Auto workers and automakers on a collision course

Auto workers reject proposed union deal
Auto workers reject proposed union deal

Seven years of relative labor peace in the auto industry may be about to end.

Members of the United Auto Workers union are prepared to go on strike at noon Sunday at a Ford plant outside of Kansas City that builds the best-selling F-150 pickup, if it can't reach a deal with management on working conditions there.

And the 40,000 UAW members at Fiat Chrysler have voted down a tentative labor deal with the automaker by nearly a two-to-one margin. The union hasn't said what it will do next at Fiat Chrysler, but a strike is a possibility there as well.

There hasn't been a strike in the auto industry since 2007, when there were brief walk-outs at both General Motors (GM) and Chrysler. The Chrysler strike was so brief it lasted less than an entire shift.

But the strike threats show that there is frustration among the rank-and-file factory workers.

The veteran workers have gone a decade without a raise, and have seen their job protections disappear. The new workers -- anyone that's been hired since 2007 -- are paid at a lower hourly wage. They also don't get the pensions and retiree health care that veterans do. About 45% of the factory workers at Fiat Chrysler (FCAU) are the so-called tier two workers who are paid less.

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While the tentative deal that was rejected closed some of that gap, it did not eliminate the second tier of workers. It also didn't call for any limits on how many workers could be paid at the lower tier. At GM and Ford (F) only 25% of the staff can be paid at that lower level. Once that percentage is reached, some of the new hires get promoted to the top tier of pay.

The industry is far healthier than it was in 2007, when all three automakers suffering from shrinking U.S. sales and losing money. High labor costs at that time were a big part of the reason for the losses. Those losses ultimately sent Chrysler and GM into bankruptcy in 2009, and both required a federal bailout.

Today car sales are near record levels and profits are strong because automakers were able to reach much more competitive labor contracts. But the automakers say they can't afford to do everything the rank and file workers want and still remain competitive.

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"A large number of new employees ...thankfully did not have to endure the pain and sacrifices that were required of the workforce [in 2009]," said Fiat Chrysler in a statement after the deal was rejected. "But it is that knowledge and those memories that continuously reinforce the Fiat Chrysler's leadership's resolve to never let those events repeat."

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