The changed economic context has made the auto workers more confident and combatitive. As one management consultant told the Wall Street Journal below, “auto makers must recognize the backdrop against which they are negotiating. Employment has recovered since the financial crisis, and a tightening job market is forcing car makers to scramble to find enough skilled workers to operate factories.”
In Fiat Chrysler’s case, the workers are demanding elimination of the two tier wage system forced on the union during the industry’s long downturn and mass layoffs. UAW President Dennis Williams had joined with auto executives in rejecting the demand on the shopworn ground that the industry needs to remain “competitive”.
Whether the Fiat Chrysler revolt will succeed and spread to other plants is still unclear, but workers’ bargaining power - at least, for the present and in the auto industry - has clearly strengthened.
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Wage Strife Clouds Car-Sales Boom By Anne Steele and Jeff Bennett Wall Street Journal Oct. 1, 201
Automobiles flew off dealer lots last month at the fastest pace in 10 years, but the good times are stirring tension between U.S. auto makers and their unionized workers that threatens to undercut the industry’s rebound.
United Auto Workers union members at Fiat Chrysler Automobiles NV this week rejected for the first time in three decades a tentative agreement as inadequate, and Ford Motor Co. faces a walkout at a big truck factory as soon as Sunday.
As buyers flood dealer lots, snapping up pricey pickups and sport-utility vehicles that deliver fat profits to General Motors Co. , Ford and Fiat Chrysler, factory workers are demanding an end to the concessions that put the U.S. industry back on its feet after near collapse seven years ago.
“We got a catered meal of hot dogs and hamburgers as our thanks while others, I’m sure, got big bonuses,” said Phil Reiter, a 44-year-old union member referring to a recent production milestone at Fiat Chrysler’s Toledo, Ohio, Jeep factory. That plant on Tuesday rejected a UAW supported contract by a more than 4-to-1 ratio.
The workers are angry that neither union officials nor Fiat Chrysler want to eliminate a concession put in place just ahead of the 2008 recession that pays some assembly-line staff substantially less than co-workers doing the same work. The same two-tier system exists to a lesser extent at GM and Ford.
Surging sales aren’t helping the relationship. U.S. car and light-truck sales rose nearly 16% last month compared with the same period a year ago, an annualized pace of 18.17 million vehicles. It was only the ninth time in history the monthly pace eclipsed 18 million, and the first time since 2005.
On Thursday, the UAW confirmed that 65% of its Fiat Chrysler members spurned Fiat Chrysler’s offer, the first time in more than 30 years a proposed bargaining deal was voted down. The decision is a blow to the UAW, which has tried to reverse a persistent decline in union auto jobs by accepting concessions.
In mid-September, UAW President Dennis Williams said the now-rejected pact addressed worker concerns while keeping Fiat Chrysler competitive. He huddled with union leaders on Thursday to determine his next move. Mr. Williams had wanted to move on to negotiate new contracts with GM and Ford that likely would follow terms of the rejected Fiat Chrysler deal.
Fiat Chrysler said on Thursday that it was opposed to returning to prerecession wage terms. “The cyclical nature of the automotive business demands that while we must recognize the need for rewarding employees during times of prosperity, we must also protect against the inevitable market downturn,” Fiat Chrysler said. It referenced its “near-death experience” in 2009, and committed to never letting those days repeat.
The Italian-American auto maker has grown faster than its U.S. rivals. September marked the 66th consecutive month of year-over-year growth as Jeep and Ram pickups remain among the most popular in the industry. It had offered a raise for workers and richer bonuses, but also said some production will be moved to Mexico.
Mark Wakefield, managing director at consultants AlixPartners LLC, said auto makers must recognize the backdrop against which they are negotiating. Employment has recovered since the financial crisis, and a tightening job market is forcing car makers to scramble to find enough skilled workers to operate factories.
“Workers are not just feeling good because their company is doing well, there are more employment options out there,” he said. Unemployment in Detroit’s metro area touched a 15-year low last month, and the area’s joblessness rate is declining at twice the pace of the country as a whole, according to newly-released Labor Department statistics.
Detroit is only one of the auto industry’s hot pockets. In Missouri, where GM and Ford build sedans and pickups, workers are threatening a walkout this weekend. That would hamper Ford’s ability to meet demand for its new aluminum pickup truck, which is driving the auto maker to some of the highest profit levels in its history.
The bankruptcies and deep restructuring of last decade allow domestic auto makers to run a much more disciplined strategy even as the industry is on pace to reach its highest volume since 2000. With less production capacity and fewer dealers, Detroit companies are limiting inventories and that makes them less likely than they used to be to offer hefty incentives.
Although Labor Day weekend deals and low interest rates played a role in boosting demand, this momentum isn’t being prompted by the extraordinary amount of sales-incentive spending that fueled booms of the past and eroded profit margins.
For instance, the industry’s sales pace topped 20 million in consecutive Julys in the mid-1980s, but that came during a fierce price war waged by Detroit auto makers looking to hold off import brand gains. GM triggered another boom in 2001 after the 9/11 terrorist attacks with its “Keep America Rolling” campaign; in 2005 it extended employee discounts for the entire market, again prompting volumes to near-record levels.
“This is a very different [job] market,” said AlixPartners’ Mr. Wakefield, who worked with the Obama administration on the 2009 bankruptcies of GM and Chrysler. Although he sees the market peaking in the midterm, he said Detroit is better prepared to deal with volume declines.
The No. 3 U.S. auto maker, Fiat Chrysler, reported a 13.6% September increase, GM logged a 12.5% gain, and Ford’s volumes grew 23.3%, all compared with year-earlier sales.
Foreign auto makers also delivered double-digit percentage sales gains last month. Toyota Motor Corp. said its sales jumped 16.2%. Bill Fay, general manager of the Toyota brand, said the company is confident demand will hold in the fourth quarter, and said in some areas demand for certain vehicles is outstripping supply.
Volkswagen AG ’s sales rose less than 1% last month, similar to its recent performance. The Environmental Protection Agency accused the German auto maker on Sept. 18 of using software to sidestep emissions testing on its diesel-powered vehicles. Volkswagen apologized and has vowed to fix the cars.