It is widely known that different industries accommodate to different levels of profitability, determined by the industry structure; and it is not different in the automobile industry. There are four basic forces constantly interacting with one another to promote innovation and drive domestic competition. In the run to cut costs and increase competitive advantage, automobile companies in the United States operate under two-tier wage model.
Fiat Chrysler (FC) is under scrutiny as it deals with the Automobile Workers Union (AWU) to renegotiate the salary contract for its lower-tier wage employees, representing 45% of the company’s production force out of its 36,000 hourly workers. In the current salary structure, in effect since 2011, first-tier workers are remunerated $28 per hour (NYT) in contrast to $16-19 per hour received by the second-tier laboring force. …show more content…
The entry-level lower-wage laboring force at GM and FM stands at 20% and 28% (Reuters) respectively; thus, the current model at FC generates a sustained labor-cost advantage for the company.
FC’s labor cost-advantage comes as a result of a cyclical performance in the automobile industry. In essence, cyclical trends are highly correlated to the economy and thus, automobile sales optimize when the domestic economy grows and suffers reverse effect when the economy slows down. As such, in 2007 the industry saw its sales significantly drop, and the economy slowdown was the catalyst to transform the wage structure in the automobile
Fiat Chrysler (FC) is under scrutiny as it deals with the Automobile Workers Union (AWU) to renegotiate the salary contract for its lower-tier wage employees, representing 45% of the company’s production force out of its 36,000 hourly workers. In the current salary structure, in effect since 2011, first-tier workers are remunerated $28 per hour (NYT) in contrast to $16-19 per hour received by the second-tier laboring force. …show more content…
The entry-level lower-wage laboring force at GM and FM stands at 20% and 28% (Reuters) respectively; thus, the current model at FC generates a sustained labor-cost advantage for the company.
FC’s labor cost-advantage comes as a result of a cyclical performance in the automobile industry. In essence, cyclical trends are highly correlated to the economy and thus, automobile sales optimize when the domestic economy grows and suffers reverse effect when the economy slows down. As such, in 2007 the industry saw its sales significantly drop, and the economy slowdown was the catalyst to transform the wage structure in the automobile