Wants to eliminate higher wage, tie lower wage to company performance
Union leaders have waged wars over the two-tier wage system, which keeps entry-level workers on a permanent, lower pay grid. So why — now that Chrysler Group CEO Sergio Marchionne wants to end the two-tier wage structure at the Detroit Three auto plants in the United States — are they so worried?
"A two-tier wage system is completely destructive to the workplace," said Unifor’s national president Jerry Dias. "A two-tier wage system creates all kinds of dissention on the shop floor. While Marchionne is right in identifying the system as a problem, I don’t agree with his solution."
Marchionne made mention of his intention at the Fiat Chrysler Automobiles five-year product plan unveiling in Auburn Hills, Mich., on May 6. Touching on the issue of the 2015 contract negotiations with the United Automobile Workers (UAW), Marchionne reiterated his long-held opposition to two-tier wages.
"I always have been of the view that the two-tier wage structure is unsustainable in the long term," he said, advocating the phasing out of the older, higher tier and tying the new, lower tier to company performance through annual wage hikes.
"We have to replace the (two-tier) wage structure with something that reflects the sharing of the economics of running this enterprise," Marchionne said. "I object violently to the notion of entitlement in the wage structure. That is something that is incredibly unwise."
Canadian union leaders fear Marchionne’s plan to eliminate the two-tier wage system in the U.S. will result in the top-tier earners losing ground to meet the bottom-tier workers in the middle. It’s a proposal that could have major implications for Chrysler’s Canadian plants as Unifor gears up for 2016 contract talks.
During the 2012 contract talks the union — then Canadian Auto Workers (CAW) — avoided two-tier wages and profit sharing. Instead, it agreed to raise its grow-in period to 10 years from six.
Unifor argues its current deal puts Canada’s labour costs on par with the U.S. — particularly when the lower loonie is considered — but the two-tier wage system in the U.S. continues to create pressure for cost-cutting here.
"What Marchionne is thinking about is not to bring the lower wage up," said Liam Rideout, president of Unifor Local 1285 representing workers at Chrysler’s Brampton, Ont. assembly plant. "He wants them to meet in the middle. That’s his idea of getting rid of two-tier wages. And whatever they do in the UAW is going to have an impact on us, because they’re our direct competition."
The company’s uncertain future in Canada is contributing to the concern. In March 2014 the automaker announced its intention to withdraw all requests for financial assistance in the development of assembly plants in Windsor and Brampton, Ont.
Chrysler still plans to develop and build its next minivan in the Windsor location, and the Brampton facility benefitted from recent investments and redesigns of the Chrysler 300, Dodge Charger and Dodge Challenger it currently produces — but the decision to take a step back from further investment has many in the industry worried.
Mexico and the United States — both lower-cost jurisdictions — offer automakers millions of dollars in incentives, said Pete Mateja.
Mateja, co-director of the Office of Automotive and Vehicle Research at the University of Windsor’s Odette School of Business and an assistant professor at the institution, argued the federal government must make changes to attract automotive investment.
"It could be a very difficult time in Canada based on what transpires" with the UAW in 2015, he said.
UAW workers in the U.S. have been without a wage increase for close to a decade, Mateja estimated, and a move to phase out the top-tier earning capacity could result in major labour action.
"You approach anybody and ask them to take a pay cut, it’s not going to go over well," he said. "Remember, these workers have not had wage increases in eight, 10 years. The companies are profitable… and you want people to take a cut? Are you out of your mind? The union would be cutting their own throats."
It’s not only the inequity in wages, Mateja continued, but also the difference in benefits, holiday time and the ability to make contributions to a defined benefit (DB) pension plan. The inequity is simply unsustainable in the long term.
And while the decisions made by Chrysler and the UAW in 2015 could potentially have a significant impact on the Canadian economy, Unifor does have an advantage in coming to the table in 2016.
"Canada is in a very fortunate position because of the fact that the UAW is going ahead of them," Mateja said. "Unifor is in a wonderful position because they’re going to be able to watch what happens south of the border. They also have the advantage of the U.S. economy getting stronger, so it could be a greater shift as far as the devaluation of the Canadian dollar against U.S. currency."
This positive perspective is shared by Dias. While UAW’s adopting a two-tier wage system made sense at the time given both the company and the country’s dire financial situation, the decision to bring its starting wage down as low as US$13 per hour kicked off a race to the bottom, something Dias said "undercut the entire auto sector. It was a disaster for working-class people in the United States." The elimination of the two-tier system can only benefit those workers, Dias said, and critics shouldn’t count Canada out just yet.
"There’s so much to take into account. We have a highly skilled, sophisticated, educated workforce. We have the infrastructure, we have the access to markets, we have all these wonderful things that make Canada an attractive place to do business."
