Marchionne Opposes Two-Tier Wage Structure with UAW; Not a Long Term Fix

By Trevor Dorchies | October 28, 2011
After weeks of working to come to an agreement with the United Auto Workers union Chrysler Group and Fiat CEO Sergio Marchionne is satisfied-almost. During the latest round of negotiations Marchionne worked with UAW president Bob King to change the two-tier wage structure, but both sides were unable to come to a mutually beneficial agreement. Marchionne believes the wage structure is a distraction among workers and hampers overall cohesiveness for the auto maker. Chrysler's boss hopes to renegotiate the system during the next round of contract talks when the current agreement expires in 2015. "The two tier wage structure, in and by itself, is not a viable structure upon which to build our industrial footprint," Marchionne told Automotive News. "It creates two classes within the plant." The two classes Marchionne is referring to are second-tier, or new hires, which start out at $14 an hour and veterans to the workforce who earn $28 an hour. Benefits and other compensation push veteran pay to $51 an hour, while the economic downtown has forced new hires' wages to be stagnant. Marchionne claims two-tier workers make up around 13 percent of Chrysler's facility workers but that number is expected to climb to 25 percent by 2015.
The Detroit Three are looking to become more competitive against their Asian and European rivals. With this in mind new hires began to receive reduced wages and benefits back in 2007. King echoed this sentiment suggesting the union will kill off the different pay scales for hourly workers at Ford, GM, and Chrysler. This is good news for Marchionne and Chrysler, since he believes the auto maker won't be able to sustain the wage structure over a long period of time. "It is in our collective interest to find a solution that effectively guarantees a credible way of going forward and dealing with a down cycle, while still rewarding people properly on the upside," Marchionne said to Automotive News. Marchionne is hoping Chrysler can turn a profit of $600 million in 2011 not including costs to repay both the U.S. and Canadian governments, respectively. If the latest reports are an accurate indication that goal may not be too far out of reach. Yesterday Chrysler reported a profit of $212 million during the third quarter of 2011. Source: Automotive News