Chrysler woes usher in tiers

Wage structuring gets a firm toehold in the auto industry in the early 1980s

The history of tiered wage contracts in Dayton dates to the tense days in the mid-1980s when Chrysler Corp. was shutting plant after plant.

Wes Wells, then president of the International Union of Electonic Workers Local 775, recalled a 1985 warning he received from one of his co-workers in the Dayton Chrysler plant.

Accept a contract paying lower wages for new hires and forget about winning another election in his union, the worker told Wells.

``So what?'" Wells said he responded. ```If the plant's not here, what do I care if I win the election or not?''

Neither Wells nor his union accepted tiering until a series of roundhouses racked both the union and the Big Three automaker.

Cheap, non-union labor at competing automotive plants, an oil embargo that undercut Chrysler's big-engine philosophy, and vast numbers of inexpensive cars imported from Japan rocked the U.S. auto industry and Chrysler in particular. Wells' union, already hemorrhaging from a decline in membership and influence, took an additional hit when the government required union concessions as part of the huge bailout that kept Chrysler afloat as it reorganized under Lee Iacocca.

Wells said there were warning signs 15 years earlier, but the union was unconvinced. Wells was in his third year as union president, and employment at what was then called Chrysler's Dayton Airtemp plant was at 5,845.

The company, he said, repeatedly emphasized at the bargaining table that it could not continue to pay automotive wages and compete in the home and commercial air conditioning business, a non-automotive portion of the Dayton plant's business.

`And a lot of our people didn't want to hear that,' Wells said. `One of my best friends said, `The company's bluffing. Hell, we'll help them load the boxcars.''

Six years later, Chrysler sold the air conditioner product line and 350 jobs left the plant.

By the early 1980s, Chrysler itself was on the chopping block as the car company struggled for survival after some of its newest lines fell apart and huge recalls ate into its nearly empty coffers. At the Dayton plant, just 700 workers remained.

Federal loan guarantees saved Chrysler from bankruptcy, but the road back to profitability proved painful for the company and its workers.

Part of Chrysler's deal for federal loan guarantees of up to $1.5 billion required Chrysler workers to agree to $462.2 million in wage concessions.

On Feb. 1, 1982, Wells' membership approved its first `Competitive Edge Agreement' with Chrysler. The union conceded wage reductions of $2 an hour for any new work brought to the plant, now named Dayton Thermal Products.

Hundreds of jobs were saved, but the tide had not turned.

Meanwhile, tiering was getting a toehold in the auto industry. IUE locals in Rochester, N.Y., and Warren, Ohio, agreed to General Motors' demands for tiered wage structures, setting the table for the many deals that would follow.

By the early 1980s, 1,800 of the 4,000 IUE members at GM's Delco Products plant in Rochester were on permanent layoff. The resulting contract created a lower tier that paid $9.68 an hour and stripped new workers of full health care benefits and some days off.

Within a year, employment at the Rochester plant increased from 2,200 to more than 3,500.

At GM's Packard Electric Division in Warren, 77 percent of the workers approved a `progressive hiring plan' that established a bottom-tier wage of $6.94 an hour and shaved most benefits.

The Warren contract also included guarantees of lifetime job security and what Bob Sutton, shop chairman for IUE Local 717, called `light at the end of the tunnel.' After 10 years, bottom-tiered workers reached parity for pay and benefits with their top-tier co-workers.

The agreement captured national attention and was prophetically hailed in an Aug. 29, 1983, Business Week story as `a radically new pay system that may become a precedent for American unions trying to compete with low-wage labor at home and abroad.'

In 1985, Wells' union overwhelmingly approved a contract that started newly hired workers at $7.50 an hour. These bottom-tier workers faced a 10-year period of incremental increases before they reached parity with senior workers who were getting $22 an hour.

But in 1988, Wells said his local union again faced the prospect of the sale of the entire plant.

`They (company negotiators) came to the table, and this was the second time they said, `Hey, this is where we're at. We're not going to argue about it,'' Wells recalled.

Wells agreed to open the contract early and negotiated a third tier that had a top wage of $9.50 an hour and reduced benefits. This lowest tier also gave new workers a gain-sharing bonus that varies with productivity.

The contract, approved by 92 percent of the members, appears to have helped the plant. By 1993, the Dayton plant was one of just seven survivors among Chrysler's component plants, which had once numbered more than 20.

David Barnes, a DaimlerChrysler Corp. spokesman, said acceptance of a tiered contract `was definitely a big piece of the pie' in saving the Dayton plant.

Another Chrysler spokesman, Dan Moore, said the contract was important because Chrysler buys 68 percent of its component parts from outside suppliers compared to GM, which uses outside suppliers for about 30 percent of its parts. Component plants must submit competitive bids to obtain Chrysler work, Moore said.

The Dayton plant is the only Chrysler plant where newer workers are permanently locked into a bottom tier, he said.

Newly hired workers represented by the United Auto Workers union at other Chrysler plants begin at 70 percent of the top rate and reach parity for wages and benefits after three years, Moore said.

Wells said what happened to Chrysler component plants is identical to what's happening at GM. He said the nation's largest car company has moved about 77,000 of its Delphi division jobs to Mexico.

`They could source that work whereever they wanted to,' Wells said. `They even whipsawed within their own plants by transferring work or product line from one plant to another plant in order to get those wage rates to where they considered them competitive. You were given a choice - you either accept the second tier system or you weren't source work. Very pure and simple."

Wells served as president of IUE Local 775 for 30 years. But last year, union members ousted him from the presidency, although he remains executive director of the Dayton-Miami Valley AFL-CIO Labor Council.

"To be very honest with you, it's a tremendous weight off my shoulders,' he said of his union defeat.

Wells, currently recovering from quadruple bypass surgery, said he is proud of his accomplishments.

He pointed to employment at the Chrysler plant, which grew from 700 in 1980 to 2,200 today. The Dayton-Miami Valley AFL-CIO Labor Council is also the 10th largest labor council in the country, with 90,000 active and retired members.

`You're going to face the inevitable when you go to tiering,' Wells said. `You're going to be defeated in an election. There's no way you can get around it. Younger workers resent it.'