Contract talks between the Detroit automakers and the United Auto Workers union get underway next week. Here are five contentious issues to watch as the talks head toward a Sept. 14 contract expiration date:
PAY RAISES: Under the contract reached in 2011, top-tier workers swapped raises for profit-sharing. That kept total hourly labor costs including benefits relatively low for the three companies. Ford is highest at $57 per hour, followed by GM at $55 and Fiat Chrysler at $47. The average of all foreign automakers with U.S. factories is $47, according to the Center for Automotive Research. Longtime “top tier” workers, who make about $29.50 per hour plus benefits, want a pay raise after a decade without one. They have received healthy profit-sharing checks — even Fiat Chrysler, the least profitable of the three, paid workers more $9,000 since 2011, according to Labor and Economics Associates, a consulting firm. That’s worth more than a 3 percent annual pay raise in each of the contract’s four years. Nick Waun, who builds SUVs at a GM factory near Lansing, Michigan, doubts workers will approve a contract without pay raises, but expects they’ll lose some benefits in return.
NO MORE TIERS: Second-tier workers currently start at $15.78 per hour and can get to $19.28, about $10 less than longtime workers. Many workers want to see Tier 2 eliminated, but the companies say it keeps them competitive. The union will want to cap the percentage of Tier 2 workers. Currently Fiat Chrysler is about 45 percent second-tier, while GM and Ford are around 20 percent. Kristen Dziczek, head of the labor and industry group at CAR, predicts the sides will settle on an eight-year period for second-tier workers to advance to Tier 1 pay.
MEXICO/JOB SECURITY: GM and Ford have each announced plans to build more cars or parts in Mexico, where auto production has more than doubled in the past 10 years. In order to protect jobs in the U.S., where sales are leveling off, the UAW likely will bargain for new cars and trucks to be made at U.S. factories. But the union will have to compromise, perhaps by paying more for health care or giving up pay raises.
HEALTH CARE: The union says its workers pay 6 percent of their health care costs. The companies contend that is more generous than the national average of 28 percent. But health care for active workers historically has been untouchable in negotiations. UAW President Dennis Williams has proposed a giant health-care pool with the companies and a 600,000-member union retiree health care trust to get volume discounts from insurers and providers. Companies want to shrink the number of providers to get better prices.
THE ULTIMATE WEAPON: In 2011, the UAW couldn’t strike GM or Fiat Chrysler under the terms of their government bailouts. Now a strike can be held at all three companies. The union has rebuilt its depleted strike fund. Williams says the union is ready to strike but doesn’t foresee one.