UPDATE 2-Chrysler, UAW discuss entry-level wage boost-sources

Thu Sep 8, 2011 10:52pm EDT

* UAW, Chrysler discussing "second-tier" wage increases

* One proposal lifts wages to $16-$18 an hour - source

* Chrysler CEO may be involved as soon as this weekend (Adds analyst comment, background on two-tier wage scale, labor costs at U.S. plants run by foreign automakers)

By Deepa Seetharaman and Bernie Woodall

DETROIT, Sept 8 (Reuters) - Chrysler Group LLC and the United Auto Workers union are discussing a plan that would lift the base wages of entry-level workers at the No. 3. U.S. automaker over time, two people involved in the talks said.

The development comes as Fiat-controlled Chrysler and the UAW make progress toward a new contract with less than a week before expiration of the current four-year deal on wages and benefits on Sept. 14.

Chrysler CEO Sergio Marchionne could be involved in the contract talks as soon as the weekend, one of the sources said. That would follow a meeting earlier this week between UAW President Bob King and General Motors Co CEO Dan Akerson.

Detroit automakers want to hold down fixed costs and instead offer workers profit-sharing and other bonuses, rather than the annual pay hikes that have been a staple of UAW contracts for decades.

The UAW in return wants the companies to commit to making more vehicles in the United States, which would create jobs in an industry that has shed them steadily over the past decade.

But increases in wages for "second-tier" workers is also a key issue for the union. King said last week that winning those increases has been the union's top priority in the current round of contract talks.

The union has fast-tracked talks with GM and Chrysler, while progress has been slower at Ford Motor Co , people involved in the talks have said.

Of Detroit's three automakers, Chrysler by far has the highest level of entry-level -- or second-tier -- workers, who start at $14.89 an hour, about half the hourly wage of a veteran production worker.

Chrysler, which is controlled by Italian automaker Fiat SpA , has proposed "two to three" models for boosting those wages over time, one of the sources said.

The other source said Chrysler has proposed to increase wages to between $16 and $18 an hour.

Any deal would have to be ratified by the union's rank and file, but the UAW gave up the right to strike Chrysler under the terms of the automaker's 2009 federal bailout.

Chrysler declined to comment and the union could not be immediately reached. The sources asked not to be named because the contract talks remain private.

A MOVING TARGET

Harley Shaiken, a labor professor at the University of California-Berkeley, said the specific dollar figure for any second-tier wage hike is a moving target.

"At this stage of the talks, the numbers at 5 pm are not necessarily the numbers at 7:30," Shaiken said.

The high end of the $16 to $18 scale would represent a wage increase of more than 20 percent, but stops short of the $19.50 an hour that Volkswagen AG's (VOWG_p.DE) workers in Chattanooga, Tennessee can make after three years on the job.

The UAW has set a target of organizing workers at the newly opened VW plant and other assembly plants operated by Japanese and Korean automakers once the round of negotiations with U.S. automakers is complete.

Automakers negotiated a two-tier pay scale for workers during the 2007 contract talks.

The companies said they needed the lower wage to bring down their average compensation costs to compete with Asian automakers operating auto plants without union representation, mainly in the southern United States.

King has faced grassroots clamor from workers who say the union went too far in allowing the Detroit automakers to hire thousands of workers at the second-tier level of about $30,000 a year, compared with about $58,000 for established workers, before overtime.

About 12 percent of Chrysler's 22,800 union-represented workers make the lower second-tier wage.

By contrast, workers at an equivalent wage make up only about 5 percent of workers at GM. At Ford, about 6 percent of workers make that lower wage. (Reporting by Deepa Seetharaman and Bernie Woodall, editing by Bernard Orr and Vinu Pilakkott)

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