DETROIT -- Fiat Chrysler CEO Sergio Marchionne, speaking today at the ceremonial opening of labor negotiations with the UAW, said pay increases for workers should come in the form of profit-sharing and other flexible compensation to avoid locking in higher costs during an industry downturn.
Marchionne also stressed that he contemplated no reduction in the company's blue-collar workforce in the event FCA merges with another automaker to help reduce redundant product development costs.
“I need (plant) capacity,” Marchionne said.
Marchionne joined his UAW bargaining counterpart, UAW President Dennis Williams, in officially launching contract talks that will take the two sides up to the expiration of the current four-year agreement on September 14.
Williams said UAW workers expected to share in FCA’s new-found prosperity without unduly harming the carmaker’s strong sales and competitiveness.
“Today’s handshake is a signal that UAW members remember the sacrifices they made to achieve prosperity for FCA and, now, they know it’s our time,” Williams said in his opening remarks.
Williams joked that he wore a sweater to the ceremony rather than the blue golf shirt that Marchionne, a fan of dark sweaters, sported today.
Williams vowed again to close the pay gap between long-time workers and entry-level, so-called Tier 2 workers during this round of negotiations.
He said the specifics would be worked out in negotiations. Tier 2 workers start at $16 an hour in wages vs. $28.50 an hour for veteran workers for doing the same factory jobs.
Marchionne said while workers deserve raises, he said the company would be returning to bad habits if it agreed to pay increases that substantially hiked fixed costs that could not be throttled back in a downturn.
“If we insist on going back to the antagonistic type of bargaining that was once typical of the industry, it will be disastrous,” Marchionne said.
Most at risk
FCA has the most to lose in this year’s bargaining. That’s because FCA is financially weaker than Ford Motor Co. and General Motors, and the UAW has vowed to improve wages for entry-level Tier 2 workers in this round of talks.
FCA’s hourly workforce of 38,000 is about 45 percent Tier 2 compared with 28 percent at Ford and 19 percent at GM. That means any increase in Tier 2 wages, either through a straight raise or creation of a phased path to full wages, will hit FCA particularly hard.
Marchionne is philosophically opposed to a two-tier workforce that pays lower-seniority workers less than veteran ones for doing the same jobs.
But he said the inequity would have to be addressed in a way that did not hurt FCA’s labor-cost competitiveness.
The Center for Automotive Research pegs FCA’s all-in hourly labor cost at $47 vs. about $57 for GM and Ford. FCA’s advantage is largely because of its large complement of Tier 2 workers. That $47 an hour rivals that of the U.S. operations of Japanese, German and Korean carmakers, CAR estimates.
Needs all workers
Marchionne used the press event to clarify that FCA’s desire for a merger is not predicated on cutting production costs. He said the company needs all the workers it has now.
In fact, Marchionne said FCA is wrestling with how to keep future production of the Jeep Wrangler in Toledo, Ohio. The next-generation Wrangler will require the plant to be idled for retooling, a move that would reduce output during a period of robust sales. Marchionne said the model is flying off dealer lots with just 20-days supply on hand.
Toledo has offered as attractive an incentive package as FCA could possibly expect, Marchionne said.