Chrysler CEO: Two-Tier Wage Scale Has To Go

AUBURN HILLS (WWJ)  - Chrysler CEO Sergio Marchionne says the auto industry has to do away with the two-tier pay scale, which pays new workers a considerably lower wage.

"It's structurally undesirable to have this diversity of pay scale," says Marchionne.

Chrysler has done a lot of hiring recently, with 13 percent of its work force earning the entry level wage. It's now $14.65 an hour. It will go up to $19.26 an hour.

During that time, Chrysler expects to hire more of the entry level workers. As older workers, who earn about $28 per hour retire, about one quarter of Chrysler's workers will be second tier by the current contract's expiration in 2015.

"When you've got this kind of economic disparity between people on the line, it's not something that can go on for a long period of time," Marchionne said, in a conference call with reporters.

Many auto workers have said that having people work side-by-side at different pay rates causes friction. The UAW resisted the practice for years, but finally allowed it as a way to add more jobs and give opportunity to more workers.

Marchionne is the first major auto exec to say that the two-tier wage system is not something that can be sustained indefinitely.

"Fundamentally, we need to end up having one set of wage rates, which clearly recognize the participation of our people, and the profit generation of our house," he said.

The long term solution, says the Chrysler CEO, is to find a system that rewards all workers when the company does well, but has all workers share in the sacrifice during tough times. He sys there will be ongoing talks on the subject between now and the next set of formal talks in 2015

"We have some time now to work on this project," he said. "We got a four year contract term, which is ample runway to try and start the dialogue and bring it on, certainly by the time we get together again in 2015."

The Chrysler conference call broached several other important subjects. Marchionne saying he didn't see an IPO in 2012, because the current stock market is "ungrateful."

He still expects Chrysler to get the Department of Energy Loan that it's requested, but the Energy Department is distracted by other issues currently.

Chrysler's 212 million dollar second quarter, Marchionne says, shows that Chrysler's turnaround plan is on track.

"We're looking forward to a pretty exciting 2012."

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