The United Auto Workers union is seeking higher wages for new workers at General Motors (NYSE:GM), Ford (NYSE:F), and Chrysler Group LLC. The UAW says the wage increases will not add to the companies’ fixed costs.
Currently, entry-level workers earn $14 an hour — about half of what senior production employees make. According to UAW President Bob King, that’s not enough to support a “middle-class standard of living”. King has made it his top priority to get these wage increases, and with 113,000 worker contracts at GM (NYSE:GM), Ford (NYSE:F), and Chrysler set to expire on September 14, he will have to work quickly.
While King admitted he was concerned about raising fixed costs for the companies, which would make them less competitive, he did say, “there is room because of the current framework to make gains in certain areas and keep the companies competitive.” In a speech at the Detroit Economic Club, King assured the audience that higher wages would not affect fixed costs. His goal is to help union members without hurting the competitiveness of their employers. “We are not going to disadvantage the companies we work for,” said King.
Each UAW member has conceded $7,000 to $30,000 to automakers since 2005 to help them survive, and King is asking that they be rewarded for their dedication and sacrifice. Surrendering raises, bonuses, and cost-of-living adjustments are just a few of the concessions made by Detroit-area auto workers, who also agreed to the two-tier wage system.
While GM (NYSE:GM) and Chrysler employees cannot strike, according to an agreement that was part of their government bailout, Ford workers can, as the automaker received no government funds during the recession. Ford union locals plan to conduct strike-authorization votes for the automaker’s 41,000 hourly workers from now until September 2, according to the UAW.
GM and Ford (NYSE:F) earned a combined $5.4 billion during the second quarter, and Chrysler earned a reported $181 million. GM earned $6.17 billion in 2010, while Ford had a net income of $6.56 billion, its highest yearly income in 11 years. While the union was willing to accept a lot of cuts as part of the auto industry’s attempts to rebuild, Harley Shaiken, a professor of labor relations at the University of California at Berkeley, says that, “What the union was willing to accept in a moment of deep crisis is not the pattern it wants to use going forward.”
Banks Are Lowering Auto Lending Standards
It’s becoming easier for people purchasing new vehicles to get credit, even with weak credit scores. Roughly 22% of all new-vehicle financing during the second quarter of 2011 went to buyers whose credit was nonprime or worse. Last year, people with such weak credit accounted for 18% of auto loans. Banks (NYSE:KBE) increased lending to buyers with lower credit scores by 21%. Automakers’ captive lenders increased loans to nonprime buyers by 7.9%.
Tighter lending standards hurt U.S. auto sales in 2009, with only 10.4 million deliveries that year, the lowest annual total since 1982. By 2010, deliveries had rebounded to 11.6 million. In the first half of 2011, they climbed to a seasonally-adjusted annual rate of 12.5 million.
While more people with poor credit have been taking out auto loans this year, delinquencies on those loans has declined across the board. The amount of payments at least 30 days overdue fell to 2.59% during the second quarter from 2.89% the year earlier, while loans 60 or more days past due declined from 0.71% during the second quarter of 2010 to just 0.60% in the three months ending June 30.