New FCA-UAW contract deal would raise Tier 2 pay to $29 an hour, report says

DETROIT (Bloomberg) -- Fiat Chrysler Automobiles is offering so-called second-tier United Auto Workers members as much as $29 an hour -- up from $25 previously proposed -- under a new tentative agreement which avoided a strike by 40,000 union members, two people familiar with the matter told Bloomberg today.

The second-tier workers would almost match veteran members’ wages -- from a maximum of $19.28 now -- after an eight-year grow-in period, said the people, who asked not to be identified because the details of the accord haven’t been made public. Senior or first-tier workers are offered the same raises and bonuses as in the original tentative pact, which members voted down almost 2-to-1, said one of the people.

There’s no cap on the number of Tier 2 workers, the people said. 

Getting this new deal ratified will be vital for both sides as UAW President Dennis Williams seeks to quiet unrest among his members and solidify his leaders before seeking similar but more lucrative deals with General Motors and Ford Motor Co.

FCA CEO Sergio Marchionne needs a deal that holds down labor costs and maintains flexibility for the least profitable of Detroit’s three carmakers. 

“We heard from our members, and went back to FCA to strengthen their contract,” Williams said in a statement early today. “We have made real gains and I look forward to a full discussion of the terms with our membership.”

The UAW National Chrysler Council, made up of leaders from union locals, meets in Detroit on Friday to discuss the accord and whether to send it to a vote by rank-and-file members.

The significantly higher pay for Tier 2 workers addresses one of the main criticisms of the tentative agreement that was reached Sept. 15 and rejected Oct. 1.

Workers wanted the tier system eliminated, more information about a new health-care cooperative and clarity about the company’s investment plans, said Art Wheaton, a labor professor at Cornell University.

Fiat Chrysler confirmed the accord Thursday in a statement and said it can’t discuss specifics. Shawn Morgan, a spokeswoman for FCA, and Brian Rothenberg, senior communications adviser for the UAW, declined to comment on any details.

Earlier rejection 

The UAW said on Oct. 1 that its members voted about 65 percent against a proposed contract that would have granted raises to all employees and narrowed the pay gap for Tier 2 workers. The two sides resumed negotiations after that rejection, and the union on Tuesday notified the automaker of its intention to strike if an agreement wasn’t reached by 11:59 p.m. Wednesday.

The earlier Fiat Chrysler accord would have boosted hourly base wages over the contract term to $29.76 at the senior tier and as much as $25.35 for the second tier, according to the UAW. The ratification bonus would have been $3,000, down from $3,500 for the 2011 contract. The automaker also had pledged to invest as much as $5.3 billion in the U.S.

At about 45 percent, Fiat Chrysler has the largest percentage of hourly workers at the second-tier wage rates.

Strike disruption

A strike would have disrupted Fiat Chrysler’s production amid the company’s streak of 66 consecutive U.S. monthly sales gains and clouded an auto industry that has been a rare bright spot in U.S. manufacturing, with deliveries on pace for the best year in more than a decade.

“That’s good news because we don’t want to strike if we don’t have to,” said Charles Bell, president of UAW Local 1700, which represents workers at the Chrysler 200 sedan assembly plant in Sterling Heights, Mich. “As long as it’s an agreement my people can deal with, it’s good news.”

A work stoppage would have crimped FCA's cash flow. The unit generated about $1.6 billion in net sales a week last year. Automakers book revenue when they ship vehicles to dealers, and 18 of the company’s 28 North American facilities are in the U.S. At the end of September, Fiat Chrysler said it had a 76-day supply of vehicles, or about 590,503 cars and trucks.

Fiat Chrysler’s UAW members had the right to strike for the first time since before the 2009 bankruptcy that led to the automaker’s formation. Walkouts by the UAW have been rare for the past decade, with the last two in 2007 when workers struck GM for two days and Chrysler for six hours.

After top UAW executives met with leaders of local unions last week to hear the Fiat Chrysler workers’ concerns, the union said it would start addressing those issues with detailed posts on the website and its Facebook page. A post Tuesday compared the $2,500 cost-of-living raises that workers would have received in the past four years, had those payments not been suspended, with the $9,000 profit-sharing checks they did receive.