Ford seeks to keep 2-tier wages

Ford seeks to keep 2-tier wages
Global manufacturing chief: System is key to remaining competitive
Nick Bunkley — Follow Nick on
Automotive News | August 6, 2012 – 6:10 pm EST

The top global manufacturing executive at Ford Motor Co. says he wants the Detroit 3’s two-tier wage system, in which some hourly workers earn lower pay and benefits than others, to remain in place permanently.

John Fleming, Ford’s executive vice president for global manufacturing, also said he does not expect any Ford workers earning second-tier wages to be moved up to the regular pay scale until at least 2015, when the company will negotiate a new UAW contract.

Fleming’s desire to keep the two-tier system indefinitely contrasts with that of Chrysler and many in the UAW, who want to eventually return to a single wage scale. The union agreed to the two-tier system in 2007 to help the carmakers become more competitive and encourage them to create jobs in the United States rather than in other countries with lower labor costs.

“I’d like to see it as a permanent solution,” Fleming said before speaking at the seminars here, “because what it’s allowed and what it will continue to allow is continued investment in jobs here in the U.S. It’s all about competitiveness.”

About 15 percent, or 6,300, of Ford’s 42,000 UAW-represented workers in the United States earn second-tier wages, which start at about $15 an hour and top out near $20, vs. an hourly rate of about $28 for veteran auto workers. Since signing a new four-year labor agreement in the fall, Ford has hired about 1,000 workers, all of whom are on the second-tier pay scale, Fleming said.

The deal allows Ford to pay second-tier wages to up to 20 percent of its work force. Although Ford has announced plans to hire thousands more workers by 2015, Fleming said he does not expect Ford to hit the cap during that time.

UAW leaders have tried to diminish opposition to two-tier wages among the rank and file by highlighting that workers hired at the lower scale can graduate to full wages as more workers are hired. But the only way that would happen is if their employer reaches its respective two-tier cap.

Chrysler-Fiat CEO Sergio Marchionne has said that he opposes a permanent two-tier wage scale within Chrysler’s U.S. plants. About 4,000 of Chrysler’s 27,000 UAW-represented workers earn second-tier wages.

“The two-tier wage structure, in and by itself, is not a viable structure upon which to build our industrial footprint,” Marchionne said last October, after the UAW approved its latest contract. “It creates two classes of workers within the plant.”

Instead, Marchionne has advanced a single hourly wage between the two current tiers, paired with larger profit-sharing bonuses for hourly workers, which he says will protect Chrysler financially if profits or sales stagnate in the future.

UAW President Bob King and Vice President Jimmy Settles, who heads the union’s Ford department, acknowledged in an e-mailed statement that two-tier wages clash with the UAW’s “long-standing value of people receiving the same pay for doing the same work.”

But, they wrote, “the UAW’s highest priority is the success of the companies where we represent workers because workers have the biggest risk and stake in the companies’ future. This means keeping the companies globally competitive and profitable.”

Two-tier wages are likely to be discussed during contract talks with the Canadian Auto Workers, which formally begin next week, though CAW leaders have opposed such a system. Fleming said two-tier wages would help Ford cut labor costs in Canada, but he stopped short of saying Ford would push for such a system in the contract talks.

Said Fleming: “Canada is one of the most expensive places in the world to manufacture vehicles.”

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