UAW, Fiat Chrysler reach tentative labor deal

Williams: Progress made in closing wage gap

UAW President Dennis Williams and FCA CEO Sergio Marchionne took the unusual stop of holding a joint press conference following the completion of their tentative agreement.
UPDATED: 9/15/15 - 9:46 pm ET - adds more details

DETROIT -- UAW President Dennis Williams said the union's tentative contract with Fiat Chrysler makes progress in closing the gap between Tier 1 and entry-level workers while allowing veteran workers to share in the financial success of the company.

Williams and FCA CEO Sergio Marchionne also agreed that the UAW's idea of creating a health care co-op for active workers has the potential to control costs.

Marchionne and Williams, who took the unusual step of appearing together at a hastily called press conference late Tuesday, declined to provide details until the UAW executive board has had a chance to vet the agreement.

Williams said the agreement would likely go to FCA's 37,000 hourly workers next week for a ratification vote.

Williams said the union's goal was to provide a path out of Tier 2 for hourly workers in this round of bargaining. The union likewise wanted a contract that allows employees to share in the success of FCA, while beginning to address health care costs.

"We believe that we have met those goals," Williams said.

The agreement came after bargainers extended a 2011 contract on an hour-by-hour basis after it expired at midnight Monday.  

The union will schedule informational meetings with local leaders to go over terms of the proposed contract before a membership ratification vote in the coming days.

“Ultimately, our membership will make the final decision,” Williams said at the press conference. "We will continue ... to make the best damn vehicles in the world."

Maturing relationship

Marchionne said there’s been a maturing in the relationship between the union and the industry in the three UAW negotiations he’s been involved with as CEO.

“It’s a reflection of the alignment of the interests,” he said.  

The joint press conference was considered highly unusual in UAW-Detroit 3 history. Typically the union has held its own press briefings to discuss tentative contracts. The companies often brief Wall Street analysts on financial impacts of such contracts. 

A tentative agreement does not always mean that the bargaining process is over. Once the details of the proposed agreement are passed on, first to leadership and then to members, it is not uncommon for one or both to reject the deal and send bargainers back to the table for sweeteners or clarification.

UAW Vice President Norwood Jewell, head of the union's Chrysler department, said in a tweet Tuesday evening: "Now it's our job to go out and explain it to people so they understand what a great job I believe we did."

The UAW selected FCA US as its initial target for pattern bargaining with the Detroit 3. The union's 2011 contracts with Ford Motor Co. and General Motors were extended hours before the Sept. 14 deadline, and bargainers at those companies were sent home while talks proceeded with FCA.

Expectations

"Expectations are very high for raises for everyone," Kristin Dziczek, labor analyst with the Center for Automotive Research, said Tuesday before the agreement was announced.

Veteran UAW workers, who make about $28 per hour, have not had a wage hike in a decade. More recently hired factory workers earn so-called second-tier wages that topped out at $19.28 in the old contract. Those workers have pushed UAW leaders to narrow that gap or set a clear path to eliminating it.

At FCA, about 45 percent of the hourly UAW workers earn lower-tier wages.

Marchionne said the agreement sets the groundwork for Tier 2 to eventually go away. He would not say exactly how.

However, in Canada, the Detroit 3 have a process whereby entry-level workers have a systematic path or "grow in" to full pay through a series of automatic raises that kick in over time. That grow-in period for Canadian auto workers represented by Unifor is 10 years. Labor experts in the U.S. said they expect a grow-in at the Detroit 3 to be no more than eight years.

Pressure for raises

The surge in profits for the once-struggling Detroit automakers -- FCA, Ford and GM -- has also fed pressure from rank-and-file UAW members for substantial raises.

Williams had also pushed publicly for the automakers to consider a proposal to pool their respective company health plans into a single group to curb rising costs. It was not known whether FCA agreed to that proposal in any form.

As the contract expiration approached, scores of UAW-represented FCA workers were on social media, either rallying their colleagues for a strike or urging calm until official word came from bargainers in Detroit. 

Word of the initial extension wasn't reported by the union or the company via social media for over 10 minutes.

Neither the union nor the company disclosed in their initial statements which issues kept bargainers from reaching an agreement before the previous pact's expiration.

Going into the negotiations, FCA was in the worst financial shape of the three Detroit automakers and least able to afford significant increases in labor costs.

However, Marchionne has said repeatedly that the two-tier wage structure put in place in 2007 -- which pays two workers doing identical work two different rates of pay depending on their hire date -- is not sustainable and unconscionable. The UAW made the elimination of the two-tier system a top bargaining priority this year.

Broader issues

Williams said negotiations at GM and Ford would continue this week. But he said he didn't expect any new tentative agreement with either company until at least next week.

Asked if the FCA agreement would serve as a pattern for GM and Ford, Williams said the broad issues addressed would be the same but resolving them might be slightly different given the different financial and operating circumstances each company finds itself in.

FCA is almost half comprised of Tier 2 workers, while Ford's Tier 2 percentage is about 28 percent and GM's is 20 percent.

Marchionne wanted to be the UAW target to negotiate a deal rather than let his stronger competitors, GM or Ford, possibly bargain an agreement that was too expensive for FCA.

He clearly was ready to do a deal given that a tentative agreement was reached less than 24 hours after the previous four-year agreement was extended just before midnight today.

He said the agreement reflects the unique financial circumstances of FCA while rewarding employees for the progress at that company since the recession in 2008-2009.

Likewise, FCA has honored its commitment to fund retiree health care, contributing $11 billion in cash to fund the Voluntary Employee Beneficiary Association that provides care to tens of thousands of hourly retirees.

Product commitments

Neither Williams nor Marchionne discussed whether the agreement calls for net new jobs to be created over the term of the agreement nor whether it details product commitments for specific FCA plants.

However, typically those are included as a sweetener to gain rank-and-file approval. Several FCA plants are in play.

FCA's apparent decision to move the Jeep Cherokee from Toledo, Ohio, and Marchionne's recent comment about bringing trucks back to the U.S. from Mexico could set off a chain of product movement.

The Cherokee shares a platform with the Dodge Dart, assembled in Belvidere, Ill., and the Chrysler 200, built in Sterling Heights, Mich. Either of those plants could build the Cherokee within a short time using existing lines and tooling.

According to the automaker's May 2014 future product plan, several new vehicles from FCA's U.S. brands will need to find assembly homes, including the Chrysler 100, a Dodge subcompact hatchback, a single replacement for the Jeep Compass and Patriot, the Jeep Grand Wagoneer and two Chrysler crossovers, one midsize and one full-size.

Reuters contributed to this report.

You can reach David Barkholz at dbarkholz@crain.com

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