Fiat Chrysler Automobiles NV will set the precedent for contracts for 141,000 United Auto Workers at the Detroit automakers, as officials work to reach a tentative agreement by midnight Monday.
The automaker was selected by the union on Sunday as the lead — or target — company to set the pattern for negotiations and important issues: labor costs, health care, raises — and a potential solution to end a contentious two-tier pay system instituted in 2007 that members say has divided their factories, even though it helped save the industry when it was on its knees. Fiat Chrysler confirmed Sunday it is the lead company, but declined further comment because “negotiations are ongoing.”
Bargaining teams for the UAW and Fiat Chrysler — as well as General Motors Co. and Ford Motor Co. — are expected to continue working through Monday to reach a tentative deal before the contracts for all three expire at midnight. If tentative agreements are not reached by the deadline, current contracts typically are extended with little to no controversy.
Nonetheless, UAW workers have authorized their leaders to strike each company, if necessary. This is the first year, post-bankruptcy, that workers at Fiat Chrysler and GM are legally permitted to strike; as part of the companies’ taxpayer bailouts, strikes were forbidden until they fulfilled bailout conditions.
The choice of Fiat Chrysler came unexpectedly to many who believed the union would get the best deal starting with GM or Ford. Fiat Chrysler is the smallest, least profitable of the Detroit automakers and was expected to be the most difficult with which to reach a tentative agreement, given its high percentage of lower-paid, second-tier workers (about 45 percent); the displeasure some workers have expressed with alternative work schedules; and significantly lower profit-sharing and bonuses.
The selection of Fiat Chrysler as the lead doesn’t mean a tentative agreement will be reached by the midnight deadline or that the UAW has stopped talking with Ford and GM. It just means the union’s focus will be on Fiat Chrysler for the time being. Nor does it mean that the Fiat Chrysler contract will be copied by the others; contracts with each automaker will carry their own stamps.
“All three companies have been working with UAW bargaining teams toward a collective bargaining agreement and continue to do so,” UAW President Dennis Williams said in a statement Sunday.
As of Sunday night, contracts had not been extended at any of the automakers because negotiations were expected to continue Monday. It is customary that talks go down to the wire, in part to convince union members and shareholders that every effort was made to get the best contract available for workers and investors.
“We will continue working with our UAW partners on issues we can resolve before they turn their focus to GM,” GM spokeswoman Katie McBride said Sunday. “We remain committed to obtaining an agreement that benefits employees and strengthens GM’s long-term competitiveness.”
Fiat Chrysler’s standing as the most challenging company could be the reason the union selected it, according to Art Schwartz, president of Ann Arbor-based consultancy firm Labor and Economics Associates.
“Why did (the UAW) pick them? Probably because they’re going to be the toughest one to do and they wanted to do them first,” he said. Schwartz added it’s not unprecedented for the union to pick the most challenging company first.
Kristin Dziczek, director of the Industry and Labor Group for the Center for Automotive Research, said there were cases for any of the automakers to be chosen as lead company. However, Fiat Chrysler’s labor costs likely played a key role.
Ford and GM want to shave as much off their hourly labor costs — which are higher than Fiat Chrysler and Japanese automakers — as possible. The Center for Automotive Research says average hourly labor costs, including benefits, are $55 an hour at GM, $57 at Ford and $48 at Fiat Chrysler.
“You can’t close that gap if you don’t know what Fiat Chrysler labor costs are going to be,” Dziczek said. “And you don’t know what they’re going to be unless they go before Ford or GM.”
Ratification could be another reason: It might be easier to get support of Fiat Chrysler workers for a new contract if gains can’t be compared with workers at GM and Ford. There could be smaller benefit gains for Fiat Chrysler workers because the company is less profitable than its cross-town competitors.
Unknown is how much, if any, the selection had to do with Williams’ relationship with Fiat Chrysler CEO Sergio Marchionne. They have known each other for nearly a decade and have voiced mutual respect on numerous occasions.
During the opening of contract talks in July, at which the two hugged instead of shaking hands, Marchionne described their relationship as a “fail-safe mechanism” for the talks. He added it would “take a long time” for the two of them to “ever blow” up.
The union on Sunday said Williams was in negotiations and could not comment on the relationship with Marchionne, who is the only CEO left from the 2011 negotiations, when no company reached a tentative agreement before the deadline.
Marchionne, known as a smart negotiator, still is expected to attend the International Motor Show this week in Frankfurt, Germany, despite being selected the lead company.
Negotiating teams for the carmakers, not the CEOs, typically are the ones at the table. CEOs are kept updated and can weigh in with a phone call if needed. The negotiating teams have been working for months with union negotiators.
Pressure to deliver
The UAW is under considerable pressure to deliver a good contract that shares in the companies’ rising profits.
Veteran workers haven’t had a base wage increase in a decade, though they have received hefty 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 deal, a strike could occur. This is the first year since 2007 that the union can strike Fiat Chrysler or GM, and members overwhelming voted “yes” to give leadership the authorization to call a strike. The union agreed not to strike as a condition of the companies’ government bailouts.
Also looming over the discussions is Michigan’s right-to-work legislation, which gives workers the ability to withdraw from the union and stop paying dues after the current contracts expire. This is the first collective bargaining since the law went into effect in March 2013.
At least one local union for Fiat Chrysler already has finalized a tentative local agreement for its workers. Local contracts cover individual plant rules and issues. On Saturday, UAW Local 1264 on its Facebook page said it had reached a tentative local agreement — its first new local agreement since 2008. UAW Local 1264 represents some workers at Fiat Chrysler’s Sterling Stamping Plant. The union local president, LaShawn English, is part of the national bargaining team.
Naming Fiat Chrysler the lead company is the first substantial announcement for this year’s negotiations since they officially started two months ago.
Those on both sides of the table are keeping developments close to the vest. In the past, leaks from the negotiating teams were not uncommon. But Williams and his team have been restricting discussions to small circles of union leadership in an attempt to avoid rumors and speculation, which many say is representative of his business-like leadership style.
Not everything has been kept under wraps though.
Marchionne has said production of the Wrangler will stay in Toledo, a major issue heading into the negotiations. And Ford, as part of the discussions, is considering bringing production of its Ranger midsize pickup to Michigan Assembly Plant in Wayne.
The automakers and union also have been discussing a proposal floated by Williams to create a health care co-op that pools active workers from all three Detroit automakers.
A co-op would pool all salaried and hourly workers to help reduce automakers’ rising health care costs, give them leverage against the health-insurance companies and maintain benefits for members in the future — similar to what the Voluntary Employee Beneficiary Association, or VEBA, does for the current 860,000 UAW retirees and dependents.
Staff writers Melissa Burden, Michael Martinez and David Shepardson contributed