Auto Union Embraces Two-Tier Wages

The United Auto Workers’ new contracts with the Big Three automakers and two top suppliers signal the union’s unabashed acceptance of a two-tier system, both within the auto industry itself and between new-hires and current workers.

New-hires at two big parts supplier companies, Visteon and Delphi, will now be paid “competitive wage and benefit levels” approximately $10 lower than those companies’ current wage of over $25 an hour. The new low tier would be permanent, with no “grow-in” to former levels. The exact wage is unknown; UAW bargainers are pledged to finalize it within six months.

Delphi (30,000 workers) was spun off from GM in 1999 and Visteon (22,000) from Ford in 2000. At that time, the union maintained the wage parity that had always existed between Big Three assembly, powertrain, and stamping workers and those who made parts.

This year, the UAW reversed course and took explicit action to lower wages for 52,000 of its members who have not yet been hired. Current Visteon and Delphi workers will be allowed to escape their two-tier factories by transferring to Ford and GM plants, as openings occur. When bargainers settle on the two-tier wage, it will not be submitted to members for ratification.

The auto industry has always had a multi-tier structure, of course, with different supplier companies at different wage rates lower than the Big Three. The situation worsened in the 1980s and 1990s, when the Big Three closed some of their own parts plants and increased their outsourcing from nonunion suppliers (and others in Mexico), and the union did virtually nothing to organize the nonunion plants.

Now the UAW is paying for that inaction. When Delphi and Visteon management declared that their wage rates were “uncompetitive” with other suppliers, they were right.

The 2003 contracts will be significantly cheaper for the Big Three than those in the previous round, when the UAW bargained a 3% wage increase each year. The pacts contain a wage increase of 5% spread over four years, plus two lump sum payments; subtractions from the cost-of-living allowance; small amounts of cost-shifting on health care; small pension increases for future retirees and none for current retirees.

Detroit newspapers focused on the companies’ success in keeping their costs down and on the union’s “new maturity,” with headlines like “Big Three narrow gap with competition” and “UAW, Big Three Unite To Rebuild.” Though this contract’s money gains are modest, Big Three workers are still far better paid, of course, than most industrial workers, and some of those displaced by the companies’ increased flexibility to move them from plant to plant will receive retirement incentives and relocation allowances.

More important for auto workers than the economics are contract provisions that will speed up the aging workforce and the destruction of solidarity between assembly and parts workers and between current workers and new-hires. Ironically, the contract could make even more difficult the union’s already daunting task of organizing “the competition.”


At DaimlerChrysler (DCX), the company announced the closing of two plants and the sale of three others. To induce the company to retain four other facilities in Detroit and Toledo, the union pledged to accept team concept, further contracting out, and “significant improvements in indirect labor utilization” (speedup).

The DCX proposal allows the company and the UAW International to impose “alternative work schedules,” including regular 10-hour days, on plants at their discretion, with no say-so from the local union. Likewise it mandates a team concept/lean production program at each plant.



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“We are giving them the right to reorganize the plants at the expense of our family life, our dignity, and our bodies,” wrote Mike Parker-author of Labor Notes’ team concept books and now a DCX worker himself. “As team concept takes away job rights, union consciousness, solidarity, we are weakening our ability to fight next time.”


The new low wages to be negotiated at Delphi and Visteon are a boon to the Big Three companies who are their customers, but they are more than that. Agreeing to low wages for parts workers is also part of the UAW’s strategy for unionizing the many nonunion supplier companies. The Delphi/Visteon contracts are a further signal to suppliers’ management that they needn’t fear the union and should sign neutrality pacts to let workers unionize.

The Big Three have already told suppliers that they should let the UAW organize their plants, and several have agreed: Johnson Controls, Magna, Dana, and Metaldyne. DCX reaffirmed this policy and also agreed to “card-check” at the Daimler-owned Mercedes assembly plant in Alabama.

Most Big Three workers who voted for their contracts no doubt did so with a sigh of relief that their own paychecks weren’t cut back. But this contract does not let them off the hook. As long as suppliers can work so much more cheaply, the Big Three’s numbers are destined to shrink even further. Suppliers are already performing many jobs that were once done inside assembly plants, and, with “modular production,” that trend is accelerating.


In addition, the Big Three face competition from the Japanese- and German-owned auto plants operating in six Southern states, Ohio, and Indiana. They are losing more market share to these non-union factories every year. The UAW has made no headway at all in organizing those companies, and seems to have conducted this bargaining round with an eye to convincing Japanese managers that the union would make a good partner.

This strategy is not likely to succeed as it appears to be doing at the supplier companies. The Big Three can tell the suppliers that they prefer to do business with unionized companies. But the Japanese-owned assembly plants, and BMW in South Carolina, have no incentive to accept the UAW (as long as it maintains any independence at all).

So here is the union’s Catch-22: If the Big Three’s competition can’t be organized from the top down, then the union must convince the workers there that joining the union would make their jobs safer and their lives better.

But a management-friendly strategy will not inspire the major shift in consciousness that would be needed to fire organizing drives at the southern plants.


Members were expected to ratify the contracts by comfortable margins, with low turnout. Votes were held quickly, with most members seeing only the union’s summary rather than any contract language. UAW leaders had cultivated low expectations, except on maintaining health benefits. Many workers were relieved to see any wage increases-and the $3,000 lump-sum “signing bonus” was a deal-closer.

Members of the dissident UAW Solidarity Coalition scrambled to get their hands on contract language and to analyze it for fellow workers. In a leaflet for fellow workers at the Ford Rouge plant in Dearborn, Michigan, skilled tradesman Ron Lare wrote, “New-hire wage concessions point to the next generation that we will all depend on. After we retire, the next generation may ask, ‘Why should we defend your pensions? You didn’t defend our pay when we were young!’

“Not only is our neighbor’s house on fire, but they’re moving our children into it.”