Compensation Chapter 15

Thirteenth Edition

The Realities for Ford and the Big Three Earlier in this chapter and in Chapter 7, we discussed the two-tier wage system at Ford and the other Big Three automakers. News reports on the contracts ratified in late 2015 by LAW members often seem to suggest that the two-tier wage system has been ended. Your task is to determine whether that is indeed the case. As a first step, revisit Exhibit 15.2, which summarizes some key elements of the contract agreement at Ford pertaining to Tier 1 workers. Compare t responding agreement reached regarding Tier 2 workers ("In-Progression Employees") at Ford. Are the contract terms the same for Tier 1 and Tier 2 workers? If there are differences, document what they are and comment on how important or unimportant they are from both the perspective of a Tier 2 worker and from the perspective of a company like Ford, which has an ongoing goal of containing labor costs, especially fixed labor costs. 2016 2017 2018 2019 2015 $8,500 $1,500 $ 250 Signing Bonus Profit Sharing Competitive Bonus Inflation Protection Bonus TBD TBD $ 250 $1,500 T BD $ 250 $1,500 TBD $ 250 $1,500 $1,500 Source: United Auto Workers, UAW-Ford Contract Surmary: Hours Workers, November 2015 *Upon ratification of contract (which curred late 2015) TBD = To be determined (by formula) Next, consider the following additional information on Tier 2 worker base wages going forward. New progression ($) Traditional wage 0 + Start 1yr 2 yrs 3 yrs 4 yrs 5 yrs 6 yrs 7 yrs 8 yrs Less than Years of Service 1-2 yrs of service 2-3 yrs of service of service of service Current Wage $15.78 Current $16.66 Current wage $1753 Current $19.28 Current an $17.00 Ratification $18.00 Oly Anniversary $19.50 2 yrs Anniversary $2100 3 yrs Anniversary Wage increases by years of service - First increase upon ratification, followed by increases on each seniority anniversary date $22.50 @ 4 yrs Anniversary $24.00 5 yrs Anniversary $26.00 6 yrs Anniversary $28.00 7 yrs Anniversary Upon reaching traditional wage, in progression members will continue wage progression in accordance with the traditional wage chart Traditional wage Rate at hire and ongoing ($) O + At hire After 12 After 24 After 36 After 48 After 60 After 72 After 84 months months months months months months months A ke Band Comte Summary Hour Workers, November 2015 Are the contract terms the same for Tier 1 and Tier 2 workers? If there are differences, document what they are and comment on how important or unimportant they are from both the perspective of a Tier 2 worker and from the perspective of a company like Ford, which has an ongoing goal of containing labor costs, especially fixed labor costs. Next, consider the additional information on Tier 2 workers base wages going forward (See graphic in the text) Based on this information, is the two-tier wage system going away? If not, why not? How much would Ford's labor costs increase if all workers were immediately converted to Tier 1? What about going forward? Fixed and Variable Pay Components of the Ford-UAW Contract, EXHIBIT 15.2 Tier 1 Workers 2016 2017 2018 2019 2015 $8.500* 3% 3% 4% Signing Bonus Wage Increase Lump Sum Bonus Profit Sharing Competitive Bonus Inflation Protection Bonus TBD $1,500 $250 4% TBD $250 $1,500 TBD $250 $1,500 $250 $1,500 $1,500 Source: United Auto Workers, LAW Ford Contract Summary: Hourly Workers. November 2015. *Upon ratification of contract (which occurred late 2015) TBD = To be determined by formula) The only fixed pay component is "Wage Increase." All other puy components are variable The Realities for Ford and the Big Three Earlier in this chapter and in Chapter 7, we discussed the two-tier wage system at Ford and the other Big Three automakers. News reports on the contracts ratified in late 2015 by LAW members often seem to suggest that the two-tier wage system has been ended. Your task is to determine whether that is indeed the case. As a first step, revisit Exhibit 15.2, which summarizes some key elements of the contract agreement at Ford pertaining to Tier 1 workers. Compare t responding agreement reached regarding Tier 2 workers ("In-Progression Employees") at Ford. Are the contract terms the same for Tier 1 and Tier 2 workers? If there are differences, document what they are and comment on how important or unimportant they are from both the perspective of a Tier 2 worker and from the perspective of a company like Ford, which has an ongoing goal of containing labor costs, especially fixed labor costs. 2016 2017 2018 2019 2015 $8,500 $1,500 $ 250 Signing Bonus Profit Sharing Competitive Bonus Inflation Protection Bonus TBD TBD $ 250 $1,500 T BD $ 250 $1,500 TBD $ 250 $1,500 $1,500 Source: United Auto Workers, UAW-Ford Contract Surmary: Hours Workers, November 2015 *Upon ratification of contract (which curred late 2015) TBD = To be determined (by formula) Next, consider the following additional information on Tier 2 worker base wages going forward. New progression ($) Traditional wage 0 + Start 1yr 2 yrs 3 yrs 4 yrs 5 yrs 6 yrs 7 yrs 8 yrs Less than Years of Service 1-2 yrs of service 2-3 yrs of service of service of service Current Wage $15.78 Current $16.66 Current wage $1753 Current $19.28 Current an $17.00 Ratification $18.00 Oly Anniversary $19.50 2 yrs Anniversary $2100 3 yrs Anniversary Wage increases by years of service - First increase upon ratification, followed by increases on each seniority anniversary date $22.50 @ 4 yrs Anniversary $24.00 5 yrs Anniversary $26.00 6 yrs Anniversary $28.00 7 yrs Anniversary Upon reaching traditional wage, in progression members will continue wage progression in accordance with the traditional wage chart Traditional wage Rate at hire and ongoing ($) O + At hire After 12 After 24 After 36 After 48 After 60 After 72 After 84 months months months months months months months A ke Band Comte Summary Hour Workers, November 2015 Are the contract terms the same for Tier 1 and Tier 2 workers? If there are differences, document what they are and comment on how important or unimportant they are from both the perspective of a Tier 2 worker and from the perspective of a company like Ford, which has an ongoing goal of containing labor costs, especially fixed labor costs. Next, consider the additional information on Tier 2 workers base wages going forward (See graphic in the text) Based on this information, is the two-tier wage system going away? If not, why not? How much would Ford's labor costs increase if all workers were immediately converted to Tier 1? What about going forward? Fixed and Variable Pay Components of the Ford-UAW Contract, EXHIBIT 15.2 Tier 1 Workers 2016 2017 2018 2019 2015 $8.500* 3% 3% 4% Signing Bonus Wage Increase Lump Sum Bonus Profit Sharing Competitive Bonus Inflation Protection Bonus TBD $1,500 $250 4% TBD $250 $1,500 TBD $250 $1,500 $250 $1,500 $1,500 Source: United Auto Workers, LAW Ford Contract Summary: Hourly Workers. November 2015. *Upon ratification of contract (which occurred late 2015) TBD = To be determined by formula) The only fixed pay component is "Wage Increase." All other puy components are variable