UAW workers should envy Social Security raise
October 19, 2011 - 3:37 pm ET

DETROIT -- When the government reported today that Social Security recipients will get a 3.6 percent cost-of-living adjustment next year, I was reminded again of what great deals the Detroit 3 wrested from the UAW during this year's contract negotiations.

Those recipients did better by the Social Security Administration than the 113,000 UAW members at the Detroit 3 did in the auto talks.

See, hourly workers didn't get their cost-of-living adjustment restored, nor did they get a wage increase.
Instead, the UAW negotiated lump-sum payments over the four years that amount to an annual increase of about 3.2 percent at Chrysler Group, 3.8 percent at General Motors and 5.5 percent at Ford Motor Co.

In other words, if inflation keeps its pace, Chrysler's 23,000 hourly workers will have less earning power in four years than they have today. The same is probably true for GM's 49,000 workers because inflation compounds and erodes income over time. Only Ford's 41,000 workers will come out barely ahead.

Remember, too, those workers haven't had a wage increase since 2003, and they made total concessions of $7,000 to $30,000 per worker over the past four years. They didn't claw back those concessions in this year's negotiations
Worker pain, though, has been the carmakers' gain.

Each of the Detroit 3 can expect its overall hourly labor costs to increase 1 percent or less annually over the contracts. If the automakers earn a net profit -- and that should be easy given that they need annual U.S. vehicle sales of 10.5 million to break even -- they'll share only a tiny fraction with the workers in the form of profit sharing.

It's interesting that Wall Street is finally noticing how sweet the labor deals really are for the Detroit 3.
On an Oct. 18 conference call, Morgan Stanley analyst Adam Jonas put it in perspective: "What's happened under our noses here is … they've locked into an hourly wage agreement that should not only be competitive with the Japanese but will be materially lower. We think they got extremely good deals."
You can reach David Barkholz at dbarkholz@crain.com.

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