The End of Two-Tiered Contracts in Auto?

Between 2007 and 2009, the American auto industry was on the verge of collapse, with GM and Chrysler requiring government assistance to stay afloat. The industry took advantage of this situation to force two-tiered contracts on the United Auto Workers that set a new wage scale for new workers significantly below that of older workers and without any way for workers to ever reach the old wage scale. The UAW didn’t have much choice but to agree for two reasons. First, the auto industry had already outsourced so much production–to Mexico, to the nonunion South, to nonunion parts suppliers–that the threat to just bust the union and outsource most everything was real. Second, the companies were genuinely in real trouble and the UAW feared lost jobs. Some argued UAW president Bob King was a sellout, etc., during this period, but other than a massive strike that would have accomplished nothing and possibly led to the end of the union and which the UAW was simply not prepared for, I don’t see any other real choice it had at the time.

But the UAW, both leadership and rank and file, hated the two-tiered contracts. As the auto industry’s fortunes began improving, especially after 2011, it became a lot harder to justify these contracts. Of course the car companies loved them and had no intention of giving them up. But rank and file pressure from the UAW seems to have done the trick, or at least started the rollback. Last week, the UAW and what is now FiatChrysler agreed to a new contract that kept the two-tiered system. Except that the membership than rejected the contract pretty overwhelmingly and prepared to strike. I don’t know if this was the UAW plan from the beginning, in order to convince the auto companies this had to end, or whether it was a real rank and file rebellion. Maybe a little of both. In any case, in going back to the bargaining table, the UAW and FiatChrysler agreed to a second contract that rolls back the two-tiered contracts.

On Friday the UAW’s Chrysler council voted in support of the new proposal, but final approval depends on the general membership of the union’s general Fiat Chrysler branch. Negotiators reached a tentative agreement the day before, narrowly averting a planned strike at several Midwestern plants.

UAW workers overwhelmingly rejected another proposed Fiat Chrysler contract a week ago, in part because it would have left the tiered wage structure intact. Under the most recent contract between UAW and the carmaker, unionized workers hired after 2007 can earn a maximum of $19.28 per hour, whereas the first-tier workers, hired before the cutoff, earn closer to $28.50 per hour.

The UAW released details of the more recent proposal after the Chrysler council vote. Under this deal, all second-tier workers could earn up to $28 per hour after seven years of employment and what it termed a “traditional wage” by year eight.

Fiat Chrysler is not the only major auto company to have a tiered contract. General Motors and Ford, the others in Detroit’s Big Three, also inked tiered deals with UAW in 2007, when the whole industry was under severe economic pressure. First-tier workers at the Big Three account for 10 percent of autoworkers in the United States; 4 percent of autoworkers are second-tier workers in the Big Three, according to an analysis by the labor publication Labor Notes. Together, the contracts cover about 137,000 workers — including a lower-wage second tier that makes up 45 percent of the workforce at Chrysler, 25 percent at Ford and 20 percent at General Motors, according to the Center for Automotive Research.

I talked to Ned Resnikoff about this in the linked article above. It’s a big deal precisely because Chrysler relied so heavily on the contracts, far more than GM or Ford. If the UAW can push back on this with 45 percent of the workers at Chrysler on them, the argument that Ford and GM need to keep this arrangement is heavily undermined.

Now, there’s a lot of details to be hashed out and I have no doubt that Chrysler is going to try and keep these arrangements in some way. The very slow timeline to fix this problem and get workers on the top wage scale is less than ideal and extends beyond the end of this contract. But this is a real victory and deserves to be recognized as such.