Fiat Chrysler Automobiles NV and the United Auto Workers reached a tentative agreement on a new contract that will be presented to members to vote on. The union will next seek agreements with GM and Ford.
UAW President, Dennis Williams, and Fiat Chrysler Chief Executive Officer Sergio Marchionne, hugged at a news conference Tuesday night in Detroit to celebrate the agreement, but they wouldn’t give much detail about the pact before union members had a chance to see it. They suggested the accord addresses the rising cost of health care, creates a “path” for entry-level workers to prosper and eventually does away with the tiered-wage structure.
“That issue will go away,” Marchionne said to reporters in Detroit. “It will go away over time.”
The tentative agreement will be presented to the union’s executive board on Wednesday morning for review before local leaders take the details to their members and schedule votes, Williams said.
“We believe we have met the goals,” he said. “But ultimately our membership will make the final decision.”
The solutions the UAW and Fiat Chrysler came up with could serve “as a model for the U.S. to compete in the global economy,” said Harley Shaiken, a labor professor at the University of California Berkeley.
“This is an important moment,” he said in an interview. “This marks a return to an industry that is competitive globally and in which workers are sharing in those gains.”
The union usually reaches a deal with one company first, often the strongest, in hopes of setting a template for pay and benefits for the other two Detroit automakers to follow. This year, the UAW bucked that tradition, choosing the weakest of the three after Fiat Chrysler laid bare its need for a merger partner. Williams didn’t say which automaker would be next.
Because Fiat Chrysler is smaller and less profitable than General Motors Co. and Ford Motor Co., the union may not have gotten as lucrative of a deal as it could have with a stronger company. By starting with Marchionne, Williams may have ensured that he forged an agreement the other two companies could accept -- and make it less likely that the union would have to reach significantly different accords with GM and Ford.
Williams suggested Tuesday night that the agreement with Fiat Chrysler won’t be a pure template for Ford and GM.
“I don’t want anyone to think we’re not looking at the other companies and the amount of money that they’ve made,” Williams said. “They are different.”
The auto talks will set terms for more than 140,000 workers, representing $17 billion in wages and benefits, according to estimates by the Center for Automotive Research.
American companies will be looking at the health-care provisions of the contract, especially if it creates or opens the door to a health care co-op, said Shaiken, the professor.
“That’s a major step that’s pioneering in a new direction in a tough environment,” he said.
Finding a way to bridge the gap in two-tier wages is a major accomplishment, even if it takes several years to be realized, Shaiken said.
“From the beginning, that was an emotional issue for workers on both sides of two tiers,” Shaiken said. “It’s very unlikely that in one swoop they’ve eliminated that gap.”
To get the contract ratified by workers, the union must have negotiated raises.
“Raises are very important because senior workers have gone a decade without a raise,” Shaiken said. “But it’s not necessarily the most important. The key was bridging the gap on two-tier.”
That’s especially true at Chrysler, where almost 45 percent of the workers make the lower wage, he said.
“Bridging the gap in two-tier will have a greater impact on these workers because they can see what their future looks like,” Shaiken said.
For the automakers, keeping labor costs corralled is always a key concern. That’s been a tougher sell this year. For the first time in more than a decade, Ford, GM and Fiat Chrysler and the UAW are negotiating with the wind at their backs, which can actually make the talks tougher.
Cars and trucks are selling better than they have in a decade, leaving automakers relatively flush. The workers, meanwhile, are armed with a tool they haven’t all had since the 2009 bankruptcies: the ability to strike any of the three. After a decade of no raises for some workers and lower wages and benefits for others, the UAW says they want to be paid back for lean-times concessions that helped the companies survive.
In the dark days of 2007, the union agreed to the two-tier system, with less-expensive benefits and lower pay, to try to end losses at the Detroit Three. During the government-sponsored bankruptcies of GM and Chrysler in 2009, those companies were given the freedom to hire an unlimited number of workers at the lower wage. Only Ford still has a cap that requires a maximum of 28 percent of its labor force receive the lower pay.
Ford ended up with Detroit’s most expensive labor contract because it didn’t seek bankruptcy protection. Under the 2011 contract, GM and Fiat Chrysler have been allowed to hire as many so-called second-tier workers as they want starting at “entry- level” pay of $15.78 an hour, while only a limited slice of Ford’s workforce can be paid less than the top-end $28.50 rate.
The relationship between Williams and Marchionne dates back several years. Williams negotiated for the UAW on the labor contract with CNH Industrial NV, a maker of trucks and tractors where Marchionne is chairman.
“He understands manufacturing,” Williams told reporters in Detroit in June. “He understands the auto industry. He’s not a person you take lightly. He and I have a very good relationship. A very frank relationship.”
Tuesday evening in Detroit, Williams and Marchionne appeared relaxed at the press conference, showing no fatigue from the talks that caused Marchionne to cancel a trip to the Frankfurt auto show and kept negotiators working until 4 a.m. Monday.
Marchionne told reporters that he sent Williams a text message when he arrived at the union office today, saying, “I’m in the building”
Then he said he paused, realized how that sounded, and texted again: “It’s not Elvis.”
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