Ford, Chrysler and General Motors are expected to side against granting annual raises to their 107,000 hourly employees as auto worker contract negotiations soon commence Tuesday, reports Automotive News. The Detroit 3 are allegedly prepared to offer productivity and quality bonuses of up to $10,000 per year. If auto workers agree to proposed profit-sharing measures offered by the United Auto Workers (UAW) union, it would mark the biggest shift in compensation practices since the 1950s.
Union proposed US auto workers do it like Japan
UAW President Bob King believes that the union is near an agreement with the Detroit 3 that would revolutionize auto worker compensation. Essentially, as much as 15 percent of hourly workers’ salaries would be paid out in performance bonuses and lump payments, as it is done with Japanese auto workers and salaried U.S. workers. A new auto worker contract would go into effect in September.
Recovering from the concessions
UAW VP Jimmy Settles, who is leading the auto workers’ negotiations with Ford, is poised to recapture much of the pay and benefits U.S. auto workers have given up since 2005 to keep the industry afloat.
“We always look for everything — plus,” said Settles. “We’re going to negotiate smart. We’re not going to cut our nose off and spite our faces.”
King will demand that U.S. auto workers be granted the raises, bonuses and cost-of-living adjustments they sacrificed. It is estimated that individual auto workers gave up anywhere from $7,000 to $30,000 from 2005 to the present.
Hope for things to come
UAW representatives were encouraged by recent bonus distribution from the Detroit 3. This month, Ford paid 40,600 hourly employees profit-sharing checks averaging $5,000 each, while Chrysler paid its union employees an average bonus of $750. General Motors has promised profit-sharing distribution for its 45,000 hourly staff that will average $4,300.
Yet the automakers may be attempting to transition into a more incentive-based pay system.
“With these profit-sharing checks, it’s the hope of all three automakers that they are making a down payment on a more incentive-based pay system,” said labor Prof. Harley Shaiken of the University of California-Berkeley. “There’s nothing like that check to show that it can be done.”
Will US auto workers accept an incentive-based system?
Gary Chaison, a professor of industrial relations at Clark University in Worcester, Mass., points out that U.S. workers prefer the predictability of set pay.
“Western workers don’t like to have a significant part of their compensation depend upon something unpredictable,” he said. “Workers want to know what they’re making in order to plan, and that requires predictability, while variable pay implies flexibility.”
Longevity and long-term security are issues that the UAW constituency desire. In negotiations with the Detroit 3, Bob King will face pressure from workers to bring back a predictable annual raise system, while the automakers will push to keep labor rates competitive with Asia and Europe.