More than 10,500 United Auto Workers in the Kansas City area will watch for clues starting today about their pay and benefits for the next four years.
The union’s national contract negotiations, conducted behind closed doors in Detroit, will kick off with a ceremonial handshake between union negotiators and the team from General Motors Co. Talks with Ford Motor Co. will begin July 23.
Bargaining with the Big Three automakers, including Fiat Chrysler Automobiles NV, is expected to last through the summer. By the Sept. 14 expiration of the current UAW contract, about 139,000 autoworkers and the automakers hope to have a new work agreement.
Going to the table, some union officials say this year is time to improve wages for the plants’ lowest-paid workers. For their part, the companies intend to focus on staying cost competitive with foreign automakers.
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“We need to move forward and maintain the middle-class lifestyle we have enjoyed under collective bargaining,” said Vicki Hale, president of UAW Local 31, which represents 3,230 workers at the GM Fairfax plant in Kansas City, Kan.
Hale, like most union members, won’t be privy to daily progress or lack thereof. She said she’s counting on the UAW executive team “to have the best interests of the membership” in mind.
Once a national accord is reached, the locals will vote to approve or reject it. The locals also will have separate negotiations on specific matters of seniority, job assignments, shifts and the like.
Meanwhile, both sides in the national talks are cautious about releasing information in advance. GM president Mary Barra said negotiators “must continue working as a team to put the customer first, protect the long-term health of the company, bolster shareholder value and strengthen job security.”
At Ford, Bill Dirksen, vice president of labor affairs, pointed to expansion successes at the Kansas City Assembly Plant over the last four years. They were possible, he said, “through an extraordinary partnership and ongoing collaboration between Ford and the United Auto Workers and the labor agreement the two sides successfully negotiated in 2011.”
Jeff Wright, president of UAW Local 249, which represents about 7,300 hourly workers at the Ford plant at Claycomo, agreed about the partnership but said it’s time for workers’ raises.
“All the Big Three are making tons of money,” Wright said. “Ford owes a lot to the workers who made sacrifices to get here. Most members haven’t had a raise in 10 years, and we need to get the entry-levels a raise, too.”
The UAW negotiations begin at a relatively prosperous time for the auto industry, nationally and locally. Workers at Fairfax and Claycomo — two of the nation’s most successful and growing assembly plants — have been at the forefront of the automakers’ resurgence since the recession, and they have received profit-sharing bonuses.
UAW workers have averaged bonuses of $7,500 a year at Ford and GM over the last four years, a testament to the industry’s rebound. Together, the Big Three automakers have scored more than $73 billion in profits since the 2009 government-assisted restructuring of GM and Chrysler. (Ford was able to forge ahead without a public bailout.)
Now, many union workers say it’s time to eliminate the automakers’ two-tier wage system that hired about 40,000 workers nationally at a lower “Tier 2” pay scale to help the companies recover.
Second-tier workers, who account for not quite one-third of the Big Three’s hourly workforce, earn about $19 an hour versus an average of about $28 an hour for UAW members hired before the companies’ financial crises. According to Automotive News last month, 20 percent of GM workers earn Tier 2 wages, 28 percent at Ford, and 45 percent at Fiat Chrysler.
Other union members argue that it’s time to give a basic raise to the legacy, or top tier, workers who’ve gone a decade without one.
“I’ve been around long enough to know about margins and profits, so we’ll look at all of that,” UAW president Dennis Williams said earlier this year at a union convention in Detroit.
Whatever the priority, UAW negotiators appear intent on restructuring wages and benefits. They’re likely to emphasize their concessions in the current labor contract reached in 2011 when GM and Fiat Chrysler were under government bailouts.
The bailout deals had prohibited the union from striking GM and Fiat Chrysler, but those bans now are lifted, providing the union a pressure tactic it didn’t have in 2011.
Local 31 in Kansas City, Kan., already has staged a food drive to stock up the union hall pantry in the event of a strike.
“No one wants a strike,” the local posted on its website. “It is the last resort in the collective bargaining process.”
Members of Local 249 already have discussed a possible August strike vote. But local president Wright has noted that a local strike authorization vote is a routine move during many negotiations.
There hasn’t been a protracted UAW strike against a Big Three automaker since the 1990s. There was, though, a brief GM walkout in 2007. Still, any word of local unions taking strike approval votes always stirs concerns about the powerful potential effect of a work shutdown on the economy.
The automakers, noting the performance-based bonuses to all employees, hope to quash some pay raise demands. They also note that tough financial decisions still remain. Foreign automakers with lower wage scales are big competition, for one thing.
A researcher at the Center for Automotive Research earlier this year pegged the “blended average” hourly labor costs (which include the cost of employee benefits as well as the cost of temporary employees) at $58 at GM, $57 at Ford and $48 at Fiat Chrysler. Similar averages were reported at $49 at Honda, $48 at Toyota, $42 at Nissan, $41 at Hyundai, $39 at BMW and $38 at Volkswagen. Only Mercedes-Benz was higher than GM and Ford at $65.
U.S. car makers also worry about an excise tax on the U.S. automakers’ high-quality health insurance benefits that looms in 2018 because of the Affordable Care Act. UAW members have richer health benefits now — sometimes called Cadillac plans — than even the top platinum level of coverage offered through Obamacare exchanges.
Plus, many autoworkers contribute only a single-digit percentage share of their total health insurance costs, with the companies covering the bulk.
In advance of the talks, the companies say they expect to address a range of pay and benefit issues. Top union officials also aren’t entirely specific about their “bridging the gap” theme, which could reference a fight against the two-tier wage system, or it could be about raising overall pay compared to executive compensation.
In fact, some industry watchers are wondering whether the UAW might actually agree to an even lower-pay tier, a Tier 3 for certain new workers, particularly in non-core assembly plant jobs, such as warehousing. That’s a strategy, though generally considered remote, that might free up money for top-tier raises.
Speculation mostly has centered on a union appeal to phase out Tier 2 pay. Many union members argue that paying a new worker so much less than what a legacy worker earns for the same job is financially unfair and a morale buster that ultimately affects productivity and retention.
This year’s talks also are taking place against a right-to-work backdrop in key automaker states. At the same time the current UAW agreement expires, new right-to-work laws in Michigan, Indiana and Wisconsin have made union membership voluntary in more union workplaces. If a sizable number of UAW members stop paying dues, it will weaken union coffers, membership and bargaining power.