Monday, October 10, 2011

That Cheap U.S. Labor

Damn Americans, stealing all the jobs.

The UAW and Chrysler are pushing toward a new labor agreement as tensions rise between Fiat, which owns Chrysler, and an Italian union that fears Fiat could shift production from Europe to North America.

Local UAW officials from Chrysler plants will meet today in Warren for an update on high-level talks with Chrysler that went through the weekend.

Fiom, Italy's largest metalworkers union, is planning a one-day strike Oct. 21 at all Fiat factories to protest what it sees as Fiat's gradual reduction of production in Italy.

"We are striking to make Fiat stay in Italy," Maurizio Landini, the head of Fiom, told Fiat's union delegates in Rome on Saturday, according to Reuters.

It's obvious that we are firmly in the age where the large multinationals can shop where they please, demanding the best deal they can get out of both workers and government.

"Any car company that operates in multiple countries looks for where it is most advantageous to produce cars and will threaten to move operations ... if the unions in those countries don't come forth with some flexibility and lower cost," said Kristin Dziczek, labor analyst for the Center for Automotive Research.

The UAW has done just that, and Chrysler's labor costs are running below both GM and Ford at this point. They also employ more lower-tier wage workers than their American competition; those new hires now comprise 12% of Chrysler's 23,000 UAW member workforce. With the recent deals signed at Ford and GM that include bonuses and gradual raises for those lower paid workers, the UAW is looking for the same at Chrysler - but they have to get past Sergio first.

“Some of the deals that we’ve seen being signed between Ford and GM (with the UAW) are probably, given Chrysler’s own predicament… overly generous,” Marchionne said.

With leaders being summoned to Detroit today, they may have worked something out - and it may come at the expense of those Italian workers.

How long can this continue? There has to be a bottom somewhere, and we may be reaching it in certain cases now. With both Ford and GM moving production back here from Mexico (and China and Japan in the case of Ford), it could be an indication that both shipping and shorter lead times on manufacturing are starting to outweigh the costs of labor when these companies are making their decisions on where to locate production.

You want to be close to your market, and you would think that eventually they will have some production in all the countries where they sell, rather than putting everything on a boat and chasing around the globe for a cheap deal today that is subject to change with rapidly fluctuating labor, material and energy costs. Not to mention the gamble you take with quality control. At some point, it may be more expensive to keep relocating than it is to stay put with a quality workforce that is already competitive on labor costs, when you add in the expense of physically moving your product.

Right?

It's a nice thought, anyway. We may see it yet. Until then, this game will continue on...