DETROIT -- Glenn Shagena, Fiat Chrysler's new lead labor negotiator, is a man on the hot seat.
The 52-year-old executive was handed the job -- and a huge, urgent challenge -- after the surprise retirement of Al Iacobelli last Tuesday.
The challenge: FCA US enters the UAW talks with a $10 per hour labor cost advantage over General Motors and Ford Motor Co., an advantage that could vanish if the union gets its way. Losing it could be catastrophic to FCA, which is still far less profitable than GM and Ford.
The single biggest reason for FCA's labor-cost edge -- its outsized use of lower-paid, entry-level production workers -- is the main item the UAW wants to roll back in this year's negotiations with the Detroit 3. The current four-year contracts expire Sept. 14.
"FCA is in a totally different financial situation than Ford or GM," said Dave Cole, chairman emeritus of the Center for Automotive Research in Ann Arbor, Mich., and decadeslong observer of UAW-Detroit 3 bargaining.
Iacobelli, 55, FCA's longtime labor chief, announced his retirement and left FCA headquarters the same day. It was a startling move. Iacobelli had led the carmaker to what most industry experts acknowledge were the best UAW deals negotiated by the Detroit 3 in 2009 and 2011.
Since 2011, FCA's overall hourly labor costs have risen less than 1 percent annually while Ford's and GM's have risen at about the rate of inflation.
That might not sound like a lot, but each additional dollar per hour costs a carmaker about $100 million. FCA's current per-hour labor cost is $47. The numbers at GM and Ford are about $10 above that, according to the Center for Automotive Research.
FCA's average hourly labor cost is close to that of nonunion U.S. factories operated by German, Japanese and Korean carmakers -- deemed by some as the gold standard for competitiveness.
Iacobelli declined to comment when reached by email last week. Shagena, most recently the head of human resources for FCA Mexico, is busy getting up to speed on the UAW talks and unavailable for comment, an FCA spokeswoman said.
Cole said the negotiations need to be viewed in the context of FCA's overall competitiveness.
Despite FCA's run of success -- 62 consecutive months of U.S. sales gains and a rich sales mix of pickups and Jeeps -- CEO Sergio Marchionne has been aggressively searching for a merger partner, even GM.
Cole said Marchionne's sense of urgency reflects a delicate balance at FCA that could unravel quickly if the economy turns down, fuel prices spike or near-record U.S. vehicle sales waver.
That's why holding labor costs in check in these negotiations is such a big deal, he said.
And it's Tier 2 where FCA is most vulnerable in the talks.
In 2009, as the then-Chrysler Group was heading into bankruptcy, Iacobelli got the UAW to agree to allow the company to hire an unlimited number of lower-paid entry-level workers now pejoratively known as Tier 2.
At the time, few expected the Detroit 3, stuck in the throes of the Great Recession, to do much hiring. In fact, GM got the same deal from the UAW.
But sensing an opportunity, FCA used $100,000 buyouts to get thousands of highly paid veteran UAW workers to retire. As the industry recovered, FCA went on a hiring spree, adding 14,000 workers at starting wages of about $16 an hour vs. the $28 an hour veteran workers earned.
Now, FCA's hourly work force of 37,000 is 45 percent Tier 2, while Ford's is 28 percent and GM's 20 percent. That's largely responsible for FCA's labor-cost advantage.
But from that success comes the challenge Shagena now faces. UAW President Dennis Williams has vowed since the UAW's bargaining convention in March to close the gap between what Tier 1 workers earn and what entry-level workers get.
Bridging that gap could take a number of forms, any of which could disproportionately hurt FCA because of its large Tier 2 work force, said Art Schwartz, a former GM labor negotiator and president of consultancy Labor and Economics Associates in Ann Arbor.
He said if the UAW insists on a wage increase for Tier 2 workers, FCA will be hit harder than GM or Ford.
Or the union may fight for a restoration on caps to Tier 2 hiring, which limited the percentage of those workers to 25 percent when the practice was first negotiated in the 2007 contract, Schwartz said.
Even if the cap is raised to 35 percent, FCA would still be way over, he said. Then FCA would have to promote the extra workers to Tier 1 wages.
Cole said that hit is what Marchionne is trying to avoid.