A Brief Note On The Auto Industry And The Automobile Industry

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Two Tier Wages in the Auto Maker Industry Two-tiered wages in the automobile industry are a result of agreements for a government bailout with the top three auto makers in the United States: GM, Chrysler, and Ford. One of the major issues identified in the near fall of these major automakers, aside from increase in gas prices and overall recessions, were the cost of labor. Hourly wages and compensations were as high as $73 per hour for Ford, GM, and Chrysler despite low overall low satisfactory and road-test ratings (Milkovich, Newman, and Gerhart, 2014) The two –tiered wages would grandfather current employees to continue receiving the same pay; however, new workers would receive about half the pay and compensations despite doing the same work (Milkovich, Newman, and Gerhart, 2014). Additionally, the Chevrolet Sonic is outsourced to the United Automobile Workers (UAW) for even cheaper labor costs than the Tier II GM workers. These methods have reduced the average cost of labor for GM from $1160 per vehicle to $710. Ultimately GM could be saving $72 million per year in labor costs alone as a result of the two-tiered wages and outsourcing (Milkovich, Newman, and Gerhart, 2014). Ultimately, this has made these companies more competitive in local and foreign markets (Armend and Zoia, 2011). Two-Tier Wages Across the Border In 2008, Ford began building the Ford Fiesta in Cuautitlan Mexico, which also adapted the two-tier pay system (Rubber and Plastics News, 2008).
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