Labor costs to skyrocket for American cars

New union contracts negotiated at American auto manufacturers will lead to a spike in labor costs after years of belt tightening.

The United Auto Workers approved significant contract adjustments at Ford and General Motors on Friday after months of tense negotiations. Those decisions—one by membership vote, the other by union leadership—come soon after Fiat Chrysler approved a new deal with dramatic pay boosts. Each of the contracts could reverse “much of the savings achieved by the companies over the last eight years,” according to a study first published in the Wall Street Journal.

The new GM deal would raise labor costs from $55 to $60 an hour, a 9 percent hike, according to a study of the deals from Kristin Dziczek of the Center for Automotive Research and Art Schwartz, a former GM labor executive and president of Labor and Economic Associates. The union contract at Ford also reached the $60 hourly rate over the next four years, a 5 percent increase from its current rate of $57. Those hike pales in comparison with Chrysler, where average hourly wages will spike nearly 20 percent from $47 to $56.

The Detroit automakers were forced to impose labor cuts in the wake of the 2008 recession that led to a multi-billion dollar taxpayer bailout of GM, which entered bankruptcy, and Chrysler, which was sold to Fiat. Ford turned down bailout assistance.

The new contracts would reverse many of the pay freezes adopted to control costs, as well as offset the tiered payment systems that allowed the automakers to hire new employees at lower pay and benefits than previous generations of union members.

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