U.S Auto Industry Facing Crisis

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Following the defeat of the proposed labor agreement between Fiat Chrysler Automobiles and the United Auto Workers Union (UAW), workers are threatening a walkout or worse.

Brinksmanship

Rejecting the labor deal that is on the table is a bold move for the union, which voted 65 percent against signing it in its current form, as Fiat Chrysler has other options such as increasing production in facilities outside of the U.S. One of the factories in dispute is also based in Detroit, once the heart of American industry, but now a shadow of its former self which is perhaps why the union is taking such a hard line on the new agreement.

Detroit has been staging a comeback of late as public pressure is forcing many U.S. manufacturers to reconsider the cost benefits of relocating abroad versus the public perception of constantly sending jobs abroad when American workers are willing and able to fill the same jobs.

The Issue at Hand

The stumbling block in the negotiations is the pay differential between long term union members that earn around $28 per hour, versus new members that only get $19 per hour. Fiat Chrysler is taking the position that any significant wage increases are not in line with its industry objective, while long term employees are mad that they have had to make concessions during the last three union agreements and have not seen much of an increase in their salaries.

Fiat Chrysler has already announced its intentions to shift the production of certain product lines, such as the Ford Focus, south of the border and has starting taking a harder line on employee commitment such as enforcing a strict attendance policy. With both sides digging in on this issue and the potential costs of meeting union demands escalating, Fiat may end up taking the bad press and instead rake in the savings by accelerating its shift to producing its cars abroad leaving the Union once again out in the cold.

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