what the d3-uaw contracts mean for u.s. auto manufacturing · 2020. 1. 22. · what the d3-uaw...

What the D3-UAW contracts mean for U.S. auto manufacturingKristin Dziczek – Vice President, Business Group2020 Automotive Insights ConferenceFederal Reserve Bank of Chicago—Detroit Branch16 January 2020

2

Topics

• Summary of the 2019 agreements• Competitive labor cost positions• Implications for U.S. auto manufacturing• Supplier considerations

CENTER FOR AUTOMOTIVE RESEARCH

Summary of the 2019 UAW agreements

CENTER FOR AUTOMOTIVE RESEARCH 3

4

2019 Ratification Timeline


Expire

TentativeAgreement

Ratification

Strike

5

• Job security =• Income security =• Benefit security =• Investments in US +*• Temps made permanent +**

Guarantees & Certainty

• Contingent pay =• Contingent work (some)• Lump sums =• Plant closures +*** • Footprint decisions =• Health cost sharing X

Flexibility

* DHAM closure reversed; $22.7B total D3 US investments **Temp-to-permanent pathway @ Ford & GM only*** GM: Lordstown Assembly, Baltimore & Warren Transmission; Ford: Romeo Engine

TALE TAPEOFTHE


6

2019 UAW Contract Summary

Signing Bonus $9,000 for permanent workers$3,500 for temporary workers

$9,000 for permanent workers$3,500 for temporary workers

$11,000 for permanent workers$4,500 for temps

Wages <2007: 4% lump, 3%, 4% lump, 3%2007-2019: 4-year grow-in to top wage>2019 $15.78-19.28 temp wage

<2007: 4% lump, 3%, 4% lump, 3%2007-2019: 4-year grow-in to top wage>2019 $16.67 temp wage

<2007: 4% lump, 3%, 4% lump, 3%2007-2019: 4-year grow-in to $32.32>2019 $16.67 temp wage

Jobs +7,900;$4.5B new investment

+8,500 new &/or secured; $6B investment

$7.7B investment

RetirementIncentives

$60K targeted for production at Belvidere, Marysville Axle, Mt. Elliott, and Milwaukee PDC <2007 employees

$60K for retirement-eligible production workers & $75K for 200 skilled tradesPre-retirement & buyout programs

$60K for 2,000 retirement eligible production workers & 60 skilled trades$75/85K for unallocated/eligible

Profit-Sharing $900 for each margin point > 2%$12K cap removed

$1/$1 Million once margin >2%$12K cap removed

$1,000/$1 Billion once margin >2%$12K cap removed

RetirementBenefits

$1,000 to FCAUS LLC UAW Savings Plan accounts for legacy workers

$1,000 to TESPHE for legacy workers $1,000 to PSP for legacy workers

Other Bonuses

$500 annual performance bonus$1000 annual quality bonus

4 $1,500 annual inflation protection 4 $1K annual performance bonuses4 $500 annual quality bonuses

Health Care No change to worker contribution;Removed distinction between traditional and in-progression plans

No changes to worker contribution No changes to worker contribution

BOLD indicates a change from 2015 contract

7

In-Progression Wage Increases for 2019 On-Roll Employees


<1 atsigning

2 3 4 5 6 7 8 Legacy

GM

$-

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00

$35.00

<1 atsigning

2 3 4 5 6 7 8 Legacy

FCA

<1 atsigning

2 3 4 5 6 7 8 Legacy

Ford

Source: CAR analysis of 2019 UAW-D3 Contracts

8

Did they get rid of the tiers?


Skilled Trades $32.45-43.66

Skilled Trades Apprentices $29.39-41.66

Production <2007:$30.46-32.32

>2007 “In Progression”$17.00-32.32>2019 “In Progression”$17.00-23.00 (*4 years)

Temporary 2015 < x < 2019$15.78-19.28

> 2019$16.67

GMCH < 2015$16.25-23.87

> 2015$16.25-22.50

CCA < 2015$17.00-$31.57

> 2015$17.00-25.00

Example: UAW-GM Wage Scales


For on-roll production workers—yes.

9

Temporary-to-Permanent Pathway


• Temporary FULL TIME (TFT) only

• 3+ years continuous service as TFT (breaks < 30 days, strike doesn’t count)

• Time as TFT counts toward seniority

• Enter wage progression at seniority step

• Temporary FULL TIME (TFT) with 2+ years continuous service as TFT (breaks < 30 days, strike doesn’t count)

• Time as TFT counts toward seniority


• Temporary PARTTIME (TPT) with 2+ years continuous service—at least last 12 months as a TFT (breaks < 30 days, strike doesn’t count)

• Time as TFT counts toward seniority (not sure about TPT status)


1/6/2020 1/1/2021 & thereafter

Did not agree to a set timeframe, but will give “supplemental” workers hiring preference overoff-the-street for the 7,900 new jobs promised in the 2019 agreement.

Ford

& G

M

GM Ford

FCA


Competitive labor cost positions


11

What is in average hourly labor costs?

• Wages• Shift premiums• Overtime• PTO/Holiday• Income Security• Profit-sharing• Bonuses

• Health insurance• Life & disability insurance• Pension / 401(k) contributions• Statutory (payroll taxes, workers’

comp insurance, UI)• Other benefits (legal services, etc.)


Weighted average by workforce composition (legacy production, in-progression production, skilled trades, apprentices, temporary/supplemental workers)

12

Estimated Average Hourly Labor Cost Changes, 2015-2023

$47

$55

$66

$0$5

$10$15$20$25$30$35$40$45$50$55$60$65$70$75

2015 2019 2023

Aver

age

Hour

ly L

abor

Cos

t

$57$61

$69

2015 2019 2023

$55

$63

$71

2015 2019 2023

Source: Center for Automotive Research, preliminary estimates for 2023CENTER FOR AUTOMOTIVE RESEARCH

13

Per Vehicle Labor Cost ChangesSelected years: 1999-2018, 2023e

$3,6

06 $4,1

67

$1,7

71

$2,5

18

$3,4

81

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

1999 2007 2014 2018 2023e

Aver

age

Per V

ehic

le L

abor

Cos

t

$2,4

66

$4,2

04

$2,4

01

$2,6

04 $3,1

31

1999 2007 2014 2018 2023e

$4,0

91 $4,4

98

$2,3

74

$2,7

00 $3,3

78

1999 2007 2014 2018 2023e

Source: Center for Automotive Research, preliminary estimates for 2023 CENTER FOR AUTOMOTIVE RESEARCH

14

Projected Cost Competitiveness in 2019:UAW Average Hourly Labor Costs vs. Non-Union Automakers

$55$61 $63

$0

$10

$20

$30

$40

$50

$60

$70

$80

Aver

age

Hou

rly L

abor

Cos

t

Estimated Weighted Average of U.S. Non-Union Producers in 2019=$50

Source: UAW-Chrysler, UAW-Ford, and UAW-GM 2019 agreements and company reports; Company data and Center for Automotive Research estimates.CENTER FOR AUTOMOTIVE RESEARCH

15

Projected Cost Competitiveness in 2023:UAW Average Hourly Labor Costs vs. Non-Union Automakers

$66 $69 $71

$0

$10

$20

$30

$40

$50

$60

$70

$80

Aver

age

Hou

rly L

abor

Cos

t

Estimated Weighted Average of U.S. Non-Union Producers in 2023=$52*

CENTER FOR AUTOMOTIVE RESEARCHSource: UAW-Chrysler, UAW-Ford, and UAW-GM 2019 agreements and company reports; Company data and Center for Automotive Research estimates.

16

While nominal average hourly labor costs have increased, costs are still $16-27 below 2007 levels in real terms.


$76

$66$68 $69

$78

$71

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

2007 2011 2015 2019 2023e

Aver

age

Hour

ly L

abor

Cos

ts (U

SD)

Nominal

$76

$49

$68

$52

$78

$53

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

2007 2011 2015 2019 2023e

Aver

age

Hour

ly L

abor

Cos

ts (U

SD)

Real

Source: Center for Automotive Research preliminary estimates for 2023Adjusted using CPI-W and assuming 2% inflation.

Implications for U.S. auto manufacturing


18

Automotive investment announcements peak every four years, & have been slower between Q4 2015-Q3 2019.Quarterly Automaker Announced U.S. Investment; 2010 to Q4 2019

-$3

$2

$7

$12

$17

$22

Q1

2009

Q2

2009

Q3

2009

Q4

2009

Q1

2010

Q2

2010

Q3

2010

Q4

2010

Q1

2011

Q2

2011

Q3

2011

Q4

2011

Q1

2012

Q2

2012

Q3

2012

Q4

2012

Q1

2013

Q2

2013

Q3

2013

Q4

2013

Q1

2014

Q2

2014

Q3

2014

Q4

2014

Q1

2015

Q2

2015

Q3

2015

Q4

2015

Q1

2016

Q2

2016

Q3

2016

Q4

2016

Q1

2017

Q2

2017

Q3

2017

Q4

2017

Q1

2018

Q2

2018

Q3

2018

Q4

2018

Q1

2019

Q2

2019

Q3

2019

Q4

2019

Billi

ons

Source: Center for Automotive Research Book of DealsCENTER FOR AUTOMOTIVE RESEARCH

x ̄ = $3.4B/Quarter x ̄ = $3.4B/Quarter x ̄ = $1.5B/Quarter

19

The Detroit Three are expected to increase their U.S. share of North American production of light vehicles, engines, & transmissions between 2019-2023.


66%

57%

70%71%

59%

76%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Light Vehicle Engine Transmission

U.S

. pro

duct

ion

shar

e

2019 2023

Source: CAR analysis of IHS|Markit and LMC Automotive Compass data

20

All automakers will increase U.S. share of North American production, & decrease shares in Canada and Mexico over the next four years.Change in Share of North American Production, 2019-2023


66%

71%

64% 65%

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

65%

70%

75%

2019 2020 2021 2022 2023

Shar

e of

Nor

th A

mer

ican

Pro

duct

ion

United States

US D3 US Internationals

13%

10%11%

11%

2019 2020 2021 2022 2023

Canada

Canada D3 Canada Internationals

21%19%

26% 24%

2019 2020 2021 2022 2023

Mexico

Mexico D3 Mexico Internationals

Source: CAR analysis of IHS|Markit data

VolumesUS: +7.4%D3: +5.0%INT: +9.0%

VolumesCAN: -9.6%D3: -27.0%INT: +11.0%

VolumesMEX: -3.8%D3: -11.0%INT: +2.0%

21

However, the Detroit Three automakers’ share of total U.S. light vehicle production is projected to fall, even as volumes increase between 2019-2023.


45%

47%

49%

51%

53%

55%

2019 2020 2021 2022 2023

Shar

e of

U.S

. lig

ht v

ehic

le p

rodu

ctio

n

U.S. Light Vehicle Production Share

D3 Non-D3

5.0

5.1

5.2

5.3

5.4

5.5

5.6

5.7

5.8

5.9

2019 2020 2021 2022 2023

U.S

. lig

ht v

ehic

le p

rodu

ctio

n (m

illio

ns)

U.S. Light Vehicle Production Volume

D3 Non-D3

Source: CAR analysis of IHS|Markit and LMC Automotive Compass data

22

The Detroit Three automakers are expected to hold U.S. hourly employment steady or increase it slightly over the next 4 years.


-

20

40

60

80

100

120

140

160

2015 2016 2017 2018 2019 2020 2021 2022 2023

Empl

oym

ent (

thou

sand

s)

Source: CAR estimates & forecast based on proprietary data sources

Supplier considerations


24

What should suppliers look for as a result of 2019 UAW-Detroit Three contract talks?

• More U.S.-based D3 investment & production

• Upward wage pressures for suppliers

• No “brave new healthcare” initiatives to use as a pattern to lower costs or improve health care outcomes

• Higher D3 labor costs may mean increased supplier price pressure


Thank You

what the d3-uaw contracts mean for u.s. auto manufacturing · 2020. 1. 22. · what the d3-uaw...

Documents