In a move to cap raising labor costs, Ford Motor Company will move hundreds of entry-level workers to a higher pay rate. The development follows Ford adding 1,550 hourly employees in the first quarter due to increasing demand for pickup trucks. Over the next two months, 500 entry-level workers will transition from an entry-level pay rate of $19.28 per hour upward to a top-tier wage of $28.50. This means 300 to 500 current workers will graduate to the new higher rate of $28.50 an hour which is above the top base pay rate that new employees have been entitled to since 2007. The majority of personnel affected are at company plants in Chicago, Kansas City, Missouri; and Louisville, Kentucky.
They would be the first entry-level United Auto Workers (UAW) members to receive higher wages under the Ford’s 2011 UAW contract, which caps the company’s Tier 2 U.S. production force at 20 percent. Because of the increase in workers, the development will exceed the quota of employees to be classified in its second-tier pay group, and consequently paychecks will need to increase as much as 1% for its hourly workforce.
The company’s entry-level workers receiving higher pay will be in place by the end of March, this will be the first time that second-tier employees will move lower wages to the higher one. The level of entry-level workers stands at close to 28 percent due to credits for in-sourcing work that was formerly outsourced. Less than 20 percent of Ford’s GM division 50,300 U.S. hourly worker are entry-level. While at Fiat-Chrysler, 42 percent of the 35,700 U.S. hourly workers are entry-level which gives the division a labor cost advantage over Ford.
The UAW union can be expected to propose changes to the two-tier pay structure with the Detroit automakers this summer. Union officials state the system is unfair due to penalizing people with different wages for similar jobs while automakers said this is necessary to remain viable against foreign automakers. The two-tier provision between UAW union and General Motors has contributed to Ford adding 15,000 hourly UAW members which exceeds a goal of 12, 000 by the end of the current contract in September.
UAW President Dennis Williams vowed to bridge the pay gap between entry-level pay which begins at $16 per hour – and top-tier pay rates during negotiations with the automaker later this year. However, automakers says the lower wages are keeping Ford companies more competitive allowing them to invest in better plants and products while hiring and retaining even more workers. About 40% of Chrysler’s U.S. hourly work force is second-tier hourly employees. New hires are brought in at $15.78 per hour and then given 5 percent raises annually, topping at $19.28 per hour.
New auto plant employees receiving higher pay will join labor forces in southeast Michigan and near Kansas City, Mo., and will be needed to support increased production of the F-series truck swelling demand amid a climate of low gas prices. The workers obtaining higher wages are located in the Louisville, Ky., Chicago; and Kansas City plants. Ford’s job announcements since the signing of the UAW contract tops 15,000 in the United States, which is 3,000 more than was first promised. The company has also invested over $6 billion in updating plants and equipment.
By Tara Newlands
The Wall Street Journal
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