The driver’s seat is exactly where Sergio Marchionne wants to be.
As national bargaining with the United Auto Workers continued toward a midnight Monday deadline, the CEO of Fiat Chrysler Automobiles NV was reaping the benefit of months-long strategy to persuade UAW President Dennis Williams to make FCA the lead company in contract talks.
FCA is the least profitable of Detroit’s three automakers, the company’s pitch went. Its business is the most at-risk of the three; its product line is performing unevenly in the marketplace, with Jeep and Ram trucks mostly powering the top line. Despite a $10-per-hour labor cost advantage over General Motors Co. and Ford Motor Co., its North American profit margins lag its cross-town rivals.
The Auburn Hills automaker’s lower-paid second-tier accounts for nearly 45 percent of the total workforce, an advantage that perversely makes contract ratification problematic. Second-tier workers are considered more likely to ratify a contract that bumps their base pay, a boost less likely to accrue to legacy workers who haven’t seen base-wage increases in a decade and could express their displeasure with no votes.
Additionally, Marchionne has said publicly that he believes the second-tier wage structure, forged in the 2007 agreement ostensibly to ensure new product investment, is unsustainable and should be reformed. Conceptually, that dovetails with Williams’ professed intention to “bridge the gap” in pay between legacy workers and the second-tier.
FCA’s pitch worked, aided by a decade-long relationship between Williams and Marchionne. Both sides have expected the ties, forged when Marchionne headed the CNH division of Fiat SpA, to pay dividends in bargaining and haggling over future investments in plants and products.
“But Sergio, what we find with him is he understands manufacturing, he understands the auto industry and he’s not a person you take lightly,” Williams said in an interview this summer.
Williams figured “if he can get Sergio done,” says a source familiar with the situation, “the other two will come along.” Plus, because FCA’s workforce earned substantially less than GM or Ford in profit-sharing over the past four years, it poses the most credible threats to a strike and to ratification.
That’s not all. Both Williams and Marchionne have demonstrated a willingness to take risks their predecessors generally would not, particularly if the likely benefit changes major rules of the game and benefits their respective institutions. Think restructuring tiered wage structures (both men), or creating a health-care co-op pool (Williams) that would increase buying power in the marketplace.
And, too, think a merger of GM and FCA, considered a long-shot by industry analysts who don’t necessarily buy Marchionne’s industrial logic. Nor do they concede his point that the risk of executing a tie-up of the two automaker is as low as he insists.
Contract talks present a unique opportunity for an in-depth discussion of FCA’s plant footprint and product portfolio, critical to any contemporary bargaining season. But they also have given Marchionne the chance to tout the benefits of a potential merger and how it could help bolster jobs and the union’s membership.
This is exactly where The Boss, as they call Marchionne, has wanted to be: in the driver’s seat, crafting the first post-bailout, post-no-strike clause deal with a UAW president he knows and respects.
Williams, for his part, has created the chance to address his biggest problems first; to begin to unwind the tiered wage structure increasingly unpopular within the rank-and-file; to plumb his health-care co-op concept with a risk-taking negotiator on the other side of the table; to learn Marchionne’s thinking on a potential merger with GM.
Big ideas, these, even revolutionary. But big drama? Not yet, anyway. Going into the final day of the four-year contract expiring at midnight, the biggest kerfuffle in this year’s bargaining are two product allocation calls already decided and whether Marchionne will get his way with GM.
Like so much else in the post-meltdown Detroit auto industry, this one feels different because it is. Both sides are bargaining to manage prosperity, not decline; both sides are eyeing their respective constituencies; and both sides are led by realistic leaders less likely than their predecessors to do a bad deal in good times.
Ugly memories can do that. So can the unceasing pressure of competition, something these three companies and their principal union cannot escape because it will not go away.
Daniel Howes’ column runs Tuesdays, Thursdays and Fridays and can be found at http://detroitnews.com/staff/27151.
Catch him 3 and 10 p.m. Thursdays on Michigan Radio’s “Stateside,” 91.7 FM.