. – When Chrysler CEO Sergio Marchionne made his disdain for a two-tier wage system known at the conclusion of UAW contract negotiations in October, his comments weren’t so much parting shots as they were a preview of coming attractions.

The viability of the two-tier wage structure will be a defining issue of the next round of labor negotiations.

“What has to be decided in 2015 is, ‘Where are you going with the second tier,” said Art Schwartz, president of Labor & Economics Associates and a former lead labor negotiator for General Motors. “Where’s this going to lead eventually? That’s the big issue.”

Several analysts at a conference hosted Tuesday by the Center for Automotive Research predicted caps on the number of second-tier employees will gradually be raised, and that an intermediate wage rate between the two rates could be negotiated.

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Midwest Memo: Chrysler CEO Predicts End Of Two-Tier Wage Structure, Indianapolis Jobs Announcement May Be Hoax

Three stories making news across the Midwest today:

1. Will two tiers vanish from auto contracts? One contentions round of contract negotiations just ended, Chrysler CEO Sergio Marchionne is already making bold predictions about what’s ahead when the current four-year contract ends. He said today that the automakers’ two-tier pay structure is not a viable one, and Chrysler and the UAW must find a way to merge two classes of workers next time. The structure is, “not something that can go on for a long period of time,” he said on a conference call to discuss the company’s second-quarter earnings. Marchionne continued, saying, two-tiers is “not a viable structure on which to build our industrial footprint.” Last month, Changing Gears reporter Kate Davidson examined the two-tiered wage structure and reported on its impact upon automakers and their workers.

2. Is Indianapolis jobs pledge a hoax? Only two short days ago, Indiana Gov. Mitch Daniels and Indianapolis Mayor Greg Ballard welcomed a California entrepreneur whose company would bring 1,100 jobs to the city. Two days later, there’s growing worry the company, Litebox Inc., and its owner Bob Yanagihara aren’t for real. The Indianapolis Star reviewed public documents that show Yanagihara owes “hundreds of thousands of dollars in state and federal tax liens” from the past decade, as well as money to investors who have sued him – and won. “I would strongly advise anyone thinking of investing in his projects to think twice,” Colin McGrath, who is owed $145,000, tells the newspaper.

3. Whirlpool will lay off 5,000 workers. Appliance manufacturer Whirlpool said Friday that it would eliminate 5,000 jobs across North America and Europe. The Benton Harbor, Mich.-based company cut its earnings forecast. Whirlpool CEO Jeff Fettig said the cuts came amid weak demand and higher costs. The cuts include 1,200 salaried positions, and company officials said overall, the layoffs will save approximately $400 million. There was no immediate breakdown of how the cuts would affect Whirlpool’s Michigan workforce.


Experts Expect Thorny Negotiations Between Chrysler and UAW

When contract negotiations stumbled last month between the United Auto Workers and Chrysler, the automaker’s CEO Sergio Marchionne criticized his union counterpart in a public letter. When deadlines passed, he declared new ones rather than continue open-ended extensions. Now he wants to remove a cap on the number of entry-level workers.

UAW president Bob King has already reached agreements with General Motors and Ford this fall. Negotiations with Marchionne and Chrysler will likely be the most arduous yet.

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One-Quarter of GM Workers Could Be ‘Two-Tiers’

GM logo. Photo by Chris via Flickr.

General Motors gave some new details today on its just-ratified agreement with the United Auto Workers union. Among them: up to 25 percent of its workforce could be “two-tiers” — new hires at lower rates than veteran workers.

Changing Gears reporter Kate Davidson profiled two-tier workers last year. Right now, they’re only 4 percent of GM’s workforce, but the auto company clearly has plans for more of them.

There’s a caveat, though. In order for GM to hire more workers, auto sales have to pick up, company executives said during a conference call with Wall Street analysts. And it isn’t promising to hire the same number of workers as it sees sales go up: it will study its staffing needs and hire accordingly.  Continue reading “One-Quarter of GM Workers Could Be ‘Two-Tiers’”

UAW Seeks Raise for Auto Industry ‘Two-Tiers’

Bob King, the president of the United Auto Workers union, wants a raise. Not for himself, but for entry level workers at auto plants, who are called “two-tiers.”

Our Kate Davidson profiled several of them last year. Two-tiers earn roughly $14 an hour, or about half the wages earned by the industry’s veteran workers.

Speaking to reporters following a speech to the Economic Club of Detroit today, King said he’s “very concerned” about attaining a higher standard of living for these workers, according to the New York Times. Continue reading “UAW Seeks Raise for Auto Industry ‘Two-Tiers’”