'Big Three' US automakers kick off contract talks with labor union

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The top three U.S. carmakers begin four-year contract negotiations with the labor union for autoworkers this week, with health care and wages expected to dominate the potentially contentious discussions.

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The talks launch on Monday with a ceremonial handshake at Ford Motor Co. While both sides have ample reasons to reach an agreement, the negotiations could quickly turn sour as the labor unions seek to craft a deal to ensure a greater share of profits and protect members during a period of rapid transformation for the industry.

"There's a lot of incentives for the parties to come to an agreement, but it's going to be tough," Susan Schurman, a labor professor at Rutgers University, told FOX Business. "They are preparing for a battle."

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Relationships between the United Auto Workers and so-called Detroit Three have been largely cordial in recent years as the industry enjoyed a sustained period of increasing vehicle sales after a recession that threatened the livelihood of the U.S. auto sector.

But Ford, General Motors and Fiat Chrysler now enter the talks with the UAW amid a global sales slowdown and an uncertain trade environment that is weighing on future outlooks.

The industry is also shifting away from traditional gasoline-powered engines for all-electric or plug-in models, putting more pressure on the labor unions to ensure there are upskill opportunities for workers.

Meanwhile, as sales slow automakers could turn to temporary employees who make less than UAW members to mitigate lost profits. The union is likely to seek to bolster protections for those workers, according to Schurman, including narrowing the time under which those individuals begin making "regular" pay under the existing two-tier wage system.

"This one is going to be huge," she said. "The reduction in temporary workers...and what protections do they have from being disregarded when production is down, that is going to be a battle royale."

TickerSecurityLastChange%Chg
FFORD MOTOR COMPANY8.96-0.07-0.78%
GMGENERAL MOTORS COMPANY36.96-0.40-1.07%
FCAUFIAT CHRYSLER AUTOMOBILES N.V.12.36-0.11-0.88%

GM could have the most difficult path forward toward renewing its contract with the UAW. The Detroit-based carmaker continues to spar with the labor union over its decision to lay off 14,000 workers and close several factories in the U.S. and Canada.

The UAW previously sued the firm over the plans, arguing it violated a 2015 labor agreement. A GM spokesperson denied that charge.

Top of mind for the union will also be rising health care costs and maintaining hourly wage growth, as well as improved profit-sharing arrangements after the three firms earned a combined $15 billion in net income in 2018.

UAW President Gary Jones has already threatened to strike should the negotiations fall through. The union previously raised its weekly strike pay to $250 per week. That would rise to $275 per week in January 2020.

The last labor walk-out was a short strike against GM in 2007.

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Wages at Chrysler, Ford and GM remain higher than international competitors like Toyota and Volkswagen, and U.S. automakers are likely to seek to close that gap. Ford, for example, pays $61 per hour to UAW workers, while the foreign-based automakers pay an average $50 per hour.

Any decline in hourly wages would face stiff resistance from the UAW, which is expected to also raise concerns over rising health care costs.

The Associated Press contributed to this report.