UAW bets pay raises, product will sell FCA deal

Williams: Put target on Tier 2

DETROIT — The UAW accord with Fiat Chrysler likely offers enough in raises and other improvements to ensure ratification by the rank and file, but it notably keeps in place the divisive two-tier system for entry-level workers.

Officials from UAW locals at FCA plants convened in Detroit on Friday, Sept. 18, to hear details of the tentative four-year agreement reached by FCA CEO Sergio Marchionne and UAW President Dennis Williams three days earlier.

Among the highlights shared with local leadership: Veteran, or Tier 1, workers can expect their first wage increase in 10 years; the idea of a health care purchasing co-op will be explored to control costs; and production of numerous vehicles will be shuffled among the automaker’s plants. Output of strong-selling pickups, SUVs and crossovers will be consolidated at U.S. factories, improving the job-security outlook for workers at those plants, while output of price-sensitive cars will move to lower-wage Mexico.

And wages for Tier 2 workers were improved dramatically. The pay range, depending on seniority, advances from $16 to $19 an hour currently to $17 to $25 an hour by the end of the four-year contract.

Yet Tier 2 — which Marchionne has called unsustainable and offensive and which Williams wanted to eliminate — survives, even if the discrepancies with Tier 1 narrow. The new Tier 2 provisions never allow entry-level workers’ wages to reach the full $30 an hour that veteran workers will earn for doing the same jobs.

Still, FCA workers, UAW local leaders and labor experts said there’s enough in the agreement for everybody — including a $3,000 signing bonus — to gain passage. Ratification votes will be scheduled for FCA’s 37,000 hourly workers over the next two weeks.

“I don’t think they’ll have a problem passing it,” said Dave Cole, chairman emeritus at the Center for Automotive Research in Ann Arbor, Mich.

The 2011 UAW contract with what was then Chrysler Group had fewer bells and whistles than this year’s accord and passed with 58 percent of the rank and file voting in favor and a minority of skilled tradespeople, 44 percent, approving.

Since then, FCA has added more than 16,000 hourly workers, all earning Tier 2 wages and benefits, who will be voting for the first time on a contract that promises them significant, systematic raises over its term. Tier 2 workers now comprise about 45 percent of FCA’s hourly work force.

After an FCA contract is ratified, the UAW will intensify its negotiations with General Motors and Ford Motor Co.

Bill Parker, an assembly line worker at FCA’s Sterling Heights Assembly Plant, said he was dissatisfied with the new approach to Tier 2. He said a plan that offers no path to full veteran pay only exacerbates the factory divisiveness endemic of a two-tier system that pays workers different rates for doing the same job. “Our goal should be to unify the membership,” said Parker, who served for years as president of the Sterling Heights local, UAW Local 1700.

Marchionne: Gap is offensive

Canada, Mexico

Workers at the Detroit 3’s plants in Canada don’t have a two-tier wage system. While their union, Unifor, agreed in 2012 to lower wages for entry-level workers, Unifor also created a 10-year ladder, or “grow-in” period, that guarantees periodic raises, thus eventually bringing new hires to the same pay as longtime co-workers. So the lower-paid workers will in time be on an equal footing with veteran workers.

Before UAW bargaining with the Detroit 3 started this summer, Canadian union officials said they hoped the UAW would negotiate a shorter grow-in period to Tier 1 pay so Canadian workers could fight for it in next year’s national negotiations.

Another wild card in the FCA and UAW accord is the elaborate product-commitment plan.

As Automotive News first reported last week, FCA agreed with the UAW to move U.S. car production to Mexico and concentrate profitable truck production in the U.S.

For example, production of the Ram 1500 pickup would move from Warren Truck Assembly Plant to Sterling Heights Assembly, both north of Detroit, during the life of the proposed four-year contract. In turn, the Chrysler 200 sedan would move from Sterling Heights Assembly to FCA’s assembly plant in Toluca, Mexico.

The Jeep Cherokee, the brand’s top-selling vehicle in the U.S. through August, would move from the Toledo Assembly Complex in Ohio to Belvidere Assembly Plant in Illinois. Belvidere will lose production of the Dodge Dart, which also will move to Toluca.

Also, Warren Truck in Michigan would be retooled and converted from body-on-frame construction to unibody construction to eventually build the Jeep Grand Wagoneer, a three-row luxury SUV that seats eight.

Since the demise of the Detroit 3 Jobs Bank in 2009, job security resides in winning popular vehicles for plants that can be built efficiently, said Kristin Dziczek, director of the industry and labor group at the Center for Automotive Research.

In FCA’s case, pickups and SUVs have been big winners for the company and the workers who build them, Dziczek said, though she declined to comment specifically about the new product plan because she had yet to see the details in the UAW accord.

Larry P. Vellequette contributed to this report.

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

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