Negotiations between the United Auto Workers union and Chrysler Group LLC over a new four-year contract have broken down after the two groups were unable to resolve a dispute over the number of workers who are paid an entry-level wage. Chrysler wants no limit on cheaper entry-level workers, while the union wants to put a cap on the number of entry-level workers, who earn roughly half of what a longtime union employee earns.
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The union’s last four-year contract has already expired, but Chrysler factories continue to operate under a one-month contract extension. The current negotiations are the first to take place since General Motors and Chrysler, now owned by Italy’s Fiat (PINK:FIATY) nearly collapsed during the recession and needed government bailouts in 2009. While Ford (NYSE:F), the other member of Detroit’s big three automakers, didn’t need a bailout, it took billions of dollars in private loans to survive.
While the UAW and GM agreed upon a tentative contract last week, negotiations with Chrysler and Ford are ongoing. Chrysler was expected to be the next to effect a deal, but negotiating teams were sent home after both the UAW and Chrysler refused to budge on key issues. For now, the union will shift its focus to negotiations with Ford.
Chrysler objects to a limit on entry-level workers because it would raise labor costs. But the union is hoping to effect a deal similar to what GM agreed to: a 25% cap on the number of employees making entry-level pay by the end of 2015. The union says entry-level workers would then have the chance to make higher pay. Currently, entry-level workers earning $14 to $16 an hour, while longtime workers earn $29 an hour. Chrysler currently has more entry-level workers than GM or Ford, making its hourly labor costs the lowest of the three.
Meanwhile, UAW President Bob King is expected to address union and Ford officials on Friday as they reach the final stages of negotiations. “Both our negotiators and the company have submitted their final resolutions,” reads a UAW memo. “On Friday, President Bob King is expected to … address the negotiators and the national Ford department staff.”
While GM and Chrysler workers had to promise not to strike as a condition of their government bailout, the roughly 42,000 UAW-represented Ford workers have retained their right to strike, giving them more power in negotiations, which is why they are expected to win the highest wages and bonuses.
Still, there are a few unsettled grievances that could complicate negotiations. The union claims that Ford broke a pledge to treat employees equally when it restored raises and 401K matches for its white-collar workers without doing the same for its factory workers. UAW President King has expressed his resentment over Ford Chief Executive Alan Mulally’s $26.5 million in compensation last year, calling it “morally wrong.” The UAW might also press Ford to move some Mexican operations to U.S. plants.
All in all, the Detroit labor talks will set wages and benefits for roughly 112,500 unionized auto workers. Talks with Ford are expected to be patterned after a deal that covers 48,500 GM employees and would keep or create more than 6,000 factory jobs, raise wages for entry-level workers, and guarantee all workers bonuses of at least $11,500 over four years.
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GM employees began to vote on Thursday on a tentative four-year deal reached between the UAW and GM last week, with voting expected to be completed by September 29. GM workers are looking at a deal that gives most of them profit sharing rather than annual pay raises, tying their compensation to the fortunes of the company. The deal also promises new jobs and car production in the U.S., as well as buyouts to longtime workers who can be replaced with those making entry-level wages. Per the terms of the contract, GM workers will receive a $5,000 signing bonus and profit sharing checks likely to exceed the $4,300 workers got this year. Entry-level workers will also get a pay raise, though longtime workers will not.