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Detroit 3 Salaried Labor Costs to Overtake UAW Hourly Costs, Researcher Says

For the first time in modern history, overall salaried labor costs next year at the Detroit 3 are expected to exceed those of all UAW-represented factory workers, says Sean McAlinden, chief economist for the Center for Automotive Research.

November 30, 2011
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For the first time in modern history, overall salaried labor costs next year at the Detroit 3 are expected to exceed those of all UAW-represented factory workers, says Sean McAlinden, chief economist for the Center for Automotive Research, or CAR.

The center estimates that the Detroit 3's 66,000 salaried U.S. employees next year, earning on average at least $122,500 in cash compensation, will bring in slightly more total income than the carmakers' estimated 115,000 hourly workers earning about $69,000 each, McAlinden says.

Until 2009, hourly employment vastly exceeded salaried employment at the Detroit 3, said McAlinden, speaking on the sidelines of a CAR conference Nov. 29 on automotive labor in suburban Detroit. But plant closings and hourly attrition now has salaried employment accounting for about 37 percent of total U.S. employment at the Detroit 3, he said.

McAlinden said a recent pledge by General Motors Co. CEO Dan Akerson to cut vehicle platforms by half and consolidate advertising with fewer agencies recognized that salaried labor costs are mounting.

"It's really about where are we getting kicked on labor costs," McAlinden said.

An analysis by the center found that the new Detroit 3 contracts with the UAW, completed this autumn, will raise the cost of hourly labor less than 1 percent annually over the contracts' four years.

At GM, that means UAW labor costs will add just $85 per North American vehicle built over the four years to $1,702 from $1,617, McAlinden said. The additional cost in four years to Ford is $96 per vehicle to $1,756 from $1,660. At Chrysler, the cost per vehicle rises to $1,293 from $1,127 today.

With vehicles easily costing more than $30,000, the increase in hourly labor costs is almost unnoticeable over the terms of the contracts, he said.

The negotiations were marked by lump-sum bonuses and inflation boosts substituting for wage increases or a restoration of cost-of-living allowances.

McAlinden said job promises in the new contracts were largely misread by the 113,000 UAW workers covered by the agreements.

The center says net hourly jobs at the Detroit 3 will rise to just 120,400 through 2015 from 110,150 today, not including about 3,000 salaried employees working with UAW representation.

That's less than the 12,000 hourly jobs that Ford alone said it would bring by 2015. GM said it would bring about 6,400 new or saved jobs and Chrysler 2,500.

McAlinden said the carmaker figures included retained jobs and the transfer of some jobs from one plant to another. Two more assembly plants are slated to close by 2015 and one will reopen—GM's Spring Hill assembly plant in Tennessee.

All told, the center estimates that U.S. auto industry employment will rise from about 580,000 today to 750,000 in 2015 with the supplier sector accounting for about 150,000 of the new jobs. McAlinden said suppliers are growing—after huge cuts during the auto recession—to accommodate a projected gradual rise in U.S. vehicle sales to about 15 million units in 2015.

UAW president Bob King's pledge to organize workers at foreign automaker plants also is being closely watched, although labor expert Art Schwartz says it could be a difficult battle.

"He is swimming upstream," said Schwartz, president of Labor & Economics Associates in Ann Arbor, Michigan, and a former GM contract negotiator. "This is going to be very tough."

While this year's labor talks with the Detroit automakers largely avoided the drama of past negotiations, the deals still aren't likely to make the UAW more appealing to transplant workers, he added.

UAW leaders said earlier this month that the union has yet to pick a target for its organizing drive, but the union is training members for the campaign.

If King were to target one foreign automaker, Schwartz said, he may go after Volkswagen AG, which in May opened a plant in Chattanooga, Tennessee. In Europe, Volkswagen workers are represented by German union IG Metall, a partnership that could work in the favor of the UAW, he said.

But even if King does pick VW, he may have trouble getting the German union to back his cause, Schwartz said. "IG Metall is way more concerned with what's going on in Germany than in the U.S.," he said.

Volkswagen spokesman Tony Cervone said in response to his comments: "We have a policy and working practices across the globe that ensure employees have a voice in the workplace and we encourage that at Chattanooga.

"But ultimately if our employees feel the need for formal representation, it's their decision to make," Cervone added. He declined to comment further.

King could also avoid picking a target altogether, Schwartz said. "The danger of that is once you pick a target, people are going to hold you accountable."

David Barkholz and Christina Rogers write for Automotive News, a sister publication of Workforce Management. To comment, email editors@workforce.com.

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