The potential rejection of the FCA-UAW labor contract shows Old Detroit is not yet dead, proof that competitive reality cannot necessarily overcome unrealistic expectations in a post-bailout era.
The loss would be a stinging defeat for United Auto Workers President Dennis Williams and Fiat Chrysler Automobiles NV CEO Sergio Marchionne, two weeks after the pair unveiled their tentative agreement amid talk of mutual admiration, cooperation and “bridging the gap” between higher-paid “legacy” workers and those paid lower second-tier wages.
In the days since, members learned there would be no cap on second-tier hires, now accounting for 45 percent of FCA’s hourly UAW workforce; that most car production would be headed to Mexico in exchange for keeping the next-generation Jeep Wrangler in Toledo; that a proposed $3,000 signing bonus would be $500 less than four years ago.
What went wrong? Plenty. Start with the “Now is our time” rhetoric, a clear signal from bargainers that they would restore the status quo upended by Chrysler’s ugly slide into bankruptcy and its slow climb out under Marchionne. Add “bridge the gap,” which Williams explained this summer did not mean eliminating the second-tier hire — even if that is not how it was widely interpreted.
A contract “highlighter” one longtime industry analyst called the weakest and most poorly written he has ever seen failed to explain adequately a proposed health-care co-op pool. It did not detail how the pool would be funded, by whom and whether its creation would affect current benefits.
“What a mess — just a mess,” says Sean McAlinden, chief economist and vice president for strategic studies at the Ann Arbor-based Center for Automotive Research. “It’s just not a clever document. They disappointed too many expectations, both the first and second-tier workers.
“They not only didn’t bring a good deal to the rank and file. They under-performed for management. They can’t control their people. Somebody gauged this wrong, unless there’s a more complex strategy here by Williams.”
Namely, if Williams and UAW Vice President Norwood Jewell are convinced their restive FCA members would not approve a deal that creates two new tiers, fails to cap second-tier hires and leaves too many health care questions unanswered, the best way to prove it is to show Marchionne that it cannot be.
Worse, the business-savvy Williams may have committed a tactical error with his decision to announce the tentative agreement Sept. 15 alongside the hard-driving Marchionne. Such overt chumminess, rare in UAW-Big Three bargaining, can raise suspicions among old-timers accustomed to us-vs-them contention in auto talks.
“Negotiations is about trying to figure out how you can do the best for the membership, keep the company healthy enough that you don’t put them in a position to invest outside the country so there’s a future,” Jewell told The Detroit News in an interview Sunday.
“That’s what we thought we did. It’s the long-term, not just tomorrow. I feel good about what we negotiated. It may not be what people wanted, but I don’t believe we did some terrible job.”
A lot of members appear to disagree. As feared by Solidarity House, the social media tools available to anyone with a keyboard or smartphone are becoming far more destabilizing — and effective — in the ratification drive than they did in the run-up to a tentative agreement.
Bargaining team members showed the needed discipline, generally ensuring that discarded proposals did not become public. The rank and file, unhappy with the dearth of information, aren’t bound similarly.
It’s showing — on Facebook, Twitter feeds and voting results pointing to likely defeat in contract balloting. Should voting at FCA’s Toledo Assembly, Belvidere and Sterling Heights Assembly track voting so far, the proposed contract likely would be rejected.
The risks are manifold, each with public perception problems. Union leaders and FCA could extend the contract on a day-by-day basis while negotiations resume. Or union bargainers could turn their attention to General Motors Co. or Ford Motor Co., leaving Marchionne and the FCA rank and file to stew.
The union could choose to strike FCA, the weakest of Detroit’s three automakers in terms of cash or its ability to withstand anything more than a symbolic stoppage, particularly at its profit-rich Jeep or pickup operations.
Marchionne has wiggle room, should he choose to use it. McAlinden’s Center for Automotive Research estimates that labor costs account for roughly 4 percent of FCA’s total costs, less than its cross-town rivals. Its proposed second-tier wage rates would still run less than Toyota Motor Corp. and Honda Motor Co. pay in their U.S. operations.
Times have changed, in many ways irrevocably. Detroit’s automakers, chiefly GM and Ford, are making big money in the United States precisely because they have re-engineered their product portfolios, rationalized their manufacturing footprints and killed brands.
The UAW did the same, eliminating the practice of paying people not to work; axing cost-of-living adjustments that balloon labor costs; trading base-wage increases for enriched profit-sharing formulas; institutionalizing the use of second-tier hires as union bargainers already had in the sprawling supply base.
Snapping back to pre-bankruptcy days is tempting in a time of strong sales volume, comparatively low gas prices and a healthy appetite for the trucks and SUVs that fatten Detroit’s bottom line — conditions that do not last forever, much less four years.
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.