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Three months after the United Auto Workers ratified new four-year agreements with Detroit-area automakers, President Dennis Williams said one of the union's biggest challenges is the shift of car production to low-wage countries like Mexico and China.
The new labor agreements with General Motors, Ford and Fiat-Chrysler gave raises to entry-level workers, who start at lower pay and with less-valuable benefits. While allowing new workers to reach to the top pay scale, the contracts also leave automakers free to boost production — particularly of small, less-expensive cars — in places like Mexicoand to import other models from China.
That stunts growth of union membership at U.S. auto plants and leaves the UAW more reliant on sales of pickups and sport utility vehicles. The UAW, contending with a new right-to-work law in Michigan, is now focused on organizing workers at U.S. plants owned by foreign automakers like Volkswagen to get more members, Williams said.
"The fact of the matter is, companies continue to run to low-wage countries," Williams told reporters at the union's headquarters in Detroit. "There is no mathematical reason to run to countries like Mexico, Thailand and Vietnam. They're making their profits right here in the United States."
The North American unit of Fiat Chrysler Automobiles said it will stop making its Dodge Dart compact and Chrysler 200 mid-sized car and focus its U.S. production on Jeep SUVs and other larger vehicles. Ford has said it will stop building its Focus compact in Michigan; that work will go to Mexico, said a person familiar with Ford's plans. Autoworkers in 2013 earned $8.24 an hour on average in Mexico, compared with $37.62 in the U.S., according to the Center for Automotive Research.
Automakers are trying to preserve margins as wages rise in the United States. Veteran workers at all three companies got two 3 percent raises and two cash payouts equal to 4 percent of their pay over the term of the four-year agreement. Entry-level, or so-called Tier 2, workers started at less than $16 an hour under the old contracts and topped out at $20. New hires now start at $17 and reach the top traditional wage after eight years. Those at Ford and GM also get the top-flight health insurance of their Tier 1 co-workers until retirement.
Shifting work to Mexico and hiring lower-paid temporary workers will help the automakers offset the union's gains and contain total payrolls. GM will be able keep its labor costs essentially unchanged, at $2,350 a vehicle in 2019 compared with $2,374 in 2014, according to analysis by the Center for Automotive Research in Ann Arbor, Michigan. Ford's costs will rise about $200 to $2,600, and Fiat Chrysler's will jump to $2,500 from $1,771.
Williams said the union never negotiated with the companies about sending work to Mexico or about importing cars from elsewhere in exchange for wage gains. Now that the companies are looking at bringing cars in from outside the U.S., the union plans to talk to them, he said.
Ford will put the Ranger pickup and Bronco sport utility vehicle in the Michigan plant that will stop making the Focus, said a person familiar with the matter.
"We will get other products in that plant," Williams said.
The union has talked to GM about its plans to import the Buick Envision SUV from China. Williams said union members have nicknamed the vehicle the "Invasion" and have expressed displeasure with the decision to import it.
The union has three strategies for dealing with shifting production to Mexico. First, it continues to lobby for adjustments to trade agreements, or even adjustments to NAFTA, to get what Williams calls fair trade agreements. The UAW and other unions need to pressure Mexico to help organized labor become more independent there, he said.
The UAW is also organizing U.S. plants owned by foreign automakers. Last year, the UAW organized skilled trades workers at Volkswagen's plant in Tennessee, giving it a foothold.
Williams said the carmakers should be loyal American taxpayers, especially since the U.S. bailed out GM and FCA predecessor Chrysler in 2009.
"What happened in 2009 is proof that the U.S. taxpayers protect the assets of a company like GM," he said. "Those companies should be as loyal to the taxpayers as they were to them."