UAW names Fiat Chrysler lead target in contract talks

UPDATED: 9/13/15 4:21 pm ET - adds background

The UAW has chosen Fiat Chrysler Automobiles as its target to set the pattern for a contract deal before turning to General Motors and Ford Motor Co.

FCA, the most financially challenged of the Detroit 3, could become a strike target if the two sides cannot arrive at an agreement.

“All three companies are working hard toward a collective bargaining agreement. At this time, the UAW has selected FCA US LLC to be the lead bargaining company,” said UAW President Dennis Williams in a statement.

The UAW’s current four-year contracts with the Detroit 3 expire on Monday, Sept. 14. They can be extended by mutual agreement.

FCA has perhaps the hardest path to a contract. FCA’s hourly workforce of 37,000 is 45 percent comprised of entry-level Tier 2 workers earning slightly more than half the wages and benefits of veteran workers.

Bridging the pay gap between the two tiers is a top priority of Williams. But any increase in fixed costs caused by closing that gap would hit FCA particularly hard because it is by far the least profitable of the Detroit automakers.

In a statement, FCA spokeswoman Jodi Tinson confirmed that FCA has been chosen as the UAW target. But she declined further comment in light of current bargaining.

GM has 51,000 hourly workers who are looking for a new four-year contract. Ford has 53,000.

Other key bargaining issues are the desire of Tier 1 workers for a wage increase and the possibility of the UAW creating a health care pool to combine the hourly workers of each of the Detroit 3 into one plan to increase the purchasing leverage of the group.

Art Schwartz, a former GM negotiator and now a labor consultant, said last week that the UAW typically selects the automaker in the strongest position to negotiate the best wages and benefits.

That was widely seen as GM and Ford, both of which earned billions more than FCA last year and continue to post better earnings than the smallest of the Detroit 3.

FCA advantages

By virtue of its large contingent of Tier 2 workers, FCA enjoys about a $10 an hour labor cost advantage over GM and Ford. FCA's $47 an hour labor cost is about on a par with that of the U.S. operations of German, Japanese and Korean carmakers.

Typically, the Detroit 3 try to keep higher pay in new contracts limited to profit-sharing and signing bonuses -- money that adjusts in good times and bad. Over the past 12 years, they have kept labor cost increase in new contracts at about the rate of inflation. That could go higher this round of talks, though, given carmaker profitability and the desire of the UAW to improve Tier 2 and Tier 1 wages.

Long-time auto workers at the Detroit 3 have not had a wage increase in 10 years.

The last UAW strike of the Detroit 3 occurred in 2007. GM workers staged a two-day strike after a bargaining impasse, but quickly returned to work after GM sweetened the deal with a laundry list of new jobs and product commitments to U.S. plants. Much of that commitment never came to fruition when the Detroit 3 were hammered by the Great Recession beginning in 2008.

You can reach David Barkholz at dbarkholz@crain.com -- Follow David on Twitter: @barkholzatan

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