A prescient meeting with Al Iacobelli

In 10 years of covering UAW negotiations for Automotive News, a face-to-face conversation I had with Al Iacobelli in 2011 stands above the rest.

Iacobelli, who retired suddenly today as Fiat Chrysler Automobile’s head of North American employee relations, had taken me through all the facts and figures on why a still-mending FCA couldn’t afford to give its UAW-represented workers a raise in the upcoming negotiations.

He looked up from his papers and straight into my eyes. “I don’t care what Ford and GM do. We aren’t raising our labor costs this time around.”

Know what? I believed him. He clearly was not posturing.

And true to his word, FCA negotiated the best contract of the Detroit 3. FCA’s overall labor costs since the four-year UAW contract was signed in fall 2011 have nudged up less than 1 percent per year.

Consequently, FCA enjoys nearly a $10 an hour labor cost advantage over Ford and GM. Its $47 an hour cost for wages, bonuses and benefits rivals that paid by the U.S. transplant operations of the German, Japanese and Korean automakers.

With Iacobelli’s surprising departure on the eve of this year’s UAW negotiations, his replacement, Glenn Shagena, 52, will have to get up to speed quickly. Shagena most recently was head of human resources for FCA Mexico.

These negotiations promise to be especially challenging for FCA, in part, because Iacobelli, 55, did such a good job in the past two negotiations.

Back in 2009 before the Chrysler bankruptcy, the UAW agreed with FCA (then Chrysler Group) and GM to allow the companies to hire an unlimited number of lower-paid entry-level workers now notoriously known as Tier 2.

At the time, few expected the Detroit 3, shrunken by the Great Recession, to be able to do much hiring.

But Iacobelli and his colleagues saw an opportunity. Unlike GM and Ford, FCA aggressively used $100,000 buyouts to get thousands of highly-paid veteran UAW workers to retire.

As the industry recovered, FCA went on a hiring spree, adding about 14,000 workers at starting wages of $16 an hour instead of the $28 an hour veteran workers earned.

Those workers have been gold for FCA. Today, 45 percent of FCA’s workforce is comprised of Tier 2 workers earning the lower wage and benefit package. Ford’s UAW workforce is about 28 percent Tier 2 and GM’s is about 20 percent.

Shagena now faces the challenge of keeping its high percentage of Tier 2 against a UAW rank-and-file that wants the practice ended and that UAW President Dennis Williams has promised to address.

In the past two negotiations, FCA’s dire financial situation steeled Iacobelli’s resolve to keep labor costs in check.

With FCA highly profitable and Tier 2 in the UAW gun sights, what will Iacobelli’s successor find as a shield against elevated rank-and-file expectations?