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Forum highlights FCA pay challenge

by Bill Cawthon on

This morning, the United Auto Workers union Special Convention on Collective Bargaining continued at Cobo Center in Detroit. It’s the last day of a two-day forum for union leaders and members to provide input into the union’s negotiating agenda, an agenda that will be heavily focused on pay and the two-tier wage system the union agreed to in 2007.


Union local leaders and rank-and-file members are pressing union president Dennis Williams and his negotiating teams to take aggressive positions and bargain for higher wages for Tier 1 workers that haven’t seen a raise since 2003 and for narrowing the gap between the Tier 1 and Tier 2 pay scales if not eliminating Tier 2 altogether and raising all worker pay to the full union scale.

On the first day of the convention, speakers were unanimous in demanding that union leaders take a hard line on the Tier 2 topic.

Delegate Bill Parker, former president of UAW Local 1700 at the Sterling Heights Assembly Plant, asked for a pledge that union bargainers would fight for all Tier 2 workers to be promoted to Tier 1 but failed to get enough delegates to bring it to the floor after UAW Secretary-Treasurer Gary Casteel said it conflicted with other proposal language.

Tielece Perry, a delegate from Local 7 at the Jefferson North plant, said it’s not fair that the Tier 2 workers at her facility can’t afford to buy the Dodge Durangos and Jeep Grand Cherokees that they build.

Automakers hope to preserve the lower labor costs associated with Tier 2. In fact, it’s reported that Ford and GM would like a third tier, with even lower pay, for certain jobs. Given the sentiment at the UAW convention, such a proposal would be fanning the flames of resentment.

As it is right now, FCA US and General Motors are under the gun. When the second-tier agreement was originally struck, there were caps on the number of Tier 2 workers in each companies’ labor force. At Chrysler, the cap was 25%. When Chrysler went through bankruptcy, its cap was waived and the company was able to hire an unlimited number of workers at the lower scale.

Today, Tier 2 workers make up 42% of FCA’s U.S. hourly workforce. GM is at 29% and Ford, which never had its cap lifted, is at 20% but recently had to move hundreds of workers from Tier 2 to Tier 1.

On September 14, FCA’s waiver expires and the 25% cap becomes effective, meaning the company will have to move thousands of workers to the full union scale.

According to figures from the Center for Automotive Research, FCA’s average hourly labor cost is $48, including all benefits and employer contributions to Social Security and unemployment. This is the lowest of the Detroit Three and average for workers at auto plants in the U.S.

Manufacturer Hourly Labor Cost Status
Mercedes-Benz $65 Non-Union
General Motors $58 UAW
Ford $57 UAW
Honda $49 Non-Union
Fiat Chrysler $48 UAW
Toyota $48 Non-Union
Nissan $42 Non-Union
Hyundai $41 Non-Union
Kia $41 Non-Union
BMW $39 Non-Union
Volkswagen $38 Non-Union
Average $48 N/A

FCA CEO Sergio Marchionne has said he would like to raise Tier 2 wages to $22.00, freeze Tier 1 pay, and let attrition eliminate Tier 1 over time.

For the first time, Marchionne will be facing UAW Vice President Norwood Jewell, who replaced the late General Holiefield as head of the UAW’s Chrysler Department, and also for the first time, he will be facing an American union that can call a strike.

Negotiations in 2007, 2009, and 2011 were all predicated on ensuring Chrysler could survive. In 2015, Chrysler seems fairly robust and the market is still good even though the rate of growth is slowing.

There’s no doubt members of the more militant locals, such as the one at the Belvidere Assembly Plant, are going to be pushing hard to regain some of what was given up in previous years. But it’s likely 2015 will be the year when both sides have to confront the new normal and strike a bargain that benefits both sides without beggaring either.

Bill Cawthon grew up in the auto industry in the 1950s. His Dad worked for Chrysler and Bill spent a number of Saturdays down on the plant floor at Dodge Main in Hamtramck. Bill is also the U.S. market correspondent for, a British auto industry publication, and a member of the Texas Auto Writers Association, which has named the Jeep Grand Cherokee the “SUV of Texas” several times and named the Ram 1500 as the “Truck of Texas” two years running.

Bill has owned five Plymouths (including the only 1962 “Texan”), one Dodge and one Chrysler and is still trying to figure out how to justify a Wrangler. He also has owned at least one of every 1:87 scale model of a Chrysler product. You can reach him directly at (206) 888-7324 or by using the form.

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