LORDSTOWN, Ohio - The day before hundreds of United Auto Workers delegates gathered to set strategy for contract talks with the Detroit Three, General Motors (GM) sent them a not-so-subtle message.
GM announced a $350 million investment in a Mexican factory to build the Chevrolet Cruze compact car, currently built for all of North America at a sprawling plant in Lordstown, Ohio, east of Cleveland.
At Lordstown and 11 other GM assembly plants scattered across the U.S., some workers feared their jobs could be moving south. Others sensed pre-contract posturing. "If they moved a lot of stuff to Mexico, it would ruin the partnership with the union," said Nick Waun, a worker at an SUV plant outside Lansing, Michigan.
Posturing or not, the talks, which open this month, are expected to be the toughest in recent memory. For the first time in more than a decade, the companies are healthy and making billions in profits. The union says it sacrificed in previous contracts and workers now deserve pay raises. GM and Ford (F) contend that labor costs are already higher than at Honda (HMC) or Toyota (TM), putting them at a disadvantage.
The steady march of auto jobs to low-wage Mexico is one of many contentious issues. But much of the bargaining will focus on pay.
Many workers want to scrap a two-tier wage system created seven years ago to help the companies cut costs when they were losing billions. A "second-tier" wage for new hires now tops out at $19.28 per hour, about $10 less than what longtime workers earn. That means new hires make 35 percent less for doing the same work.
But even longtime "top-tier" workers aren't all happy. They haven't had a pay raise for a decade, although UAW workers have gotten handsome profit-sharing checks.
GM and Ford say they need to cut total labor costs. Ford pays about $57 per hour in wages and benefits, $8 to $9 higher than Honda and Toyota pay at U.S. plants. Chrysler (FCAU), with labor costs about equal to Toyota, doesn't want expenses to grow. One place for savings might be health care. UAW workers pay relatively little toward what is a huge and growing cost to the automakers.
"The UAW says it's our turn. We've sacrificed," says Kristen Dziczek, head of the industry and labor group for the Center for Automotive Research, an industry think tank. "The companies say we can't go back to old ways, we can't go back to getting locked into wage increases that multiply over time."
Back in the 1970s, the talks set wages for 1.5 million UAW members and were the benchmark for blue-collar America. The negotiations now cover only 140,000 workers, but still set the bar for those in the auto parts, agricultural and heavy equipment businesses.
UAW President Dennis Williams finds himself in a difficult -- if not impossible -- position. He likely will need to score pay raises to get a contract ratified, and he also wants to create more U.S. jobs. But he can't risk hurting the Detroit companies' competitiveness. Already he's suggested the creation of a giant health care pool with the companies and retirees who now get benefits through a union-managed trust. With 600,000 people in the trust alone, the pool could get lower prices for health services, Williams said.
Caught in the middle are 4,150 workers in Lordstown, who are busy making early versions of a new Cruze. Workers in Mexico cost the car companies only $8 per hour, according to CAR.
"You're always worried for your members' job security, point blank," says Glenn Johnson, president of a UAW local in Lordstown. "I believe it's going to be a very difficult set of negotiations."
But Johnson is confident both sides can compromise. He figures GM won't mess with the success and quality of the Cruze, which gave GM a foothold in the small-car market that it lacked for decades.
If both sides play hardball, the union has more weapons this time. In 2011, it was barred from striking at GM or Chrysler under terms of their government bailouts.
Williams says the union is prepared for a strike, but he is not looking for one.
Analysts say a likely strike target would be Fiat Chrysler's giant transmission complex in Kokomo, Indiana. A work stoppage there would bring nearly all Chrysler factories to a halt in a day or two.
"Nobody wants to go on strike," said Rick Smith, a worker at the complex for 17 years. "But I think everybody is willing to should the need arise."