Ramifications of the United Auto Workers’ Deal and the Kohler Employees Strike to Your Firm

At least four types of manufacturing leaders are mulling over the new labor contracts which just wrapped up between the Detroit Three automakers and the United Auto Workers. One issue they’re looking at closely is the likely cause-and-effect between the union’s huge financial gains in the new accords and the potential sacrifices it is making in job security and future membership levels.

They’re also pondering the implications of the deals for the shaky future of so-called “two-tier” wage deals that have helped the automakers and other U.S. manufacturers leverage lower compensation for new workers into a new cost advantage that has helped them beef up jobs here.

“Two-tier wage deals have helped automakers and other U.S. manufacturers leverage lower compensation for new workers.”

CEOs of other companies with UAW-represented employees are rapt about all of this, of course. Chiefs of auto-industry suppliers with unionized workforces also are engaged. Naturally, the CEOs of General Motors, Ford and Chrysler are picking through the pacts they’ve just reached. And union leaders across the country are interested in any UAW-established patterns they might be interested in pursuing.

Kohler employees strike on the heels of the new deal
In the immediate aftermath of the auto deals, the UAW has already struck Kohler Co., the giant Wisconsin-based manufacturer of toilets, faucets and other bathroom fixtures. And chief among the union’s complaints when it struck Kohler beginning in mid-November was the company’s continuation of a two-tier wage structure that was established five years ago amid the U.S. housing bust.

Now, workers at Kohler—like their counterparts at the automakers—believe their highly profitable employer should be able to eliminate two-tier wages just as the car companies did in new UAW contracts. But Kohler CEO David Kohler is resisting.

UAW members at the automakers face a similar reality. Their members got big bumps in compensation in the new contracts after seven years without a raise, and additional profit-sharing bonuses are as high as $10,000 a head. They also succeeded in getting GM, Ford and Chrysler to agree to gradually eliminate the lower tier of wages, a structure that currently covers about half of Chrysler’s hourly workforce.

But the UAW also pointedly gave up job security wholesale. Essentially, they agreed to let the automakers move all small-car production out of the U.S. to Mexico in exchange for pledges to keep production of high-profit large cars, SUVs and trucks in this country. The next time gasoline prices rise, therefore, the union could face widespread U.S. job losses.

In the meantime, analysts are saying that while purchasing a lot of new flexibility in terms of where they produce their vehicles, the Detroit Three got stuck with huge increases in U.S. labor costs, around $2 billion over the four-year life of the deals. Fortunately, analysts noted, the auto companies are enjoying record profits thanks to the buoyant U.S. auto market and should be able to absorb the labor-cost increases relatively easily, unless sales collapse.

The ripples continue from the auto companies’ new accommodation with their main union. Expect CEOs in other manufacturing verticals, as well as automotive suppliers, to be dealing with the effects of it for years.


MORE LIKE THIS

  • Get the CEO Briefing

    Sign up today to get weekly access to the latest issues affecting CEOs in every industry
  • upcoming events

    Roundtable

    Strategic Planning Workshop

    1:00 - 5:00 pm

    Over 70% of Executives Surveyed Agree: Many Strategic Planning Efforts Lack Systematic Approach Tips for Enhancing Your Strategic Planning Process

    Executives expressed frustration with their current strategic planning process. Issues include:

    1. Lack of systematic approach (70%)
    2. Laundry lists without prioritization (68%)
    3. Decisions based on personalities rather than facts and information (65%)

     

    Steve Rutan and Denise Harrison have put together an afternoon workshop that will provide the tools you need to address these concerns.  They have worked with hundreds of executives to develop a systematic approach that will enable your team to make better decisions during strategic planning.  Steve and Denise will walk you through exercises for prioritizing your lists and steps that will reset and reinvigorate your process.  This will be a hands-on workshop that will enable you to think about your business as you use the tools that are being presented.  If you are ready for a Strategic Planning tune-up, select this workshop in your registration form.  The additional fee of $695 will be added to your total.

    To sign up, select this option in your registration form. Additional fee of $695 will be added to your total.

    New York, NY: ​​​Chief Executive's Corporate Citizenship Awards 2017

    Women in Leadership Seminar and Peer Discussion

    2:00 - 5:00 pm

    Female leaders face the same issues all leaders do, but they often face additional challenges too. In this peer session, we will facilitate a discussion of best practices and how to overcome common barriers to help women leaders be more effective within and outside their organizations. 

    Limited space available.

    To sign up, select this option in your registration form. Additional fee of $495 will be added to your total.

    Golf Outing

    10:30 - 5:00 pm
    General’s Retreat at Hermitage Golf Course
    Sponsored by UBS

    General’s Retreat, built in 1986 with architect Gary Roger Baird, has been voted the “Best Golf Course in Nashville” and is a “must play” when visiting the Nashville, Tennessee area. With the beautiful setting along the Cumberland River, golfers of all capabilities will thoroughly enjoy the golf, scenery and hospitality.

    The golf outing fee includes transportation to and from the hotel, greens/cart fees, use of practice facilities, and boxed lunch. The bus will leave the hotel at 10:30 am for a noon shotgun start and return to the hotel after the cocktail reception following the completion of the round.

    To sign up, select this option in your registration form. Additional fee of $295 will be added to your total.