Auto workers’ pay agreement signals new reality for industry
The union that once set the gold standard for American wages is giving up pay rises in exchange for a piece of the auto industry’s profits and the promise of thousands of new jobs.
Under agreements struck with Ford and General Motors, most of the companies’ factory workers will get profit-sharing cheques instead of annual rises. They will also get a signing bonus. In turn, the carmakers will increase their workforces and invest billions more dollars in their factories.
It is an unusual turnabout for the United Auto Workers. For decades, its members’ pay and benefits were the envy of workers around the world, and it would not hesitate to strike to protect them. But the agreement signals a new reality. After the industry nearly collapsed two years ago, a sobered UAW is no longer fighting the Big Three but fighting to compete against rivals that pay their workers far less.
“We are aware of the competition that Ford and General Motors and Chrysler face,” UAW president Bob King said on Tuesday after announcing terms of a new four-year contract with Ford. “If we are going to succeed in the long run and really be able to have long-run security and decent income for our membership, we can’t put Ford and GM and Chrysler at a competitive disadvantage.”
Ford and the UAW agreed on a four-year contract on Tuesday, three weeks after the union reached a similar agreement with General Motors. The companies are promising at least 17,000 new US jobs over the life of the contracts, and are offering workers signing bonuses and profit-sharing payments. Costs will be cut because companies will not be paying annual wage increases to their factory workers and will hire thousands of the new workers at lower rates.
King expects some of his members will be unhappy. But he thinks they can live with the terms. GM workers have already ratified their agreement; Ford workers are expected to wrap up voting by 14 October.
“They know the competitive structure as well as I do. They know their family and friends who are underemployed [and] unemployed,” King said. “They know how important it is to have long-term jobs so they can be back in 2015 [for the next contract negotiations]. Maybe we will be able to do some fixed-cost increases then.”
Ford’s job expansion plans
Ford workers will get at least $16,700 (£10,800) over the four-year contract, in the form of a $6,000 signing bonus, $7,000 in lump-sum and inflation protection payments and at least $3,700 in profit sharing this year. That is more generous than GM’s agreement, which guarantees workers at least $11,500.
Ford plans to add 5,750 US factory jobs under the deal, on top of 6,250 it announced earlier this year, for a total of 12,000 jobs by 2015. It also pledged to invest $4.8bn in its US factories. When combined with $1.4bn in investments previously announced, Ford plans to invest $6.2bn by 2015.
Union leaders approved the deal on Tuesday after a meeting in Detroit. The deal is subject to a vote by Ford’s workers.
If they agree to the contract, Ford’s 41,000 workers who are paid an hourly wage, rather than a fixed salary, will get $1,000 more than a signing bonus than the $5,000 bonus GM workers got. The GM deal also gives most workers profit-sharing payments instead of annual rises and promises 6,400 new or retained jobs.
John Fleming, Ford vice-president of manufacturing, said most of the 5,750 additional hires will start at $15.78 an hour, a fraction of the $28 hourly wage of Ford’s older workers. They will get $19.28 after four years. Ford currently has 70 entry-level workers, but will hire thousands more. The union agreed to the lower wage in 2007 when Ford was losing billions of dollars.
The deal will increase Ford’s labour costs at first, but bring them down as more entry-level workers are hired. The company has the highest labour cost in the US auto industry.
Ford’s hourly labour cost, including wages, benefits and pensions, was $58 last year. GMs was $56 and Toyota’s was $55, according to the Center for Automotive Research. Volkswagen, with a new plant in Chattanooga, Tennessee, had the lowest cost at $38, followed by Hyundai at $44.
“The tentative agreement will enable us to improve our overall competitiveness here in the United States,” Fleming told reporters.
Ford also will save money by offering retirement-eligible production workers $50,000 to leave the company by 31 March, rising to $100,000 for skilled trades workers such as pipe fitters or electricians. The retirements would clear the way for more workers at the lower wage, but their numbers are limited to 20% of the workforce.
Approval of the contract could be a problem. Workers still harbour some anger at chief executive Alan Mulally‘s $26.5m pay package from last year. Many workers also feel Ford is healthy enough to offer annual rises. Ford earned $6.6bn last year.
Gary Walkowicz is a worker at Ford’s Dearborn truck plant. He helped shoot down a round of concessions at Ford in 2009, and says he is against this deal because it does not restore pay rises and other concessions the workers have made since 2007. He contends that it also makes the entry-level wage permanent.
“They say, ‘OK, take this, and forget about everything we took away,’” he said of Ford.
But Rick McDonald, an electrician at a transmission plant in Livonia, Michigan, said that although he had not seen all the details, he liked what he had heard so far.
“I think it’s pretty fair,” he said. “Would more money be nice? Of course. I feel as though I make a pretty good hourly rate.”
McDonald, though, has concerns about 10% of the profit-sharing checks being sent to a trust fund for retiree healthcare and some other provisions.