UAW Wants Health-Care Pool of U.S. Automakers to Cut Costs

Updated on

The leader of the United Auto Workers said the union is looking at ways to reduce health-care costs at the three biggest U.S.-based automakers through a group that would include all of their hourly and salaried employees.

“The more people we pool together, the better we are,” UAW President Dennis Williams told reporters Thursday in Detroit. “The more people who pool together for health care, the more that you have an ability to leverage the products.”

The union is preparing to begin formal negotiations next month with General Motors Co., Ford Motor Co. and Fiat Chrysler Automobiles NV’s FCA US unit to replace contracts that expire in September. Williams said there are 155,000 salaried employees and 140,000 U.S. hourly workers at the three automakers, as well as about 607,000 people in the union retiree health-care trust.

Williams also is seeking to eliminate the pay gap between the union’s most senior workers and the companies’ newest hires. And he wants raises for all of the UAW’s 80,000 auto-making members, including those in the lower tier, whose wages start at $16 an hour and top out at $19.28. Autoworkers in the higher tier haven’t had a raise at GM, Ford or FCA US, the former Chrysler Group, for at least eight years.

Jimmy Settles, the UAW vice president in charge of Ford, said this week that he wants that company to set the wage-and-benefits pattern that the other two automakers will be asked to follow.

Still Undecided

Williams said the union hasn’t decided which automaker will be the first to negotiate its contract.

“When it comes to the lead, I don’t plan on picking it until I can see it,” he said. “This isn’t an exercise in who gets a merit badge. It’s an exercise of leadership and hard work.”

Negotiations will start July 23 with Ford, Settles said. Talks will open July 13 and 14 with GM and Fiat Chrysler, he said, adding that he didn’t know which would go first. Williams didn’t officially confirm the July 13 start date, but said “they’ve got it on my calendar.”

The three automakers want labor costs that are in line with those at foreign competitors’ U.S. operations. They hope to keep hiring entry-level workers at less than the $28 an hour that their senior union employees earn and are considering asking for a new tier of even lower-paid workers in their U.S. factories, people familiar with the matter said in March.

Labor-Cost Gap

Ford’s average U.S. labor cost, including benefits, is $57 an hour, about $9 more than at Toyota Motor Corp. and FCA US, according to the Center for Automotive Research in Ann Arbor, Michigan. GM’s all-in hourly labor expense is about $52.

GM and Ford, even with the higher labor costs, are more profitable than Fiat Chrysler. Ford’s net income fell 56 percent last year to $3.19 billion, while GM’s earnings slid 26 percent to $3.95 billion and Fiat Chrysler’s declined 37 percent to $568 million. GM had the lowest gross margin of the three last year, at 11.45 percent of sales, followed by Ford’s 12.4 percent and FCA U.S.’s 13.38 percent.

The union and U.S. carmakers set up a second tier, with less-expensive benefits and lower pay, in 2007 to try to end losses in North American operations. During the bankruptcies of GM and Chrysler in 2009, those companies were given the freedom to hire an unlimited number of workers at the lower wage.

UAW workers at GM and Chrysler had agreed not to strike during the talks in 2011 for the current labor contracts. This year, union members at all three automakers have that power.

Williams said Thursday that while the union is prepared for any situation, he doesn’t expect a strike.

“We believe we can get through collective bargaining without a confrontation, but we’re prepared for the worst,” he said. “It’s not really on my mind.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE