Fiat Chrysler could have a big problem on their hands as early as Wednesday night, if the automaker does not agree on a contract deal with workers. In a letter to the company Tuesday, the United Auto Workers said workers would strike if a deal was not reached.
Not only would the potential strike include approximately 36,000 workers, but it could also cost Fiat Chrysler big bucks that the automaker cannot afford to lose as it continues to work on its recovery.
Brent Snavely and Alisa Priddle of the Detroit Free Press laid out why a strike might be imminent:
Discussions between the United Auto Workers union and Fiat Chrysler aimed at restructuring a tentative agreement overwhelmingly rejected by workers last week appear to have broken down, raising the possibility of a strike, according to two sources briefed on the matter who aren’t authorized to speak publicly on the matter.
The union threatened to strike if it does not reach an agreement with Fiat Chrysler by the end of Wednesday.
As of Tuesday, the UAW’s negotiating team had been pulled from the bargaining table, according to one of the people, who was not authorized to speak publicly about the developments.
“(Fiat Chrysler) confirms that it has received strike notification from the UAW,” the Auburn Hills, Mich. automaker said in a statement Tuesday. “The company continues to work with the UAW in a constructive manner to reach a new agreement,” the statement continues, suggesting talks may be continuing at some level.
Bernie Woodall of Reuters explained how a strike could impact Fiat Chrysler:
A strike at its U.S. operations could cost the automaker $40 million a week in operating profit, said Sean McAlinden, chief economist with the Center for Automotive Research.
Workers at several plants in Kokomo, Indiana, and at least one in Michigan received notices to be ready to strike but it was not clear whether all Fiat Chrysler plants would be involved.
Kristin Dziczek, labor analyst with the Center for Automotive Research, said the last time the UAW took the company, then known as Chrysler, out on strike it was a “Hollywood strike,” as in “just for show” in 2007. That strike, in the second week of October, lasted six hours.
The strike weapon was not available to the UAW until this year for Fiat Chrysler or General Motors Co (GM.N) as part of the 2009 government-sponsored bankruptcies at those companies.
The UAW must balance the need to make a forceful statement to Fiat Chrysler with concerns it could substantially hurt the company, the weakest of the Big Three, which would be bad for its own members and hopes of growth.
Arthur Schwartz, a labor consultant and former negotiator with GM, said, “This is the union’s play now. It is up to them what happens.”
Schwartz said UAW President Dennis Williams would not want a lengthy strike because of the pain it could inflict on his members and the harm to Fiat Chrysler.
“Chrysler is not in great financial shape, no matter what the UAW members may think. The company is the weakest of the (Detroit Three) so a long strike would hurt them.”
Business Insider’s Matthew DeBord explained why workers rejected their proposed contract:
A key sticking point is the so-called “two tiered” wage structure. New hires are paid at the Tier 2 level, significantly below the Tier 1 wage. The UAW wants to eliminate this. In the proposed FCA contract, CEO Sergio Marchionne and UAW negotiators had developed a roadmap for Tier 2 workers to be paid more.
However, FCA has hired more Tier 2 workers since the financial crisis, bailout, and bankruptcy than any other Detroit automaker. Losing the dual-wage structure could affect the car maker’s business in negative ways.
A strike at FCA is the last thing Marchionne needs right now. He’s preparing an IPO of Ferrari, which has long been owned by Fiat. The offering, expected to launch later this month, could value the Italian supercar manufacturer at as much as $11 billion, according to market watchers.
Bill Vlasic of The New York Times explained what U.A.W. president Dennis Williams is doing to calm workers’ discontent:
In his message to members, Mr. Williams pledged to communicate more openly and to post “more facts and explanations” to help them understand the challenges of reaching a better deal with Fiat Chrysler.
“We are also going to tell the whole story,” he said. “This is a very serious situation.”
He defended the union leadership’s commitment to keep products in American factories and lashed out at speculation that the initial contract proposal allowed the company latitude to move the manufacturing of some car models to Mexico.
“For someone to suggest we endorse products going to Mexico is just nonsense,” Mr. Williams said.
Fiat Chrysler has described the rejected agreement as “transformational” as one that both benefited workers and kept the company competitive on labor costs.
With a strike deadline looming, Fiat Chrysler declined on Tuesday to offer any new details on the current negotiations. “The company continues to work with the U.A.W. in a constructive manner to reach a new agreement,” Fiat Chrysler said in a statement.
