The dis-structuration and Mexicanization of labor relations in the American Auto industry: Two-Tier-Labor Systems in play and the reconfiguration of governance compromises

Publication Type:

Conference Paper


Gerpisa colloquium, Kyoto (2014)


How important is labor market restructuring and the downplaying of wages for automakers to overcome the financial crisis, along a more fierce competition, and the recovery of profitability? How far these processes have gone and can go in the foreseeable future? This work shows that American automakers´ labor markets restructuring have played a critical role in the spectacular financial and productive revival they have been experiencing after the crisis and state-led bailout in 2008-09. We also show that in doing this the Detroit 3 have been following after dramatic labor arrangements taking place in their Mexican facilities.
In 2006 labor relations in Ford Hermosillo –a stamping and assembly plant in Northern Mexico-- took a u-turn as the firm was launching its most important productive project in the last years, namely the CD3. The factory was almost duplicating its labor force, from 2000 to 4000 employees, and introducing a new collective bargaining agreement that created two parallel employment subsystems for workers meant to carry out the same tasks. The contract set up a web of additional rules for new workers cutting in a half their wages, opportunities for promotions and job security. A Two-Tier-Labor System came into being. In the next months, GM and Chrysler were announcing new productive projects in Central and Northern Mexico while deploying similar labor transformations.
In the 2007-2011 contract of the Detroit 3 and the UAW took place an unusual move to put into place a Two-Tier System in the US. Entry level wage was set up in $14 and there were no pay increase for extant workers. Two year later, in the midst of the financial crisis of 2009 and as a part of the plan to clean their legacy and financial cost imposed by the bailout to rescue them, a new contract came to rule and transform labor relations of the Detroit 3. Aimed at turning them “competitive with transplants”, Two-Tier-Wage was completely introduced, cutting in half compensation of all newcomers and extending indefinitely the freezing of wages to old workers. Resembling many features of the Mexican u-turn, the firms step further ahead of the concessionary bargaining (Katz, Kochan & MacKersie, 1985) of the last three decades to complete dissemble the remaining of the institutional bargaining through which the UAW and they set the pattern of labor for the industry in the previous century. All these features were just ratified by the last contract, the 2011-2015.
Additionally, they suspended the Cost of Living Adjustment (COLA) and Annual Improvement Factor (AIF) rules, substituting for a growing set of variable compensations mechanisms; eliminated also the job bank for idle workers, increasing the number of temporary and contract jobs; and transferred definitively the pension system to the UAW (through the VEBAs) postponing their contributions for future negotiations.
Based on detailed study of collective bargaining agreements in the three countries since 2006 to the present, and interviews carried out with labor representatives of the Detroit 3 in each country, this paper shows that during these years the government compromises that in the past support income and employment improvements, a pattern for labor negotiations, and job control unionism have been dismantled. All these are brought about an entire reconfiguration of labor relations that I term the dis-structuration and Mexicanization of labor relations in the industry –as opposed to the “Braileñizacion” of Occident that Beck (2000) conceptualized early. It means that the Detroit automakers are increasingly introducing in their USA and Canadian facilities the same precarious rules that in their Mexican counterparts have implied not only low wages but more unsecure and uncertain jobs.

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Concéption Tommaso Pardi
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