UAW faces showdown over Detroit's wage gap

The system caps new hires' pay at $19 an hour while veterans make $28. That split rankles younger workers.

By MSN Money Partner Jun 3, 2014 1:38PM
File photo of a Ford Motor Co. employee attaching a wheel to a 2009 Ford F-150 pickup truck on an assembly line at the company's Dearborn Truck Plant in Michigan on Oct. 30, 2008 (© Jeff Kowalsky/Bloomberg via Getty Images)By Christina Rogers, The Wall Street Journal

The likely next president of the United Auto Workers plans to attack the two-tier wage system that divides workers at Detroit car makers, setting the union up for a confrontation with companies intent on keeping labor costs down.

"It's time to bridge the gap," said UAW Secretary-Treasurer Dennis Williams, whose nomination as president will be put to a vote at the union's convention this week.

A two-tier wage structure was negotiated by the three Detroit auto makers in 2007 as a way to make their labor costs more competitive with foreign car makers' U.S. plants. Under the structure, newer hires' pay is capped at about $19 an hour while veterans make $28 an hour -- a split that rankles many younger workers.

Chrysler Chief Executive Sergio Marchionne last month said he wanted to do away with the higher tier, phasing it out as veterans retire.

Mr. Williams, a 61-year-old former Marine and salvage welder from Rock Island, Ill., made his mark in the UAW as a regional director in Chicago, negotiating with companies such as heavy-equipment maker Caterpillar (CAT) and farm-equipment manufacturer Deere & Co. (DE).

In the late 1980s, he was part of a successful effort to organize workers at a Mitsubishi Motors factory in Normal, Ill., currently the only Japanese-owned auto assembly plant in the U.S. represented by the UAW.

The UAW's next president will inherit an organization that is undergoing profound change. Despite the name, only about half the UAW's members work in the automotive sector today.

The rest are teachers, nurses, social workers, and other public and private sector workers. The UAW's largest local is in Lansing, Mich., and it represents about 17,000 state employees.

As did current UAW President Bob King, Mr. Williams plans to continue to push for a union presence at foreign-owned auto plants in the U.S., despite a string of failures including a loss earlier this year at Volkswagen AG's (VLKAY) Chattanooga, Tenn., assembly plant.

Mr. Williams and other UAW officials blame the defeat in Tennessee on outside political pressure. "We learned a great deal of lessons about being more cautious about who is out there trying to undermine the process," Mr. Williams said. "We'll be more prepared. We're going to communicate differently."

Mr. King on Monday linked abolishing two-tier wages with organizing foreign car plants in the U.S. "The fastest way to get rid of the two-tier wage . . . is by organizing the competition, he said at the convention.

Although he inherits some old battles, Mr. Williams has shown himself to be astute about business and cost cutting as secretary-treasurer.

He has worked to improve the union's finances, proposing to off-load union-staff retirement health benefits to a separate medical trust, just like those of retired Detroit auto workers. The move would save between $15 million and $20 million a year.

Troy Clarke, CEO of Navistar International (NAV), where Mr. Williams is a member of the board, calls the union official among a new generation of business-minded UAW leaders. "He's very conversant in the business jargon we use, so that bargaining takes place on a higher plane," Mr. Clarke said.

While the UAW remains one of the largest and richest U.S. industrial unions, it is fighting to expand membership, wrestling with tightening finances and dealing with political setbacks in the South and Midwest.

Its ranks grew slightly last year to just over 391,000 people, but far off the peak of 1.5 million members in 1979.

To balance its budget, the UAW has cut spending by nearly 23 percent over the last five years and sold about $245 million in assets. It also has tapped its strike fund for operating expenses.

The UAW this week will ask members to approve a 25 percent increase in dues -- the first increase since 1967 -- to rebuild its strike fund. The fund last year stood at $627 million. In 2006, it had more than $900 million. 

The UAW will be free to call strikes next year if it can't agree on a contract with the Detroit car makers. In the 2011 talks, the UAW was barred from striking General Motors (GM) and Chrysler Group under the terms of the federal auto-bailout agreements. "Do we plan on striking? No one wants a strike," Mr. Williams said. He described the strike fund as "a deterrent."

A potential risk for the UAW's next round of talks with auto makers is that the companies employ nearly 58,000 union-represented workers in Michigan, who could withhold dues if they don't like the next contract. Michigan became a right-to-work state last year, allowing workers to opt out of paying union dues.

Mr. Williams said he wasn't worried about that. In Iowa, a right-to-work state, where Deere has many of its factories, UAW participation is close to 98 percent, he said.

"We've already got contracts [in Michigan] that have expired, not in autos, but for state workers and a lot of independents," he said. "We don't see the numbers dropping."

More from The Wall Street Journal
Jun 3, 2014 5:05PM

The answer is easy, just make the old guys that make more give up some of their pay to give to the younger workers that make less. 


Isn't that how communism works?  Isn't that what unions are all about now days?  They want executives to do it, why don't they set an example in their own ranks, in a situation where they are actually doing the same job.

Jun 3, 2014 3:20PM

New hires almost always OR SHOULD go through a probation period...That's just good business.

Line of progression wages are the norm many places, U.S. Military, U.S. Government with GS-ratings. Tenure for teachers, etc, etc.

Most any Apprenticeship program.

And about any Company that has different Skill Levels...

Plus Seniority raises and bonuses.

If you don't know that, maybe you have never worked for a living...??

You don't come out of Highschool or College and "work your way down."

Jun 3, 2014 2:52PM
To all those union workers who have voted to keep there above market pay while new workers are pail less, just wait. When the new workers are the dues paying voting members, what will they vote for you in the future. 
Jun 3, 2014 1:54PM

I smell another Federal intervention.

Jun 3, 2014 6:17PM
Unions are basically mobsters with picket signs. Take a look at what the bus drivers in SF are doing:
Jun 3, 2014 4:24PM
The biggest threat to the UAW and manufacturing jobs is not Nissan, Toyota, Honda, VW etc-it is automation, technology and the EPA.
Jun 3, 2014 4:46PM
They could offer new hires $19.00 an hour... or Minimum Wage.  You Choose...
Jun 4, 2014 8:03AM

Welcome to a Union.  It isn't about your capabilities or ability to negotiate compensation based on your skills and the need of the company.  It is about the collective "good".  Of course you could just not join, oh wait, that is only available in some states.  Of course you could negotiate indepent on the Union.

Welcome to life, liberty, and the pursuit of happiness, only if you play by the Union rules.

Jun 4, 2014 10:10AM

Funny how so "very few" know anything about Unions or understand so little...?

Guess most have been brainwashed by Capitalism, the large Corporations, high paid Management or in several cases by Congress Sens. and Reps. that have had their pockets fattened by Lobbyist' form Big Business...

Of course Unions, put out similar Messages for a balance and have lobbyists also.

Unions were formed to "Humanize the Workplace", better wages were a secondary issue down the line; In many cases it wasn't about money, but respect and fair treatment...And then getting paid a fair wage for a day's work...

I find it funny that those that have complained about high wages on here and a monkey could do their jobs because a lack of skill factors...


Are complaining that the Union is going along with that, bowing to Company and public pressure;

Rethinking the pay scales, and benefits for new hires...And then, non-union hacks and other jealous workers are still whining and crying, about everything being unfair...

Your whining is really going on deaf ears as far as I'm concerned.

Unions were accused of Communism once before many years ago, more so in the 30s and 40s.?

Although admittingly they could be called a Socialist organization, they are hardly Communist anymore than the Catholic Church or another organized Religion. 

They are a group of people (usually workers) that have banded together to make their lives BETTER..     

Jun 3, 2014 3:46PM
Stupid Unions ! Did you really think supporting obama was the answer? Now you will lose more jobs than ever ! Oh well, Mexico will gladly welcome more auto plants !
Jun 3, 2014 3:38PM
I heard that Maggie's butt has it own Congressman!
Jun 3, 2014 6:54PM
The FED is drooling over a UAW strike and wage increases.
Jun 7, 2014 11:12AM
I will never own a UAW built vehicle!
Jun 3, 2014 3:34PM
Only unskilled and below average workers need a union.
Jun 4, 2014 7:38AM
Ever since I heard that GM makes about 15,000.00 profit on selling a new pickup truck, I  will never buy a new truck again, NEVER. They are selling us cheaply made plastic and aluminum crap. Now Ford is going to an all aluminum frame on their truck, talk about a piece of junk. Man o man.
Jun 3, 2014 2:36PM

Dirty greedy union workers and their rediculous wage gaps!!!


Shut these unions down for their unfair pay practices.  There is no reason why someone with more experience should make 50% more than a new higher.

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