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Latest News - July 2011

July 2, 2011
Ford, UAW talks unlikely to be a smooth ride
Two-tier pay system, part-time employees likely key topics as negotiations for a 4-year deal begin, but neither side can afford to push too hard in fragile recovery
Source: Chicago Tribune
By: Alejandra Cancino

As the United Auto Workers union and Ford Motor Co. kick off contract talks, union representatives are expected to push Ford to restore a vacation day, cost of living adjustments and bonuses that they gave up in 2009 to help keep the company financially stable.

Ford was the only one of the three domestic automakers that didn't seek bankruptcy protection or federal aid, and it's the only one of Detroit's Big Three to have a Chicago assembly line.

But the tug of war expected to start this month may be more symbolic than real. If Ford pulls too hard, union members probably won't approve the four-year contract. And if the union pulls too hard, Ford would be at a disadvantage to General Motors Corp. and Chrysler Group LLC, and that wouldn't be good for unionized workers either. The UAW will negotiate new contracts with all three companies.

"Everything is really on the table, but the union at the national level understands that for job security you need a healthy company making products that people in America are buying," said Kristin Dziczek, director of the Labor and Industry Group at the Center for Automotive Research.

Harley Shaiken, a professor at the University of California at Berkeley who specializes in labor issues, said he expects the tenor of talks to be one of compromise. The union likely will work with the automakers to ensure the success of the industry but also get workers their fair share.

"These are critical negotiations that define the nature of the recovery of the industry," Shaiken said.

Though the core of the current contract was negotiated in 2007, the UAW made additional concessions in 2009, which included giving up a vacation day known as Easter Monday holiday, along with cost of living adjustments and Christmas bonuses. In addition, overtime pay was modified to be compensated after 40 straight hours, instead of an eight-hour day, and break time was cut a minute per hour to 40 minutes per eight-hour shift and 50 minutes per 10-hour shift.

The talks are especially important to the nearly 3,500 unionized workers at Ford's two plants in Chicago — an assembly plant that builds the Ford Explorer, Taurus and Taurus SHO and the Lincoln MKS, and a stamping plant that turns out body panels, including hoods, roofs and doors. Approximately a fourth of those workers are part-time employees earning about $16 per hour, or about half of what their counterparts earn for the same work.

Nationwide, Ford employs 40,600 union workers, including about 100 entry-level workers who also earn about $16 an hour, and roughly 2,250 part-time workers. The workers earning lower wages would like to see their hourly pay increased to match their counterparts.

"They are very excited about the potential opportunity that the contract brings them," said Grant Morton, who will lead negotiations for the workers at Ford's assembly plant in Chicago.

The UAW has said it would bargain for career paths that would allow these workers to move up to the top pay tier while limiting the use of temporary workers. Under the current contract, only entry-level workers can reach the higher tier.

Ford maintains that the two-tier pay system and the temporary workers are needed. That system and creation of health care funds for retired workers managed by the UAW have allowed Ford to lower labor costs — wages and benefits — per employee to $58 per hour, or $17 less per hour than in 2007. Ford said those savings narrowed the labor cost gap with its foreign competitors to $8 per hour from $27 per hour.

And closing that gap is key to remaining competitive, said Ford spokesman John Stoll.

The other two domestic automakers also benefited from similar concessions in their contracts with the UAW. Labor costs are about $58 an hour for GM and about $50 for Chrysler, according to the Center for Automotive Research. By comparison, hourly labor costs for nonunion Toyota's U.S. plants are about $55, while Honda's are about $50, and Nissan, Hyundai and Kia are about $45.

Ford argues that lower labor costs allow it to bring more work to the U.S. For example, Ford spokeswoman Marcey Evans said, the company plans to create 170 jobs in Michigan next year by moving production of hybrid battery assembly packs and electric drive transaxles to plants there. The battery packs are now assembled in Mexico and the transaxles in Japan.

Dziczek said it's unlikely that the two-tier concept would be changed. "You can't roll it all back now that the happy days are here again."

Another issue likely to find its way to the negotiating table is Ford's 20 percent cap on the number of workers it can maintain at the entry-level wage. GM and Chrysler negotiated deals without a cap, so Ford will likely push to eliminate it. The cap doesn't include the part-time workers.

The UAW approved the two-tier concept in 2007 partly because it was looking to increase its membership, which has continued to decline since its decade peak in 2001. The union has 376,612 members, down from 701,818 in 2001 and from 464,910 members before the recession.

Traditionally, the UAW targets one company to set the pattern for contract talks with the other two. Analysts say that probably won't be Ford but more likely a company in the middle of the pack financially, possibly GM. That would mean the union could push for better terms in its contract at Ford and grant more concessions in its contract for Chrysler, viewed as the weakest of the three.

This year, Ford reported its best first quarter since 1998, with earnings of $2.6 billion, or 61 cents a share — a 22 percent increase from a year earlier. The first quarter followed a strong 2010, with the company reporting earnings of $6.6 billion, more than double what it made in 2009 and its largest profit since 1999.



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