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U.S. automakers are counting on a two-tier wage structure to control labor costs over the next several years. The case talks about how this new pay strategy has helped U.S. automobile companies beat recession and bankruptcies and increase employment rates in the industry. There are also some automobile plants that have employees of an outside supplier as their workers, to whom they pay even lower wages, which has, in turn, helped them reduce their cost per vehicle and as such increase their savings.

a) True
b) False

1 Answer

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Final answer:

The statement about U.S. automakers relying on a two-tier wage structure to manage labor costs and the employment of workers from outside suppliers at lower wages is true. This has been part of the industry's efforts to reduce costs and adapt to increased import competition and economic pressures.

Step-by-step explanation:

The assertion that U.S. automakers are using a two-tier wage structure to control labor costs is true. The manufacturing strategies of U.S. auto companies have evolved over time due to various pressures such as increased import competition from Japanese and European manufacturers since the 1960s. This import competition has significantly reduced the number of unionized workers in the U.S. automobile industry and has weakened the bargaining power of these unions, as indicated by the decline in membership of the United Auto Workers from 975,000 in 1985 to around 390,000 by 2015.

Moreover, the adoption of just-in-time production has allowed car companies to outsource labor to non-union plants, resulting in job losses for union workers. Multinational companies have also built assembly plants in countries like Mexico where labor is cheaper, further enabling cost savings and affecting union leverage. Such cost reduction strategies include a two-tier wage system where new hires are paid less than established workers and using employees from outside suppliers who are paid even lower wages. These tactics have been used to reduce costs per vehicle and increase company savings.

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