Visteon Corporation and the United Auto Workers have signed a seven-year supplemental labour agreement that allows the world’s second-largest automotive supplier to pay new recruits represented by the UAW far less than current workers.

Associated Press (AP) said the two sides announced a tentative deal on April 29 and the two-tiered wage arrangement also requires newly hired employees to pay higher out-of-pocket health care costs, part of an overall compensation plan Visteon says will make it more competitive.

“We’re pleased to have worked cooperatively with the UAW to reach an agreement that improves our cost structure while providing opportunities for future UAW-represented employees,” said Robert Marcin, Visteon’s senior vice president for corporate relations, according to AP. “This is an important step in our continuous drive to be a globally competitive Tier 1 automotive supplier.”

The report said the agreement covers employees at Visteon’s 15 UAW-affiliated facilities in the United States. Under the terms, the new starting wage will be $US14 an hour but the hourly wage can grow to $18.50 by the end of the deal.

Associated Press noted that the UAW has reached a similar arrangement with Delphi Corporation, the world’s largest automotive supplier. In exchange, Visteon and Delphi have pledged to send more work to their UAW-represented plants and not to close any of their US plants until 2011.

AP also noted that Visteon and Delphi are the largest parts suppliers to Ford and General Motors respectively.

The two firms were also previously parts making units of the giant car makers.

AP said current UAW workers at Delphi and Visteon are paid $24 an hour on average, though some earn $36 an hour – their wages and benefits are identical to those of union members at Ford, GM and Chrysler.

AP noted that the UAW traditionally has demanded equal pay for equal work but, faced with declining membership, it relented on the two-tiered wage and benefit agreements with the parts makers.

Visteon has 72,000 employees in 25 countries, including 21,000 US employees covered by the supplemental agreement with the UAW, Associated Press added.