DETROIT – UAW President Dennis Williams says the rapidly growing role of Mexico as a low-cost alternative to building vehicles in the U.S. challenges his membership to increase productivity, but perhaps more importantly raises serious socioeconomic issues between the two countries.

Speaking to reporters at Solidarity House here today ahead of the start of contract negotiations with the Detroit Three next month, the first-term labor chief also warns General Motors, FCA US and Ford that the union’s war chest is full and workers are prepared to strike if talks break down.

As part of the restructuring of the Detroit Three in 2007, the UAW agreed not to walk off the job and risk torpedoing the industry’s turnaround. But that caveat lifts when the current 4-year agreement expires in September, and with a controversial 2-tier wage gap as a central bargaining topic, the prospect of a strike has never been stronger.

“I never go into a negotiation without being prepared,” Williams says of the strike possibility. He reports the union’s strike fund is healthy, too, but adds, “We believe we can get through collective bargaining without a confrontation.”

Successful talks likely will hinge on the 2-tier wage structure put in place at Detroit Three manufacturing plants when contracts were unsealed and edited eight years ago. The pay scale, widely credited with bringing the lopsided labor costs of GM, FCA and Ford in balance with those of transplant automakers, sees entry-level workers earning $19 an hour compared with $28 for traditional ones.

While it effectively saved the industry from collapse when the U.S. economy imploded, it takes a long time to graduate from the first tier to the second, and with thousands of entry-level workers hired in recent years and automakers earning billions of dollars in profits, the union  rank-and-file say it creates friction with management and colleagues on the shop floor.

Longtime UAW members at the Detroit Three also have not seen a wage increase in eight years, although profit-sharing checks have been flowing again.

“We’ve made sacrifices, and we feel it is our time,” Williams says. “We will bridge that gap. We are going to find a way.”

Williams also would like the U.S. government to address the growing role Mexico plays in North American production.

Automakers are investing billions of dollars in new and existing operations there, taking advantage of low labor costs, loose regulations and cheap real estate. He admits the combination makes it difficult for his union to compete.

Last year, Mexico built 3.2 million light vehicles, or more than twice the cars and trucks it assembled 10 years ago. WardsAuto forecasts the country’s annual production will grow to 4.7 million units by 2021.

“Right now we are competing because we are more productive, but we’ve got to get the number of hours down that it takes to build a vehicle,” Williams says.

“But the real question is why we allow a neighboring country, such as Mexico, to not create a real middle class and a real democratic country. Why are we so critical of the Middle East, when it is happening right here in North America?”

Williams says he speaks with automakers regularly about global investments and Mexico is “a big concern,” calling it an example of how a trade pact failed. He blames NAFTA for sucking 700,000 manufacturing jobs out of the U.S. since it began in 1994.

“They have a lot of problems in their government and otherwise,” Williams says. “They suppress workers, and corporations are taking advantage of the conditions. And at the same time, their biggest market is the United States.

“So they are using cheap labor and conditions our government would be speaking out against if it was any other country. And they are shipping products here to sell. It is wrong for the (U.S.), it is wrong for the Mexican people, and we are going to address it.”

Williams stops short of taking a side in the merger dispute between GM and FCA. The tussle saw GM CEO Mary Barra rebuff FCA CEO Sergio Marchionne’s plea for a tie-up to reduce soaring product-development costs. Unsatisfied, Marchionne has pursued it with activist GM investors and in recent days it has emerged that both sides secured financial consultants to fortify their positions.

The UAW has brought in its own team experts to assess the proposition.

“We’re testing what Sergio has said,” Williams remarks. “We have not come out for or against. We’ll continue to monitor it. When it comes to bargaining, that does not have an impact. We’re not going to support anything that hurts our members.”

At the same time, Williams admits he relishes his front-row seat to the spectacle.

“I enjoy, every once in a while, them sparring instead of us.”

jamend@wardsauto.com