An FCA strike: $1 billion a week in lost revenues

UAW walkout would quickly cause shortage of popular vehicles

A UAW strike of Fiat Chrysler could cost the Detroit automaker close to $1 billion a week in lost revenue and would quickly lead to a shortage of several hot-selling vehicles.

An extended shutdown could be devastating for FCA, the only major auto group whose U.S. market share has risen in 2015.

The union and FCA were sent back to the bargaining table this week after 65 percent of FCA's UAW rank and file rejected a proposed contract. And late in the week, both sides were planning their next moves -- moves that could include a strike.

FCA's six U.S. assembly plants produce more than 35,000 vehicles per week -- ranging from a $17,890 Jeep Patriot to the $112,090 Dodge Viper GTS Coupe.

Among those built in the U.S. are the auto-maker's most popular vehicles: the Ram 1500 in Warren, Mich.; the Jeep Cherokee and Wrangler in Toledo, Ohio; and the Jeep Grand Cherokee in Detroit.

At an average wholesale price of $25,000 -- estimating conservatively -- that would total about $175 million in lost revenue per day if production of those vehicles is stopped. FCA's costs also would decline because the company wouldn't incur parts and labor expenses.

For dealers, supplies of some vehicles could become tight very fast. On Oct. 1, FCA said it had 590,503 unsold vehicles in inventory, a 76-day supply. But FCA reported just 28,202 unsold Wranglers available on Oct. 1 -- a 40-day supply, while Jeep Compass inventories stood at 46 days.

FCA said it had a 90-day supply of unsold Ram pickups, including light- and heavy-duty versions. Heavy-duty Rams are built in Mexico, and wouldn't be subject to a UAW strike. But automakers normally desire at least a 100-day supply of pickups because of the many configurations and trim levels.

While a general strike could potentially shut down all 40,000 hourly workers at FCA, the union could act strategically -- and save expenses from its strike fund.

A strike only at FCA's giant Kokomo Transmission operations in Indiana would shut down about 75 percent of profitable Jeep and Ram pickup production, said Kristin Dziczek, director of the industry and labor group at the Center for Automotive Research in Ann Arbor, Mich.

FCA workers not on strike but idled by a shutdown at a key component plant such as Kokomo would be eligible for unemployment insurance, rather than the $200 per week from the union's strike fund. Neither the UAW nor FCA would comment.

FCA CEO Sergio Marchionne could face a dilemma if the union now negotiates with Ford or GM.

No bridge to Tier 1

The proposed agreement granted raises and bonuses that would close the pay gap between Tier 1 and lower-paid Tier 2 employees. But it removed a path for lower-paid workers to achieve parity with their higher-paid co-workers. The tentative agreement also didn't lay out what future products would be made in what plants, which could help workers gauge their job security.

Some employees also said that the tentative agreement failed to address concerns with FCA's alternative work schedule, which in some cases requires workers to move from days to nights to days again over a period of weeks.

UAW President Dennis Williams said the rebuke wasn't "a setback; we consider the membership vote a part of the process we respect." He said the union would notify FCA that "further discussions" were needed.

FCA US said it was "disappointed" that UAW members rejected what it called a "transformational" agreement.

In its statement, the automaker said memories of Chrysler's 2009 bankruptcy "are vivid to this day in the minds of most of us at FCA. A large number of new employees have been brought in ... since then who, thankfully, did not have to endure the pain and sacrifices that were required of the workforce then."

FCA said it looked forward to "continuing a dialogue with the UAW."

FCA is not the UAW's only ball in the air, however. The union also announced last week that it could strike as early as Sunday, Oct. 4, at Ford's Kansas City Assembly Plant in Claycomo, Mo., where popular F-150 pickups are built, over local issues such as safety and work schedules.

FCA’s plant in Belvidere, Ill., top, builds the Dodge Dart, which the company plans to make in Mexico. The Kokomo Transmission plant in Indiana, above, could be a key to the UAW’s strategy.

Big risks

If FCA CEO Sergio Marchionne has to push more money into the contract to get ratification, it could mean shifting jobs to Mexico, said Art Schwartz, a former GM labor negotiator who is president of Labor and Economics Associates in Ann Arbor, Mich. "The trade-off for more money is jobs," he said.

FCA has told the UAW that it plans to move to Mexico production of the next-generation Chrysler 200 sedan from Sterling Heights, Mich., and the next-gen Dodge Dart compact from Belvidere, Ill., to allow for building more pickups and SUVs in the U.S.

But FCA made no promises on what's coming back from Mexico, nor did the company authorize the UAW to publish a product plan in the proposed contract that the rank and file rejected.

Schwartz said the union owes it to Marchionne to return to the bargaining table with FCA before moving on to Ford or GM. He said responsibility for the rank and file's rejection of the agreement fell on UAW leadership, which should have better explained the pay raises contained in the deal.

The risk for Marchionne if the UAW shifts to Ford or GM is that one of those companies could negotiate a cap on Tier 2 employees at 25 percent of the total hourly work force and expect FCA to follow suit. Industry vehicle sales could peak in the coming months, then decline. There may be little new hiring that would allow Tier 2 workers to be promoted to Tier 1 for exceeding the cap, Schwartz said.

The potential dilemma for Marchionne is that FCA's Tier 2 work force already accounts for 45 percent of its total of 40,000, putting the carmaker well above 25 percent. It would be cost-prohibitive for FCA to reduce its Tier 2 work force to 25 percent of its total overnight, possibly snagging negotiations already complicated by the rank-and-file rejection, Schwartz said.

UAW President Dennis Williams said the rejection of the tentative deal wasn’t a setback.

'No thanks'

Many FCA rank-and-file workers rejoiced that the contract proposal failed so soundly.

"It sent a strong message to the company and the union that people were not happy at all with this proposal," said Todd Perkins, a 30-year employee in Toledo.

One skilled trades worker in Indiana said he is unsure whether he can trust UAW leadership.

"Many rank-and-file members feel the international is trying to bamboozle us," said the employee. "Promises from the previous contract have been set aside, new promises have been made then not kept via twisting of words, and a set product plan is not in place for our benefit."

The biggest rebuke of the contract came at FCA's Toledo Assembly Complex, where 85 percent of UAW members rejected the proposed agreement.

About 75 percent of workers at Toledo Assembly are lower-paid Tier 2 workers. There, the union's failure to eliminate two-tier pay and publish a product plan doomed the agreement's chances, said one longtime Tier 1 assembly worker.

"There was very poor communication, and then [the UAW] tried to fast-pass deals that favor the company and take even more away from employees," said the Toledo employee, who asked not to be named. "They want to take the Cherokee away and eliminate an estimated 1,000 jobs, move four vehicles to Mexico, and all the while, [Marchionne] takes in $73 million last year? No thanks."

You can reach David Barkholz at

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