New Labor Pacts to Undercut Auto Industry Savings: Study

Two prominent researchers estimate labor costs for the Detroit car makers will rise significantly under new contract agreements with the United Auto Workers union, undoing much of the savings achieved by the companies over the last eight years.

At General Motors Co., the largest of the U.S. car makers, all-in hourly labor costs will rise to $60 in 2019 if a new UAW pact is ratified, up from $55 this year, according to a forecast provided by Kristin Dziczek at the Center for Automotive Research and Art Schwartz, president of Labor & Economic Associates.

Ford Motor Co.'s labor costs, including wages and benefits, will also rise to $60-an-hour over the next four years, up from $57 an hour, the researchers estimates. Ford workers have yet to approve the contract with voting set to conclude Friday.

Fiat Chrysler Automobiles NV, which has the lowest labor costs of the Detroit car makers, will also see a bump with its all-in hourly cost rising from $47 this year to $56 over the next four years, according to the two researchers.

UAW officials have touted the new agreements as some of the richest in union history, restoring raises that were put on hold over the last decade and rolling back a major concession made in 2007 that created a lower pay scale for newer hires to help make the car makers more competitive on labor costs.

The new estimates, released Friday, come as approval of Ford's tentative labor deal with the UAW is heading for defeat with a majority of workers who have voted so far rejecting the deal by a slim margin. The UAW needs an overwhelming majority of workers at the company's historic Rouge manufacturing complex in Dearborn, Mich. to back the deal Friday or else it will fail.

Despite the economics, union leaders have had trouble getting the rank-and-file to ratify the agreements. UAW bargainers had to go through two rounds of negotiations at Fiat Chrysler before getting a contract workers would approve.

At GM, approval of the agreement remains on hold. While overall workers support the deal, a smaller group of skilled trade workers voted it down. Both production and skilled trade workers must approve the contract separately.

The U.S. auto makers' labor costs are closely watched by Wall Street for their potential impact on the bottom line. Over the last several years, and particularly during the bankruptcies of GM and Fiat Chrysler, the companies managed to win significant cost savings to make their U.S. labor costs more competitive with the Asian rivals.

Write to Christina Rogers at [e-mail]

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(END) Dow Jones Newswires

November 20, 2015 11:35 ET (16:35 GMT)

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