Made in USA: More Cars Coming After New UAW Contract
This story was updated October 19, 2011.
Shoppers who prefer to buy American-made cars should get a few more choices in the coming years.
Under a new United Auto Workers contract with the Big Three U.S. automakers -- which got final ratification from Ford workers this week, despite some early opposition -- Ford, General Motors and Chrysler are pledging to open or reopen U.S. factories to make vehicles that otherwise would have been made in Mexico or elsewhere.
Key to this change is a lower wage structure for newer employees, allowing them to be paid $14 to $16 an hour (eventually rising to $19.28), instead of the full $28-an-hour standard UAW wage. This two-tier system was first put into place during the government bailout and bankruptcy of General Motors and Chrysler; the union is now extending it to Ford.
The earlier two-tier agreement paved the way for the current deal by providing for U.S. manufacture of the just-introduced Chevrolet Sonic (above left). The Sonic is being produced at General Motors' Orion Assembly Plant in Michigan under a previous union deal, with 40% of workers there getting the lower-tier wage; until now, automakers believed they had to build low-priced subcompact cars abroad to maintain profitability.
Here's what the new deal should mean for other American-made models:
- General Motors has announced it will reopen its plant in Spring Hill,
Tenn., which built Saturns until that brand was discontinued. GM has not specified which vehicles it will build in Tennessee, but the Tennessean newspaper reports that one of them likely will be the Chevrolet Equinox (at right) -- a small crossover SUV now made in Canada. The reopening will eventually add 1,700 jobs, albeit many in the lower wage bracket.
- Chrysler has promised to invest in plants in Belvidere, Ill., and Sterling Heights, Mich., to build what it describes only as compact vehicles. Now majority-owned by Italy's Fiat, the combined company already is selling the small-car Fiat 500 here. Overall, Chrysler would add 2,100 jobs, all at the second-tier wage.
- Ford has pledged to add 5,750 U.S. jobs over the life of the contract. It will be adding shifts at U.S. plants that build the Focus compact, Taurus sedan, Explorer SUV, the new Escape small SUV, and the Fusion midsize car, according to the Associated Press, and will move production of medium-duty trucks from Mexico to an assembly plant near Cleveland.
As understandably reluctant as many auto workers are to see wages scaled back, the lower wage is crucial to making U.S.-made cars more cost-competitive. In Mexico, the combined wage and benefits cost for each worker is about $10 an hour. That number for the UAW second-tier wage is about $30. For a UAW worker making full wages and benefits, the total is $60 an hour.
Photos courtesy of the manufacturers
More from MoneyWatch:
