#TwoTier

Norwood Jewell, a nominee to become a UAW vice-president, said that the autoworkers want to eliminate the two-tier wage system that pays new hires at a lower rate than higher seniority workers. The wage system was agreed to by the union to help the domestic automakers as they went through financial troubles when the economy turned down in 2007. New workers are paid slightly more than half of what veteran autoworkers earn.

“The international executive board hates two-tiers,” Jewell told Automotive News at a General Motors Co plant in Flint, Mich. as the automaker was announcing $1.3 billion in investments in some of its plants in the U.S. midwest, mostly in Michigan. Jewell is currently director of UAW’s Flint region. “We didn’t do two tiers because it’s a wonderful thing,” he said, explaining that the financial circumstances six years ago more or less forced the two tier wages on the union. “We hate them. We intend to eliminate them over time.”

Chrysler CEO Sergio Marchionne wants an end of what he called “two classes” of employees represented by the United Auto Workers union. The two-tiered system “creates the kind of environment that doesn’t appear to work in the same direction that we’ve been trying to use to establish the new basis of Chrysler,” Marchionne told Reuters. He continued:

Watch UAW President Bob King on New Contracts: Top Priority Was Creating Jobs on PBS. See more from PBS NewsHour.

Though UAW boss Bob King has said that organizing transplant factories is a life-or-death struggle for the union, but the real make-or-break issue this year was the contract negotiations with the Detroit Automakers. And though King roundly denies that a rift has been formed in his union over two-tier wages, the facts simply don’t back that position up. In the last contract to be ratified (with Chrysler) for example, only 54.8% of the union approved the deal… hardly the “overwhelming support” that King claims. Moreover, 55.6% of the skilled-trades workers at Chrysler rejected the contract, according to the Detroit Free Press. King’s narrative of experienced workers “demanding” higher wages for the Tier Two brothers “in the greatest spirit of solidarity” just doesn’t hold up to scrutiny.

As predicted, the hand-wringing over Sergio Marchionne’s letter to Bob King was not enough to derail the basic motivations for the UAW to reach new deals with the automakers. Last night the union agreed to a tentative agreement with GM, its pattern target for this, the first round of negotiations since the bailout. That agreement must be approved by the union rank-and-file, but if ratified, Reuters reports that it includes

• The re-opening of the idled Spring Hill, TN plant to build an unspecified “new product”
• $5,000 signing bonuses (at a cost to GM of $245m)
• According to the NYT, “significant improvements to health care benefits” are also part of the deal
• According to AN [sub], the union “successfully fought back efforts to make major changes — and weaken — our retirement plan.”

At the end of May, GM had no fewer than 288,000 pickup trucks sitting on its dealers’ lots (up from 275k in April). With gas prices on a short-term dip, but in the midst of a long-term increase, and with the season of traditional gas price spikes upon us, that could give The General cause for concern. After all, even a short-term spike in gas prices could cause a sharp falloff in truck sales, stranding huge numbers of trucks on dealer lots. But, GM North American boss Mark Reuss tells Bloomberg,

We’re not going to run big incentives to clear inventory. We’ll adjust inventory on a production basis.

That’s good news for GM’s financial position, and a promising sign of a new spirit of responsible pricing. But in an industry as complex as this, even good decisions could have troubling consequences. If GM “adjusts inventory on a production basis,” the “Tier One Gypsies” who fled Orion Township to avoid a 50% pay cut could find t heir temporary refuge at Flint Truck drying up, as HD pickups are likely the first to undergo “adjustments on a production basis.” And though that’s not explicitly GM’s problem, it could ratchet up the pressure to roll back the two-tier system in the upcoming negotiation session, and generally fire up the UAW’s dissidents and hard-liners. Meanwhile, with CAFE and gas prices converging on Detroit’s BOF bread-and-butter, we’ll be watching for signs of trouble as GM adjusts to the larger issue of likely long-term declines in truck demand.

I took some flack from TTAC’s Best and Brightest on Monday when I suggested that the UAW’s deal to give 40 percent of Orion Assemblys returning workers a 50 percent pay cut was “cowardly and despicable.” What I didn’t make clear enough was that I have no problem with the UAW working for a lower wage as long as the burden was spread evenly. Instead, the union has arbitrarily divided its existing workforce into the old guard “haves” and the relatively-recently-hired “have nots” as a ploy to make the union seem capable of profitably building subcompact cars in America. It’s bad enough to prop up the old guard by paying new hires less, but cramming down recalled Tier One workers is totally contrary to the very concept of a union. And I’m not the only one who finds the lack of solidarity and shared responsibility within the union troubling.