Pending Fiat Chrysler merger could complicate UAW talks

Breana Noble
The Detroit News

The potential merger between Fiat Chrysler Automobiles NV and French automaker Groupe PSA of the Peugeot brand could complicate contract talks between FCA and the United Auto Workers.

Fiat Chrysler under the proposed combination would surrender majority control of the new company's board of directors to PSA, and some UAW members fear a combined company would pit them against European workers for product allocation. But a bigger and richer company could better compete in the future and provide opportunities to produce more in the United States.

"You don’t necessarily have full and complete trust," said Art Wheaton, an automotive industry specialist at Cornell University's Industrial and Labor Relations School. "People get nervous when you change the name of your company. It makes you nervous and ask, 'Are you really here to invest in us?' That can make it difficult at the bargaining table."

Bargaining between Fiat Chrysler and the UAW continues as Ford Motor Co. members this week begin voting on a tentative agreement that follows a pattern set by General Motors Co. and includes wage increases, no additional health care costs and a pathway for full-time production employees to reach the top of the pay scale. Fiat Chrysler employees are continuing to work under an indefinitely extended 2015 contract.

Some Fiat Chrysler workers fear a merger would pit them against European workers. But a combined company could also provide opportunities to produce more in U.S.

If FCA is the third Detroit Three company to ratify a deal as expected, it will have the least amount of flexibility, experts said, but it still could be a challenge to make a settlement. Temporary and lower-paid production employees account for about a quarter more of Fiat Chrysler's workforce than that of its crosstown rivals, which means pathways for those employees to full pay would be costlier for the company.

The federal government also has identified Fiat Chrysler as a co-conspirator in a UAW corruption probe involving bribes and misused union and training center dues, raising questions about the sanctity of labor talks in 2015. Former Fiat Chrysler Vice President Alphons Iacobelli is one of 10 people convicted and 12 people charged in the investigation that also implicates top union leaders, including UAW President Gary Jones. Jones has not been charged, but on Saturday he was placed on paid leave. Rory Gamble, head of the union's Ford Department, is filling in for the interim.

"That will be more of a distraction or concern than the potential merger," said Carla Bailo, CEO of the Center for Automotive Research in Ann Arbor.

Some Fiat Chrysler employees expressed trepidation about the proposed partnership with PSA after reading news reports about the French company cutting jobs to turn profits and moving production from Europe. With the help of thousands of job cuts, PSA CEO Carlos Tavares, who would lead the combined company, made profitable the Opel and Vauxhall brands that lost money under GM for decades. Under the proposed plan with Fiat Chrysler, there would be no plant closures, according to a combined statement from the companies.

"The new deal could, well, it will provide the capital for potential new technology and new vehicles," said John Barbosa, 49, of Clinton, a team leader and machinist at Fiat Chrysler's Dundee Engine Plant. "But my concern with that is they will use the Europeans and Americans to whipsaw and compete for product."

The proposed deal announced last week would bring together the strengths of Fiat Chrysler in the Americas and of PSA in Europe to create economies of scale, purchasing power and $4.1 billion in annual cost savings based on "synergies" from the consolidation of vehicle platforms, powertrain and technology. Leaders said they expect to have a memorandum of understanding in the coming weeks, but if a merger is successful, it could take a year or more before it closes, experts said.

Fiat Chrysler CEO Mike Manley last week in an email to employees emphasized "synergies are NOT based on closing plants," as is common with major mergers and acquisitions. A tie-up would more likely to affect the manufacturing headcount in Europe than in the United States because PSA does not have a manufacturing presence here, experts said. Instead, Fiat Chrysler is increasing its capacity with a new assembly plant on Detroit's east side, which would not be affected by the merger.

"As far as mergers go, this one is probably the least threatening," said Kristin Dziczek, vice president of industry, labor and economics at the Center for Automotive Research.

White-collar employees in the United States would be at greater risk of redundancies than production workers, said Rebecca Lindland, founder of, an auto industry and reviews website.

On how the merger would affect negotiations, a Fiat Chrysler spokeswoman referred to an earlier statement saying the company continues bargaining with "the goal of reaching an agreement that will allow us to continue investing in our future while creating opportunities for our employees, their families and the communities where we live and work."

A PSA spokesman declined to comment.

Not only would PSA's CEO lead the combined company, but PSA would nominate an additional five members to its 11-member board, creating an effective majority.

If the merger does happen, experts said that especially in future years it presents a potential opportunity for the UAW, which did not respond to inquiries about the deal. Combined, the companies represented $7.3 billion in profits in 2018 compared to Fiat Chrysler's $4.1 billion alone.

"They could negotiate a bigger piece of the pie, maybe," Lindland said.

A merger with PSA wouldn't affect profit sharing right away, which is calculated based on the company's profit margins in North America. But the tie-up could give the UAW a chance to advocate for its employees to build more products for the new company.

"How do they petition to potentially be involved in Peugeot products for exports, for instance?" Lindland said. "Is there an opportunity to brand some FCA products as Peugeot for export?"

Key to the merger also is PSA's existing electric vehicle powertrains and the size of a combined automaker to invest in future technology sooner to continue to compete in the global auto industry in the future. But conventional drivetrains have as many as 2,000 parts, while electric ones can consist of fewer than 20 without multi-speed transmissions, radiators, exhaust systems and more. Battery production also tends to be more automated. That could put jobs at risk.

A 40-page report from the UAW released earlier this year discusses the "implications" of electric vehicles and how to address them. One of the greatest concerns in "Taking the High Road: Strategies for a Fair EV Future” is that companies would outsource their parts to non-union suppliers.

PSA buys batteries from South Korea's LG Chem Ltd. and China's Contemporary Amperex Technology Co. Ltd., but has plans to produce them in Slovakia and Spain. Fiat Chrysler buys batteries from LG Chem's facility in Holland and from South Korea's Samsung Group. FCA said last month it will build a battery assembly complex in Italy.

The UAW "could try to use these negotiations to steer as much as that business to locate here like battery production," said Marick Masters, a management professor at Wayne State University's Mike Ilitch School of Business. "Any merger comes with its own concerns, but I think the wave of the future is one involving consolidation."


Twitter: @BreanaCNoble

Staff Writer Kalea Hall contributed.