Fiat Chrysler Has Lowest Per-Worker Labor Costs

Fiat Chrysler Automobiles’ labor costs for its U.S. workers are now on par with Toyota and Honda and about $10 less per hour than crosstown rivals General Motors and Ford, according to a report published Monday by the Center for Automotive Research.

The figures, revealed a day ahead of the UAW’s bargaining convention that started Tuesday in Detroit, shows how far the Detroit Three have come in cutting per-worker labor costs. In 2007, they were scrambling to close a $30-per-hour labor-cost gap with Asian rivals.

FCA US, the company previously known as Chrysler, pays its workers about $48 per hour when all benefits and profit-sharing are included, compared with $58 for GM and $57 for Ford. The UAW’s four-year contract with all three automakers expires Sept. 14.

At first blush, the numbers might suggest the UAW would want to select FCA US as a target to set the pattern in contract talks later this year. But Chrysler’s workforce is arguably the most dissatisfied among the three companies, and its workers have been receiving the least of any domestic automaker in annual profit-sharing checks. That means securing a yes vote on any contract could prove the most difficult of the Detroit Three.

FCA US pushed down its average per-worker labor cost by hiring thousands of entry-level workers over the past several years at its Midwest factories as the industry rebounded following the Great Recession. Profit-sharing checks also have been comparatively smaller for its workers, allowing the automaker to close the gap with Asian automakers at a much faster rate than GM or Ford.

The lower average labor costs could put FCA US in a strong bargaining position with the UAW because it already has achieved its goal of lower per-worker labor costs and it could afford to give some ground in negotiations. It also will resist giving up a special provision gained from the 2009 Chrysler bankruptcy allowing it to hire more lower-paid Tier 2 wage workers.

In January, FCA CEO Sergio Marchionne bristled when a Wall Street analyst suggested that its contract, which allows it to hire a higher percentage of entry-level workers than in the past, amounts to “favoritism.”

“We are the fastest-growing North America brand, and we have had to hire people to get volumes up,” Marchionne said at the time.

On Tuesday, about 900 UAW delegates from across the nation will gather in Detroit to discuss the union’s bargaining strategy with the Detroit automakers and employers with UAW-represented workers.

“Chrysler has been able to take greater advantage of entry-level hiring,” said Kristin Dziczek, director of the labor and industry group for the Center for Automotive Research. “The annual profit-sharing checks for Chrysler workers also have been much lower.”

The hourly labor costs of U.S. auto workers, as calculated by the Center for Automotive Research, includes hourly pay, the estimated value of all health and pension benefits and any bonuses or annual profit-sharing payments.

According to CAR, Mercedes’s labor costs are highest, at $65 per hour, followed by $58 at GM, $57 at Ford, $49 at Honda, $48 at FCA US, $48 at Toyota, $42 at Nissan, $41 at Hyundai, $39 at BMW and $38 at Volkswagen.

This article appeared in print in the March 24th, 2015 edition of Hamodia.