Marchionne wants end to 2-tier wages
 Chrysler CEO says it creates class system that can't go on
Bryce G. Hoffman/ The Detroit News - October 29, 2011
 

Four years after the United Auto Workers and the Detroit Three agreed to a two-tier wage system, at least one automaker's CEO says the system must go.

Chrysler Group LLC CEO Sergio Marchionne says he tried to abolish the two-tier system in the company's U.S. factories during his recent negotiations with the UAW, but was unable to reach an agreement with the union. Now, he is vowing to do it in 2015.

"It creates two classes of workers in the plant," Marchionne told analysts and reporters in a conference call Friday. "This kind of economic disparity between people on the line is not something that can go on for a long period of time."

The UAW declined to comment on Marchionne's remarks.

But labor experts said Marchionne's call for a return to a common wage structure for all production workers is not as altruistic as it might seem.

"The UAW would also like to see the end of Tier Two, but I think they have very different ends in mind," said Kristin Dziczek of the Center for Automotive Research. "His desire is to get everybody to the lower level, not the higher."

The two-tier wage system was adopted by all three Detroit automakers as part of their game-changing 2007 contracts with the UAW. Under it, new hires were paid about $14 an hour, compared to about $28 an hour for existing production workers. They also received a less generous benefit package that replaced defined-benefit pensions with a defined-contribution retirement plan.

At the time, union leaders acknowledged the fundamental inequality of the system, but said it was the only way to convince the companies to hire more workers. The UAW, which has seen its ranks dwindle from 1.5 million in 1979 to just 377,000 last year, needs new members to cover its own expenses.

Workers have complained about the system, and it was a major factor in recent voting at Chrysler. Plants with many entry-level workers appeared more inclined to vote for ratification than those with more veteran employees.

Marchionne is determined to raise the issue again when the new contract expires in four years. But he said the current agreement does provide a solid foundation for future growth.

"It makes us a lot more confident going forward," he said.

Chrysler Chief Financial Officer Richard Palmer said the new agreement would have no net effect on the company's labor costs. It will raise the wages of entry-level workers to $19.28 over the life of the contract, but he said that would be offset by adding more lower-wage workers as the company expands production in the United States. The new contract also provides bonuses for quality and productivity to all workers, but he said these would be offset by the actual gains they are tied to.

"(There is) no overall increase in net costs," he said.

Chrysler's contract offered fewer gains for workers than the ones the UAW negotiated with General Motors Co. and Ford Motor Co. Both of those automakers said their new agreements would increase labor costs by about 1 percent over the next four years.

"They would have to have a heck of a lot of second-tier people hired at the end of contract in order to have this net out," Dziczek said. "That doesn't seem to include any profit-sharing either."

The contract is supposed to pay workers a bonus of 85 cents for every $1 million the company makes.

Marchionne said the new contract is only a beginning. He would still like to see a more flexible compensation scheme that makes workers more invested in Chrysler's success.

"We do need to provide real upside to all workers as long as the organization continues to perform and deliver value," Marchionne said. "On the other side of the equation, there's got to be an undertaking and a commitment by our people to share in the downside risks of this venture."

bhoffman@detnews.com

(313) 222-2443



From The Detroit News: http://detnews.com/article/20111029/AUTO01/110290372/Marchionne-wants-end-to-2-tier-wages#ixzz1cBiBxBSz
 Detroit Three agreed to a two-tier wage system, at least one automaker's CEO says the system mu CEO Sergio Marchionne says he tried to abolish the two-tier system in the company's U.S. factories during his recent negotiations with the UAW, but was unable to reach an agreement with the union. Now, he is vowing to do it in 2015.

"It creates two classes of workers in the plant," Marchionne told analysts and reporters in a conference call Friday. "This kind of economic disparity between people on the line is not something that can go on for a long period of time."

The UAW declined to comment on Marchionne's remarks.

But labor experts said Marchionne's call for a return to a common wage structure for all production workers is not as altruistic as it might seem.

"The UAW would also like to see the end of Tier Two, but I think they have very different ends in mind," said Kristin Dziczek of the Center for Automotive Research. "His desire is to get everybody to the lower level, not the higher."

The two-tier wage system was adopted by all three Detroit automakers as part of their game-changing 2007 contracts with the UAW. Under it, new hires were paid about $14 an hour, compared to about $28 an hour for existing production workers. They also received a less generous benefit package that replaced defined-benefit pensions with a defined-contribution retirement plan.

At the time, union leaders acknowledged the fundamental inequality of the system, but said it was the only way to convince the companies to hire more workers. The UAW, which has seen its ranks dwindle from 1.5 million in 1979 to just 377,000 last year, needs new members to cover its own expenses.

Workers have complained about the system, and it was a major factor in recent voting at Chrysler. Plants with many entry-level workers appeared more inclined to vote for ratification than those with more veteran employees.

Marchionne is determined to raise the issue again when the new contract expires in four years. But he said the current agreement does provide a solid foundation for future growth.

"It makes us a lot more confident going forward," he said.

Chrysler Chief Financial Officer Richard Palmer said the new agreement would have no net effect on the company's labor costs. It will raise the wages of entry-level workers to $19.28 over the life of the contract, but he said that would be offset by adding more lower-wage workers as the company expands production in the United States. The new contract also provides bonuses for quality and productivity to all workers, but he said these would be offset by the actual gains they are tied to.

"(There is) no overall increase in net costs," he said.

Chrysler's contract offered fewer gains for workers than the ones the UAW negotiated with General Motors Co. and Ford Motor Co. Both of those automakers said their new agreements would increase labor costs by about 1 percent over the next four years.

"They would have to have a heck of a lot of second-tier people hired at the end of contract in order to have this net out," Dziczek said. "That doesn't seem to include any profit-sharing either."

The contract is supposed to pay workers a bonus of 85 cents for every $1 million the company makes.

Marchionne said the new contract is only a beginning. He would still like to see a more flexible compensation scheme that makes workers more invested in Chrysler's success.

"We do need to provide real upside to all workers as long as the organization continues to perform and deliver value," Marchionne said. "On the other side of the equation, there's got to be an undertaking and a commitment by our people to share in the downside risks of this venture."

bhoffman@detnews.com

(313) 222-2443



From The Detroit News: http://detnews.com/article/20111029/AUTO01/110290372/Marchionne-wants-end-to-2-tier-wages#ixzz1cBiBxBSz
 United Auto Workers and the Detro two-tier wage system, at least one automaker's CEO says the system must go.

Chrysler Group LLC CEO Sergio Marchionne says he tried to abolish the two-tier system in the company's U.S. factories during his recent negotiations with the UAW, but was unable to reach an agreement with the union. Now, he is vowing to do it in 2015.

"It creates two classes of workers in the plant," Marchionne told analysts and reporters in a conference call Friday. "This kind of economic disparity between people on the line is not something that can go on for a long period of time."

The UAW declined to comment on Marchionne's remarks.

But labor experts said Marchionne's call for a return to a common wage structure for all production workers is not as altruistic as it might seem.

"The UAW would also like to see the end of Tier Two, but I think they have very different ends in mind," said Kristin Dziczek of the Center for Automotive Research. "His desire is to get everybody to the lower level, not the higher."

The two-tier wage system was adopted by all three Detroit automakers as part of their game-changing 2007 contracts with the UAW. Under it, new hires were paid about $14 an hour, compared to about $28 an hour for existing production workers. They also received a less generous benefit package that replaced defined-benefit pensions with a defined-contribution retirement plan.

At the time, union leaders acknowledged the fundamental inequality of the system, but said it was the only way to convince the companies to hire more workers. The UAW, which has seen its ranks dwindle from 1.5 million in 1979 to just 377,000 last year, needs new members to cover its own expenses.

Workers have complained about the system, and it was a major factor in recent voting at Chrysler. Plants with many entry-level workers appeared more inclined to vote for ratification than those with more veteran employees.

Marchionne is determined to raise the issue again when the new contract expires in four years. But he said the current agreement does provide a solid foundation for future growth.

"It makes us a lot more confident going forward," he said.

Chrysler Chief Financial Officer Richard Palmer said the new agreement would have no net effect on the company's labor costs. It will raise the wages of entry-level workers to $19.28 over the life of the contract, but he said that would be offset by adding more lower-wage workers as the company expands production in the United States. The new contract also provides bonuses for quality and productivity to all workers, but he said these would be offset by the actual gains they are tied to.

"(There is) no overall increase in net costs," he said.

Chrysler's contract offered fewer gains for workers than the ones the UAW negotiated with General Motors Co. and Ford Motor Co. Both of those automakers said their new agreements would increase labor costs by about 1 percent over the next four years.

"They would have to have a heck of a lot of second-tier people hired at the end of contract in order to have this net out," Dziczek said. "That doesn't seem to include any profit-sharing either."

The contract is supposed to pay workers a bonus of 85 cents for every $1 million the company makes.

Marchionne said the new contract is only a beginning. He would still like to see a more flexible compensation scheme that makes workers more invested in Chrysler's success.

"We do need to provide real upside to all workers as long as the organization continues to perform and deliver value," Marchionne said. "On the other side of the equation, there's got to be an undertaking and a commitment by our people to share in the downside risks of this venture."

bhoffman@detnews.com

(313) 222-2443



From The Detroit News: http://detnews.com/article/20111029/AUTO01/110290372/Marchionne-wants-end-to-2-tier-wages#ixzz1cBiBxBSz
Four years after the United Auto Workers and the Detroit Three agreed to a two-tier wage system, at least one automaker's CEO says the system must go.

Chrysler Group LLC CEO Sergio Marchionne says he tried to abolish the two-tier system in the company's U.S. factories during his recent negotiations with the UAW, but was unable to reach an agreement with the union. Now, he is vowing to do it in 2015.

"It creates two classes of workers in the plant," Marchionne told analysts and reporters in a conference call Friday. "This kind of economic disparity between people on the line is not something that can go on for a long period of time."

The UAW declined to comment on Marchionne's remarks.

But labor experts said Marchionne's call for a return to a common wage structure for all production workers is not as altruistic as it might seem.

"The UAW would also like to see the end of Tier Two, but I think they have very different ends in mind," said Kristin Dziczek of the Center for Automotive Research. "His desire is to get everybody to the lower level, not the higher."

The two-tier wage system was adopted by all three Detroit automakers as part of their game-changing 2007 contracts with the UAW. Under it, new hires were paid about $14 an hour, compared to about $28 an hour for existing production workers. They also received a less generous benefit package that replaced defined-benefit pensions with a defined-contribution retirement plan.

At the time, union leaders acknowledged the fundamental inequality of the system, but said it was the only way to convince the companies to hire more workers. The UAW, which has seen its ranks dwindle from 1.5 million in 1979 to just 377,000 last year, needs new members to cover its own expenses.

Workers have complained about the system, and it was a major factor in recent voting at Chrysler. Plants with many entry-level workers appeared more inclined to vote for ratification than those with more veteran employees.

Marchionne is determined to raise the issue again when the new contract expires in four years. But he said the current agreement does provide a solid foundation for future growth.

"It makes us a lot more confident going forward," he said.

Chrysler Chief Financial Officer Richard Palmer said the new agreement would have no net effect on the company's labor costs. It will raise the wages of entry-level workers to $19.28 over the life of the contract, but he said that would be offset by adding more lower-wage workers as the company expands production in the United States. The new contract also provides bonuses for quality and productivity to all workers, but he said these would be offset by the actual gains they are tied to.

"(There is) no overall increase in net costs," he said.

Chrysler's contract offered fewer gains for workers than the ones the UAW negotiated with General Motors Co. and Ford Motor Co. Both of those automakers said their new agreements would increase labor costs by about 1 percent over the next four years.

"They would have to have a heck of a lot of second-tier people hired at the end of contract in order to have this net out," Dziczek said. "That doesn't seem to include any profit-sharing either."

The contract is supposed to pay workers a bonus of 85 cents for every $1 million the company makes.

Marchionne said the new contract is only a beginning. He would still like to see a more flexible compensation scheme that makes workers more invested in Chrysler's success.

"We do need to provide real upside to all workers as long as the organization continues to perform and deliver value," Marchionne said. "On the other side of the equation, there's got to be an undertaking and a commitment by our people to share in the downside risks of this venture."

bhoffman@detnews.com

(313) 222-2443