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American Axle Gets 2-Tiered Pay Plan In Tentative Deal

The UAW’s quick settlement Friday morning of the one-day strike at American Axle & Manufacturing Inc. in Detroit finds the union again authorizing a concept it once loathed — a two-tier wage structure that ensures future employees never make as much as current ones.

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by Jeffrey McCracken
Free Press Business Writer

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DETROIT — The UAW’s quick settlement Friday morning of the one-day strike at American Axle & Manufacturing Inc. in Detroit finds the union again authorizing a concept it once loathed — a two-tier wage structure that ensures future employees never make as much as current ones.

The tentative 4-year contract reached between the UAW and American Axle includes the following: A $5,000 signing bonus for each of the 6,500 workers covered by the contract. A guarantee by American Axle that it won’t close any of the six plants in Michigan and New York covered by the deal. A lower, second-tier wage for new hourly workers hired by American Axle.

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The tentative 4-year deal guarantees all of the American Axle plants stay open during the contract and gives about 6,500 UAW members a $5,000 signing bonus. About 4,500 of those workers are based in Michigan. American Axle sought the right to potentially close two plants — Detroit Forge and a plant in Cheektowaga, N.Y. — which would have cut up to 1,500 UAW jobs. An impasse over that issue, in essence, caused the strike that began at 11:59 Wednesday night.

Instead of plant closings, Wall Street darling American Axle gets a two-tier wage, still to be negotiated. American Axle has increased profits for several years and its stock is up almost 60 percent in the last year — but increasingly its competitors pay lower hourly wages.

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Workers, who picketed all day Thursday, were told to report to work Friday afternoon.

“It was a short strike, as we expected. Given what I’ve heard, it sounds like American Axle did OK. The UAW appears willing to give a two-tier wage system to suppliers that used to be part of the automakers,” said Rob Hinchliffe, auto-supplier analyst with the New York firm of UBS.

The concept of a two-tier union wage, where new hires will always make many dollars an hour less than those hired before them, was once forbidden in UAW circles.

It remains a touchy subject with many UAW traditionalists who subscribe to the theory of “equal pay for equal work.”

Nonetheless, the UAW leadership appears willing to grant a second-tier wage to suppliers that were spun off from the automakers, including American Axle. What’s different here is that American Axle is a very profitable supplier, unlike others, such as Visteon Corp., that wrangled two-tiered deals from the UAW.

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In return, the union gets agreements by the companies not to close plants, cut jobs or move work to Mexico and other lower-wage countries.

The UAW is desperate to keep or add jobs, as its membership has fallen from 1.5 million in the late 1970s to about 640,000 today.

The UAW agreed in concept this fall to a similar two-tier structure with Delphi Corp. and Visteon, two of the world’s largest auto suppliers, which were spun off from General Motors Corp. and Ford Motor Co. respectively. The UAW is still negotiating with Delphi and Visteon on what exactly that second-tier wage will be.

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Though the details of the two-tier system at American Axle will be negotiated later, it will likely allow for higher wages — in the area of $23-$25 an hour — for current workers. In exchange, American Axle would be allowed to hire future workers at a lower wage.

American Axle already has tiered wages at two plants, one in Buffalo, N.Y., and another in Three Rivers, but this contract will apparently spread it out to its other plants. At Buffalo and Three Rivers, new hires will top out at $17 an hour, plus cost-of-living adjustments. Three Rivers actually has a three-tier wage plan.

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The new contract covers six plants in Michigan and New York.

UAW officials said workers will likely vote in March. “It’s a four-year agreement that we’re very happy with and I think our members will also be very happy with,” said Kevin Donovan, UAW area director in Buffalo.

American Axle, which was formed in 1994 when a group of investors purchased five struggling parts plants from GM, today gets 82 percent of its sales from that automaker.

The strike hit four GM assembly plants. GM’s truck-assembly plant in Pontiac closed Friday because of a lack of parts. A truck-assembly plant in Flint had “off-and-on production” Friday, said GM spokesman Tom Wickham. On top of the $5,000 signing bonus, UAW members at American Axle will soon get $3,000 profit-sharing checks for 2003.

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Copyright 2004 Detroit Free Press. All Rights Reserved.

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