UAW Wage Plan Would Shield Chrysler’s Cost Advantage

Chrysler operations in the U.S. would be able to maintain a labor cost advantage over General Motors and Ford under terms of the tentative wage agreement between the United Auto Workers union and Fiat Chrysler Automobiles NV, Bloomberg News points out.

The plan would hike hourly starting wages for so-called tier-two new hires to about $17 from $15.78, with subsequent raises to more than $29 over four years. That would bring tier-two wages into near alignment with tier-one rate paid to senior workers.

GM and Ford also are allowed to hire workers at tier-two rates, but the ratio is capped. The new Chrysler proposal has no cap, thereby enabling the company to continue to have lower labor costs. Bloomberg cites data from the Center for Automotive Research in Ann Arbor, Mich., that puts average pay for Chrysler’s hourly workers at less than $20, the lowest in the industry.

CAR estimates the labor content of vehicles made by GM, Ford and Chrysler fell to less than 7% in 2014 from 15% in 2008. CAR figures the average UAW labor content in a vehicle made in the U.S. by Chrysler is $1,771 compared with about $2,400 for Ford and GM. Analysts doubt the advantage will narrow, because the UAW is certain to demand that GM and Ford grant Chrysler-like increases in tier-two wages.

The UAW’s Chrysler workers will vote on the new four-year agreement on Oct. 20-21.