Chrysler CEO claims two-tier wage system is unsustainable

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Chrysler Group LLC CEO Sergio Marchionne.

Chrysler Group LLC CEO Sergio Marchionne wants to avoid a class war among his UAW-represented workers. (Photo Credit: CC BY-ND/Archivo Perini/Flickr)

Chrysler CEO Sergio Marchionne has balked at the United Auto Workers union’s call for a two-tier wage system, reports Reuters. The split wage system, which Marchionne believes is “not viable” for Chrysler Group LLC in the long term, creates a contentious class system between newer and veteran employees.

Marchionne wants solution by 2015

The two-tier wage system is one aspect of the contract between Chrysler and UAW on which Marchionne had hoped to see improvement following the most recent re-negotiation of the labor contract. As it stands, the next chance for change will be when management and labor are scheduled to return to the table in 2015.

In lieu of a two-tier system, Marchionne has said that he would like to create one wage rate that would conceivably eliminate bickering amongst levels of labor. The current split wage system spells trouble, he told the Detroit Free Press.

“It 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 reporters.

UAW agreed to the two-tier system in 2007, a move at the time that U.S. automakers believed would help cut labor costs and allow for more effective competition against foreign automakers like Toyota.

How pay breaks down

Currently, new UAW-represented workers start at a salary level of just more than half of what veteran workers earn. Reports indicate that around 13 percent of Chrysler’s 26,000 UAW workers are receiving entry-level pay of about $15 per hour. The new labor contract will increase that amount to $19 over the next few years.

Marchionne is hopeful that the issue of economic disparity among workers will be a more focal topic of conversation during the next round of labor talks.

“The whole notion of trying to get this organization to work in unison when you’ve got this kind of economic disparity between the people on the line is not something that can go on forever,” Marchionne said via conference call.

Skilled tradesmen didn’t vote with their union

The Free Press notes that 55 percent of Chrysler’s UAW workers ratified the latest labor contract. A large percentage of those UAW workers who did not agree to the contract were veteran tradesmen, who see the Chrysler contract as weaker than contracts at General Motors and Ford.

Chrysler’s labor costs average $51 per hour per worker, which industry research confirms is competitive with the labor costs of foreign automakers.

State of contract talks between Chrysler and UAW

Sources

Auto News

Detroit Free Press

Reuters

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