Fiat Chrysler Automobiles NV and the United Auto Workers announced a tentative agreement Tuesday night that addresses the critical issues of a two-tier pay structure and health care costs.
UAW President Dennis Williams said the proposed deal is “balanced” and keeps both sides competitive. At a joint press conference, he and Fiat Chrysler CEO Sergio Marchionne strongly suggested the deal includes a health care co-op — a concept floated by the UAW during negotiations. He said it also addresses the union’s two-tier pay system that members say has divided factory floors, and it rewards workers for sacrifices made in recent years — the union’s main goals heading into negotiations.
“We believe that we have met those goals,” Williams told reporters in a press conference shortly after the tentative deal was announced around 6:45 p.m. Tuesday — nearly 19 hours after the sides agreed to an “hour-by-hour” contract extension after missing the 11:59 p.m. Monday deadline. “But ultimately, our membership will make the final decisions.”
Williams, Marchionne and their top negotiators declined to discuss exact details of the likely four-year agreement until it has been discussed with the union’s membership.
Marchionne did say the contract addresses the issue of the tier-one/tier-two pay disparity under which newer workers are paid about $10 less per hour. He said it will go away “over time,” but would not elaborate if the system will be eliminated under the tentative deal.
One of the most radical changes in the new deal could be a new way to address health care costs that was inspired by the Voluntary Employee Beneficiary Association, or VEBA, that controls health care costs for 860,000 UAW retirees and dependents.
“(Williams’) suggestion to effectively look at a co-op arrangement to rely on what we have learned through the VEBA structure… and really benefit a much larger population in terms of purchasing capability and administration process is something which is very close to us. I think it’s embedded in the spirit of the agreement and I sincerely hope it gets implemented,” Marchionne said without providing direct details if a co-op pool is included in the deal.
A health care pool at all three Detroit automakers could pool all active salaried and hourly workers to help reduce automakers’ rising health care costs and maintain benefits for its members in the future — similar to what the VEBA does.
Union leaders will have to sell the deal to their 40,000 members at Fiat Chrysler. The process can take weeks, but it’s extremely rare for the membership to completely reject a national agreement.
“And now it’s our job to go out and explain it to people so they understand what a great job I believe we did,” said UAW Vice President Norwood Jewell, head of the union’s bargaining with Fiat Chrysler.
Many UAW members such as FCA tier-one worker Mike Izzi, 46, of Harrison Township, want the two-tier system eliminated.
“I’d like to see us get a little bit of a raise for a change. We haven’t seen a raise in a long time,” Izzi said Tuesday outside the Warren Stamping Plant where he has worked for 15 years. “More importantly, though, I’d like to see the tier twos come up to tier one wages.”
“It just doesn’t work well in the plant with people earning different wages,” he said. “It creates a lot of friction.”
Fiat Chrysler has the largest percentage of second-tier workers of all the automakers at about 45 percent. GM has 20 percent and Ford 28 percent.
Economics of the tentative agreement, however, were under wraps Tuesday night.
The proposed pact is expected to set a pattern for General Motors Co. and Ford Motor Co. to follow in their ongoing negotiations.
“This is a contract that we can very well pattern, but pattern is very unique to each company,” Williams said, adding “each company has different unique ways of operating.” He also mentioned he will look at the profitability and status of each company.
GM and Ford announced indefinite contract extensions on Monday, a typical move if a contract is not reached by the deadline. Williams said deals with neither company will get done this week.
The mood in the auditorium of the Chrysler-National Training Center in Detroit was upbeat and relaxed after bargainers had put in long hours at the table. There were hugs and handshakes and a sense of accomplishment.
Marchionne and Williams ended the press conference with a hug — the same way they kicked off negotiations in July.
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.
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.
Looming over this year’s negotiations 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.
■The UAW International Executive Board will meet Wednesday morning to review the tentative agreement for Fiat Chrysler members before voting on it.
■UAW leadership from across the country will come to Detroit to receive details of the tentative agreement and vote on it.
■Local Fiat Chrysler unions then will set information sessions for members, followed by ratification votes. The whole process will take about two weeks.
Source: United Auto Workers