Why are UAW raises out of the question?
Automotive News -- August 29, 2011 - 12:01 am ET David Barkholz
Instead, they'll settle for profit-sharing and performance bonuses. But assuming the workers will settle quietly could be a significant miscalculation.
By all indications, UAW workers won't get a raise as a result of this year's auto talks.
We've heard the reasons why raises are considered unlikely. Profit-sharing and performance bonuses tie UAW members closer to the fortunes of the companies.Vehicle sales may slide in a tottering economy. As such, the Detroit 3 need to keep labor costs flexible. If sales soar, workers share in the bounty.
All convincing views from 30,000 feet. But here's the skinny from the shop floor: The 112,000 UAW-represented workers at the Detroit 3 have not had a wage increase since 2003. Their COLA is frozen. And only lots of overtime has kept their standard of living from being badly eroded by inflation over the past eight years. So it's questionable, given the mood of the rank and file, that profit-sharing alone is going to cut it after workers have sacrificed a total of $7,000 to $30,000 apiece in pay and benefits since 2007.
Ask them what they would rather have: A 4 percent total pay increase and COLA restoration in each of the next four years? Or no pay or COLA increase and the chance to earn 8 to 10 percent in profit-sharing and performance bonuses in each year?My bet is they'd take the hard money 9 times out of 10.
What would a modest raise and COLA really cost the Detroit 3?
Four percent of an annual straight-time wage of $58,240 is $2,330. Five percent is $2,912.
To provide the 48,000 hourly workers at General Motors with a 4 percent total boost next year would cost GM about $112 million (not including overtime, which the company controls, not the workers.)
The price tag for Chrysler's 23,000 workers: $53.6 million. And Ford's 41,000 workers would see an increase of $95.5 million.
That's a tad less than the combined $98 million in pretax stock awards made in March to Ford CEO Alan Mulally and Executive Chairman Bill Ford Jr.
UAW President Bob King and the Detroit 3 appear intent on gambling that the rank-and-file will accept enhanced profit-sharing and bonuses in lieu of raises.
Ultimately, the troops will have the final say at ratification sometime around the Sept. 14 expiration of the current four-year agreements.
If Detroit 3 negotiators and King are wrong, we could see a strike at Ford and arbitration at GM and Chrysler.
You can reach David Barkholz at email@example.com.