DAVID BARKHOLZ

How Marchionne could forfeit his big win on Tier 2

UAW President Dennis Williams and FCA CEO Sergio Marchionne shared a hug after last month's joint press conference. Photo credit: Reuters

A UAW strike of Fiat Chrysler Automobiles could force CEO Sergio Marchionne to give back a hard-earned labor trophy he was already polishing for his mantel.

For months leading up to UAW negotiations this summer, Marchionne talked about the fundamental unfairness of a two-tier wage system at the Detroit 3 that pays entry-level workers substantially less than traditional workers for the same work.

On that, FCA’s 40,000 U.S. hourly workers totally agreed. The rank-and-file mantra at the UAW bargaining convention in March was “No More Tiers.”

Marchionne, though, had a twist on Tier 2 far different than his workers. His approach was not to bring the 18,000 entry-level workers at FCA up to full Tier 1 pay. Instead, his plan was to bring down and permanently reset the prevailing domestic wage closer to what the transplants pay their workers at non-union plants -- about $25 an hour.

He achieved that in FCA’s tentative agreement that UAW President Dennis Williams signed with a big hug on Sept. 15. In it, FCA agreed to a big raise for Tier 2 workers from a maximum of $19 an hour to $25 an hour by the end of the four-year deal.

But the deal continued to permit unlimited Tier 2 hiring and provided no pathway or ladder of pre-determined annual raises for Tier 2 workers to ever attain the $30 an hour wages that Tier 1 workers will make at contract’s end.

In effect, Marchionne had had his way. Tier 1 workers had been red-circled and they would eventually retire and otherwise attrite from the system, leaving $25 an hour as the new prevailing wage.

However, a funny thing happened as Marchionne was making his way to the victory stand. The FCA rank-and-file noticed the maneuver and rejected the contract by 65 percent of the voting members.

For his part, Williams blamed the rejection on poor internal communication and outside agitators.

That’s bunk.

Members had made crystal clear their desire for an end of two tiers. And UAW leadership had failed to deliver it.

Now the rank-and-file are poised to strike at FCA. A stoppage would cost the still-healing carmaker about $175 million a day in lost production or about $1 billion if it lasts a week. Profitable, popular vehicles such as the Jeep Wrangler and Ram pickups are already in short supply.

With FCA factories operating full out to meet phenomenal industry demand, lost production may never be made up.

So Marchionne has a big decision to make. Will he agree to a new contract that really ends Tier 2, probably with an eight-year grow-in from the lowest entry-level wage of $16 an hour to full Tier 1 pay, or try to resolve the stand-off with more half measures that the rank-and-file will see coming from a mile away?

Your move, boss. But consider whether that shiny trophy is worth $1 billion a week in lost production.

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

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