Coverage: Fiat Chrysler reaches labor deal, maybe

Fiat Chrysler Automobiles and the United Auto Workers union reached a potential labor deal Tuesday night that would put an end to the company’s unpopular two-tier wage system. But before the deal can be officially enacted, it must first be approved by the union’s rank-and-file members.

Christina Rogers and Jeff Bennett of The Wall Street Journal laid out what the company’s two-tier payment system worked:

The United Auto Workers union reached a tentative labor deal with Fiat Chrysler Automobiles NV that will eventually remove a controversial two-tier wage system that pays newer hires less than more-experienced co-workers doing the same jobs, according to people familiar with the agreement.

Under the current arrangement, newer factory employees earn about $9 an hour less than more senior employees, a point of friction for many rank-and-file workers. The new structure will eventually phase out the two classes of wages over time, the people said.

Pay for entry-level workers hired after 2007 is currently capped at $19.28 an hour. The new deal would raise that pay ceiling after a number of years closer to $25 an hour, the people said, though the precise time frame and dollar amount couldn’t be learned. Veteran workers earning more will keep their wages until they no longer work for the company, leaving the other wage as the new pay standard for auto workers going forward, the people said.

Fiat Chrysler Chief Executive Sergio Marchionne and UAW President Dennis Williams discussed the pact at a news conference in Detroit Tuesday evening, but declined to disclose specific wage details. UAW leaders will likely brief members on highlights in coming days.

The New York Times’ Bill Vlasic explained how the deal came together:

The union had been seeking pay raises for its veteran workers, who earn about $28 an hour, and its entry-level employees, who earn $16 to $19 an hour.

“We will not be talking about the details,” Mr. Williams said.

He said the deal put Fiat Chrysler “in a competitive place,” but would not share whether the agreement specifically called for wage increases.

He also would not address whether the union was successful in putting a cap on the use of lower-paid workers at Fiat Chrysler.

More than 40 percent of the union workers at the company are entry-level employees — about double the percentage of lower-paid workers at G.M. and Ford.

Mr. Marchionne has been outspoken that the two-tier wage system cannot be sustained in the long term, and suggested that the tentative agreement provided a starting point for the elimination of the tier structure.

“It will go away over time,” Mr. Marchionne said, without providing any further details.

He said that employees at the company, under the tentative agreement, will have a “trajectory of career development,” which implied that lower-paid workers can move up to higher-wage status over some period of time.

Mr. Marchionne also said that cutting health care costs was a key component of the agreement.

The U.A.W. had been discussing creating a health care collective covering workers at all three companies for the purpose of saving money on the costs of medical care and prescription drugs.

“The cooperative arrangement is embedded in the spirit of this agreement, and I really hope it gets implemented,” Mr. Marchionne said.

Michael Wayland, Melissa Burden and Michael Martinez of The Detroit News described the next steps for both Fiat Chrysler and the UAW:

John Beck, associate professor in Michigan State University’s school of human resources and labor relations, said it appears the UAW and Fiat Chrysler worked well together during these contract talks.

“It’s been fairly unprecedented in terms of the tenor,” he said. “Both sides brought a serious, critical eye to negotiations. Both sides came to the table with a problem-solving attitude.”

He said the biggest challenge, though, is getting the rank and file to ratify a deal.

“The UAW has attempted as much as it can to solidify good jobs for American workers,” he said. “It’s hard to know if it will be ratified in the current environment where a good job is hard to find.”

Veteran workers haven’t had a base wage increase in a decade, though they have received profit-sharing checks as the automakers regained their financial footing. Williams has made raising pay a big issue. U.S. auto sales are booming and the all three automakers are reporting strong profits, putting added pressure on the UAW to deliver.

On the other side of the bargaining table, automakers face pressure from Wall Street and foreign competitors to hold the line against big increases in labor costs.

If members aren’t happy with the Fiat Chrysler deal, union negotiators could have to return to the bargaining table.

“If they can’t get it ratified, it doesn’t help either party,” said Art Schwartz, president of Ann Arbor-based consultancy firm Labor and Economics Associates and a longtime labor-relations executive at GM.

During the last round of negotiations in 2011, 58 percent of Chrysler production workers voted to ratify the contract. Union rules require contracts to be ratified by both skilled trades and production workers. Only 44 percent of the company’s skilled trades workers voted for the contract. UAW leaders in closed session voted to overturn that veto and sign the agreement.

Workers at several Fiat Chrysler facilities complained this week that communication from union leadership was scarce heading into the final hours of the negotiations. Those on both sides of the table kept developments close to the vest.

With an agreement hammered out at Fiat Chrysler, attention turns now to GM and Ford. In total, the contracts cover about 141,000 UAW members at all three automakers. Williams did not say which automaker is the next target for the union.

UAW members have authorized their leaders to strike each company, if necessary. This is the first year, post-bankruptcy, that workers at Fiat Chrysler and GM legally have been permitted to strike; as part of the companies’ taxpayer bailouts, strikes were forbidden until they fulfilled bailout conditions.

Union members at all three automakers overwhelming voted “yes” to give leadership the authorization to call a strike. During the 2011 negotiations, the union agreed not to strike as a condition of the companies’ government bailouts.

But general strikes, as a bargaining chip, have dwindled in the U.S. in recent years. They’re costly — and the UAW’s strike fund has $600 million, down from $1 billion in 2006. Williams has said “striking is a failure on both parties’ part,” but the union is prepared to do so, if necessary.