Cars and Drivers

Detroit Three Automakers to See Hike in Hourly Labor Costs

Paul Ausick

Published: November 20, 2015 11:40 am

Last Updated: January 13, 2020 4:56 pm

United Auto Workers union members approved a new labor contract with Fiat Chrysler Automobiles N.V. (NYSE: FCAU) after rejecting it once. The union’s membership at both Ford Motor Co. (NYSE: F) and General Motors Co. (NYSE: GM) are now voting on similar contracts, and the initial outlook is for a first-round defeat at both carmakers.

Under the agreement with FCA, hourly labor costs will rise from a current level of $47 an hour to $56 over the next four years. Labor costs per vehicle will rise from the current $1,771 to $2,500, according to Kirsten Dziczek of the Center for Automotive Research. The Jeep and Ram maker received the most concessions from its labor unions in the dark days of the recession and now believe it’s payback time.

Labor costs per vehicle at Ford are expected to rise about $200 per vehicle to $2,401, and hourly costs are expected to rise from $57 to $60. As it now stands, however, voting on the contract ends Friday and there is some question of whether the deal will be approved by the union membership. A 10,000-member local in Louisville, Ky., rejected the contract by a two-to-one vote.

At GM, voting on a new contract is also stalled. GM’s total labor costs per vehicle are expected to drop from $2,374 currently to $2,350 in 2019 if the contract is approved. Current hourly costs of $55 are expected to rise to $60. GM’s production labor force has approved the proposed contract, but skilled workers who must approve the deal separately have rejected it.

Dziczek told Bloomberg News that using less expensive temporary workers, moving some production to Mexico and accounting for retirement of older, more highly paid workers will offset some of the cost of what the Detroit Three have agreed to.

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Ford’s stock traded up about 0.3% late Friday morning, at $14.61 in a 52-week range of $10.44 to $16.74.

GM’s stock traded down about 0.2%, at $36.08 in a 52-week range of $24.62 to $38.99.

Fiat Chrysler’s stock traded up about 1.0%, at $13.97 in a 52-week range of $11.08 to $17.08.