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Changes to two-tiered wage system possible as UAW, GM begin bargaining

Contract talks are starting today between union bargainers and the management of General Motors. Current State talks with Sean McAlinden of Ann Arbor’s Center for Automotive Research.

Today is an important day at both General Motors corporation and the United Auto Workers. A ceremonial handshake will launch contract bargaining sessions, which are described by some as the most important in years. Much of the bargaining is expected to be over GM’s ‘two-tier’ salary system. That government (imposed/approved) reform, which established a lower starting wage for incoming hires helped GM recover from bankruptcy a few years ago after the great recession. And General Motors has recovered. It’s in the middle of its most financially healthy period in over ten years.

Current State talks with economist Sean McAlinden of Ann Arbor’s Center for Automotive Research in Ann Arbor.


How Ford and GM justify the need to cut total labor costs

They're going to be facing a lot of competition from new plants in Mexico, and that's been in the news regarding a Ford plant here in Michigan in recent days and also other Ford investments. GM's doubling their capacity, too, in Mexico to face an industry south of the border that's doubling in size.

But on the other hand, when you look at the share of UAW labor cost and the overall cost of the vehicle in North America for General Motors, it's down to about five to six percent. It's not the major factor or share that it used to be back in the 1990s or 80s. We're spending just under $5 billion a year, the UAW department at GM is. Once it was well over $20 billion. So, labor cost is only one set of costs that needs to be improved, maybe not the most important.

What would hourly UAW workers at GM like to see?

The first tier workers would like a base rate wage change. They haven’t had one since 2005, although they still have one of the higher wage rates of any automaker in the United States, only Mercedes is higher. Second, they really would like to bridge the gap for the second tier workers in regards to what they're paid for the doing the same work as first tier workers. We think that some sort of formula is going to be worked out where that second tier wage might have a fairly rapid grow-in over four to six, or seven years to catch up with the first year. These workers are doing heavy manufacturing right next to workers who make actually twice what they do, and that's not good for either the union or the company.

On comments that Mexico calls the tune for everyone in North American automotive labor

Ford told us last week and GM told us several months ago and so did Honda, Mazda, Audi, Mercedes, Toyota, Nissan, are all expanding or starting very large assembly plants in Mexico. Essentially, soon they'll be doubling the size of their vehicle production, most to the size of Germany, and essentially producing one of every three vehicles in North America. Assembly workers, automaker workers in Mexico earn about $5.35 an hour for a wage rate compared to our $19 or $28 an hour up here. Obviously benefits aren't adding much to that score down here. The peso has been devalued consistently by 40 percent in the last 10 years and wages are actually falling in Mexico, not rising with all this new employment.

So, you tell me, who's calling the tune? It's certainly not a Toyota plant in Kentucky; it's a brand new plant maybe near Monterey or south of Mexico City. 600,000 people working in their auto industry now at considerably less than our people are.

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