Ford-UAW Pact Would Create 2-Tier Pay Scale
The tentative contract reached Monday with Ford Motor Co. features an agreement by the United Auto Workers to a permanently lower wage scale for new auto-parts workers, a first in modern U.S. auto industry, sources said.
Exact details of the complex UAW-Ford pact remain sketchy, but industry analysts and sources said Tuesday that the new contract would in effect establish a two-tier wage scale under which newly hired auto-parts workers--as opposed to assembly workers--would earn less than everyone else.
The provision would only be applied to entirely new parts business or in cases in which the auto maker decided to bring back parts work that it had previously outsourced--that is, contracted to an outside, nonunion, supplier.
The union’s agreement to the wage provision underscores the importance it attaches to winning back work that its members have lost in recent years as Detroit’s Big Three, seeking to cut production costs, farmed out component work they have traditionally performed by themselves.
“This is precedent-setting. The UAW has historically resisted creating two classes of citizens among its workers,” said David Cole, executive director of the University of Michigan’s Office for the Study of Automotive Transportation.
Such two-tier pay plans were widely introduced in other industries during the 1980s. Employers ranging from airlines to supermarket chains negotiated lower pay scales for new hires as a way to cut costs.
“Unions don’t like it, but it’s always a matter of what’s the alternative,” said Daniel J.B. Mitchell, a labor economist at UCLA.
Mitchell said many two-tier plans crumble as more workers are hired at the lower pay scale. When the unions initially negotiate two-tier structures, Mitchell noted, the “newly hired people aren’t there to vote it down.”
One key difference in the Ford plan, though, is that such workers would probably be in separate factories and working under different local contracts from their higher-paid colleagues.
In addition to lower wages for new parts workers, the three-year Ford-UAW contract would establish for the first time a guarantee that Ford will maintain employment levels at 95% of current levels. Workers would also get a 3% bonus in the first year of the contract and 3% raises in the next two years. Monthly pension benefits for retirees would increase 11%.
The UAW hopes to use the Ford contract as a framework for similar agreements with Chrysler and General Motors. Most analysts expect GM to demand--and probably get--a relaxation of some provisions negotiated by Ford, such as the guarantee of 95% of current job levels.
“Obviously, General Motors is a different company than Ford,” GM Chairman John F. Smith told reporters Tuesday. “We will just have to see how it works out for us.”
Meanwhile, the Canadian Auto Workers and Chrysler Canada reached a tentative deal late Tuesday, 90 minutes before 13,000 workers had been scheduled to start a strike. The three-year pact would include a 2% annual wage increase. Earlier, Chrysler agreed to replace any job it contracts out with a similar job at one of its plants. It also promised not to sell or close any plants in the next three years, the union said.
The UAW has long opposed two-tier wage systems, but the industry’s 1983 financial crisis led to a system in which new hires start at 70% of top scale but reach parity in three years.
In this year’s talks, Ford unsuccessfully sought a provision to pay new workers 50% of what senior laborers are paid and to extend the grow-in period to full scale to six years.
The wage language in the new auto-parts deal will be closely scrutinized. Labor experts said that permanently lower wages for a class of parts workers would represent an admission by the UAW that it cannot maintain its high wage scale in the largely nonunion parts business.
UAW and Ford have refused to divulge details of the agreement. The 105,000 Ford UAW members are to vote on the pact Sept. 29.
A major reason the Big Three have farmed out parts work is that independent parts makers often pay about half the $19 an hour that UAW Big Three members receive. However, there are UAW members at auto-parts firms that make less than their Big Three counterparts.
About 80% of auto-parts companies are not unionized. UAW President Stephen Yokich has vowed to organize more parts plants, but such efforts are costly and have met with much resistance. The UAW’s membership of 750,000--including 400,000 auto workers--is just half the 1979 level.
A two-tier wage system is fraught with political peril for the UAW leadership. But it could also serve as a way to persuade the Big Three to remain in the parts business and help bolster the union’s membership.
Staff writer Stuart Silverstein in Los Angeles contributed to this report.
