UAW workers vote on FCA agreement without Tier 2 cap or product plan

The Warren Truck plant in Michigan would be retooled and converted from body-on-frame construction to unibody construction to eventually build the Jeep Grand Wagoneer.
UPDATED: 9/23/15 4:04 pm ET - adds detail

The UAW leadership is seeking ratification this week for a tentative deal with Fiat Chrysler that is missing two key provisions from previous contracts -- a written product plan and a cap on the maximum percentage of Tier 2 workers.

The product plan -- including the transfer of the Chrysler 200 and Dodge Dart to Mexico and moving light-duty pickup assembly from Warren, Mich., to Sterling Heights Assembly 10 miles north -- has been communicated orally to UAW officials, but not in writing.

The 37,000 UAW members voting on the FCA contract will have to accept those details on faith, since they’re not spelled out either in the contract language or the shorter contract highlighter book distributed to members. Voting is expected to wrap up by Monday. 

In the 2011 round of UAW bargaining, FCA’s product commitment and the jobs it preserved played a crucial role in passage of an agreement that included no wage increase for veteran workers and small raises for lower-paid, entry-level Tier 2 workers.

But this year the UAW has decided against capping Tier 2 employment at 25 percent of the total hourly workforce, a provision negotiated in 2007 when the union agreed to the lower-cost entry-level wage system at the Detroit 3.

The UAW quietly allowed the cap to expire at FCA in 2011 -- even after informing workers in the 2011 highlight book that it would be restored in 2015.

Without the cap, there is no way under the new agreement for a lower-paid, Tier 2 worker to achieve the same rate of pay as the higher-paid Tier 1 worker, as happened to 865 Ford workers earlier this year who moved from Tier 2 status to Tier 1.

Instead, the UAW replaced the Tier 2 cap with systematic raises over four years that boost the maximum wage for Tier 2 workers from $19 today to $25. But that will still be $5 short of the $30 an hour that veteran production workers will earn at contract’s end.

No cap

Until last week, many local union leaders in FCA locals believed that the Tier 2 cap existed, similar to one in place at Ford and General Motors. They believed FCA’s cap had been suspended in 2011 and was to return at the end of the agreement -- on Sept. 14, 2015.

They had good reason to believe.

A front-page letter on the UAW’s 2011 highlight book, a document passed out prior to a close 2011 ratification vote, explained the cap in specific terms.

“The 25 percent cap will be reinstated at the end of this contract,” said the letter from then UAW president Bob King and the late General Holiefield, who was the UAW Chrysler Department vice president at the time. “All workers in excess of the 25 percent cap will be [sic] begin receiving the same wages as traditional Chrysler workers.”

The issue of the 2011 cap was brought up last Friday at a meeting with local leadership to go over the terms of the tentative agreement, according to a person in the room. In response, UAW Chrysler Vice President Norwood Jewell said the cap in 2011 had been “a typo,” the person said.

Forty-five percent of FCA’s UAW work force earns Tier 2 wages, compared with 20 percent at General Motors and 29 percent at Ford.

Two paths

Before formal bargaining with the Detroit 3 began this summer, labor experts predicted that resolving the Tier 2 dilemma would take one of two paths.

Either the union would fight for a “grow in” or stepped approach to equalizing pay with veteran workers by instituting a ladder of annual raises that would eventually align their wages with Tier 1. That’s the Canadian model, which features a 10-year grow-in to full wages.

Or, other experts believed the UAW would fight to preserve caps on Tier 2 hiring that would provide a way for higher-seniority entry-level workers to join Tier 1 ranks. That’s the current situation at Ford, which has exceeded its 25 percent cap on Tier 2 hiring. Every time it hires another worker it promotes a Tier 2 worker to Tier 1 wages.

As the UAW moves to its next negotiating target, it will have to deal with the issue of whether to keep the existing cap in place, or live by the pattern it has established with FCA. If the union ditches the pattern and forces Ford and GM to keep a cap in place, it would give FCA a competitive advantage over its domestic rivals.

No product plan

The lack of a detailed product plan also is a change from previous contracts. At a press conference last Friday, Williams said FCA was still finalizing where it would build future products. Thus the plan was not included in the agreement that FCA’s hourly employees are considering. He also would not estimate the net number of jobs that would be created over the next four years of the contract.

In 2007 bargaining, GM workers struck the company for two days over concessions -- including the shifting of retiree health care to an independent trust -- until GM sweetened the deal with a laundry list of product commitments and jobs at U.S. plants.

Ultimately, that plan was never instituted because the recession caused all three of the Detroit 3 to shrink. But the promises sold the 2007 contract to the GM rank-and-file, said Dave Cole, chairman emeritus of the Center for Automotive Research in Ann Arbor, Mich.

In 2011, the UAW’s agreement with FCA listed where several vehicles and engines would be built over the four-year contract, including product details for Sterling Heights Assembly, Trenton Engine and Belvidere.

Though UAW-represented workers at FCA are voting this week without the benefit of a written product-commitment plan and the promise of job security it assures, some details of the carmaker’s product footprint are known.

As Automotive News reported this month, 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 and would 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 is a factor 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.

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

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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