You heard us say last month that the UAW’s success pushing through their collective bargaining agreements with the Big Three, eliminating the two-tier wage system, has some people expecting those same companies to move auto production to Mexico. Today, we’d like to dive a little further into what the reasoning is behind that.


Will Ford, Fiat Chrysler, and GM move all auto production to Mexico? No. However, just as all vehicles have a different tag price, so does their cost of labor. Cheaper cars are cheaper to manufacture. More expensive vehicles – trucks and SUVs – are, you guessed it, more expensive to manufacture. Truck and SUV manufacturing may be able to support these higher wages; however, production costs associated with, say, the Ford Focus can’t.

Charles Lane, writer for the Washington Post, speculates that we won’t see the actual effects of this decision until gas prices come back up. Increased fuel prices mean less interest in gas-guzzling vehicles (trucks, SUVs) and more interest in fuel-efficient cars (those that U.S. auto manufacturing companies will be forced to move south of the Rio Grande). The fact is, roughly 70 percent of the Big Three’s sales this year came from pickups and SUVs. What’s going to happen when gas prices catch back up and the Big Three’s most lucrative products hit a wall?

Lane suggests:

In a different world, one in which the Big Three were not legally bound to deal with the UAW at all U.S. plants, and thus did not face a binary choice between paying UAW wages or moving abroad, the carmakers would at least have had the option of hiring Americans to build smaller cars at some wage between union scale and Mexican rates: bad for the union, but not necessarily bad for American workers.

Elsewhere in Michigan, UAW members are not as happy with their union’s dealings. Nexteer workers are concerned UAW leaders are more interested in keeping face with the company than representing its employees. After 98 percent of Nexteer workers voted down the most recent deal brought to them by UAW, the union issued a strike and then called it off shortly thereafter, claiming a new tentative deal was on the table. Members haven’t seen any sign of a new deal.

In Wisconsin, Kohler employees have been involved in a nasty strike for the past five weeks. In week two, the UAW actually distributed a list of all Local 833 members who had crossed the picket line. The document said things like: “No longer our union brothers or sisters,” “A scab is a scab,” and “Don’t be afraid to point them out.” A tentative deal was announced on Tuesday.