After a marathon push, Fiat Chrysler Automobiles reached a tentative agreement with the United Auto Workers late Tuesday that is expected to become a template for contracts with General Motors and Ford Motor Co.
The settlement was announced more than 19 hours after the union granted FCA U.S. an hour-by-hour extension of the previous 4-year contract to avert a potential strike that could have proved costly to both sides.
While specific details have not been released, UAW President Dennis Williams said the settlement with FCA meets all three of the union's top objectives, including job security, better wages and improvements for second-tier workers earning barely half as much as senior colleagues.
Williams hinted that senior workers also will get a pay increase as part of the agreement, which still must be ratified by the company's 40,000 unionized employees in the U.S.
The proposed contract also includes language that will start the industry towards placing the health-care resources into one giant pool, sources indicate. The two-tier wage system that has been featured in UAW contracts since 2007 also appears headed for elimination.
“We believe we have met those goals," Williams said. "But ultimately that’s up to the members to decide.”
Williams also said during a post-settlement press conference that he believes the tentative agreement will be acceptable when it is presented to GM and Ford, where more than 100,000 workers are currently working under contract extension. It is the norm for the UAW to focus on just one manufacturer as the contract deadline approaches, aiming to come up with a pattern-setting agreement it then can take to the other two companies.
FCA’s U.S. chief executive Sergio Marchionne said the two-tier wage system, where new workers receive less than senior employees doing the same job, “will go away over time.” He did not provide details, but added that the contract includes ways to raise the wages of employees as they learn more and become more adept at their jobs.
The two-tier system was established under duress as the U.S. auto industry plunged into a financial recession that ultimately drove the former Chrysler Corp. and General Motors into bankruptcy. Various concessions by the UAW helped all three of the domestic manufacturers to slash labor costs by as much as $20 an hour, putting those costs more on a par with so-called transplant assembly plants in the U.S. owned by foreign brands like Toyota, Hyundai and Volkswagen.
At FCA, 43 percent of the hourly UAW workforce earns the lower-tier wages.
Marchionne said the wrapping up of negotiations with the UAW will free him to spend more time on pursuing a merger or consolidation that will reduce the amount of capital required to run an auto company today. "It's necessary," Marchionne said during a press conference.
The executive remained in Detroit to see the contract talks through their final push. He had been expected to attend the Frankfurt Motor Show in Germany to meet with reporters and industry analysts.
While Detroit automakers said they needed to ensure wages didn’t rise under their new, four-year contracts, they faced heavy pressure from the UAW rank-and-file in the wake of strong profits they have reported lately.
FCA’s North American operating profit in the second quarter reported on July 30 was $1.35 billion, up 37 percent from the previous year.
Going into this year’s negotiations, the UAW was freed up from a key restriction on calling strikes placed on it as part of the 2009 federal bailout of GM and Chrysler. But UAW chief Williams indicated going in that he would view a strike as a “failure.”
The union feared that a strike would hurt short-term wages, but also impact longer-term sales and market share for any targeted company, making it more difficult to ensure jobs.
The UAW also worried that a strike would scare off workers at those transplant factories that have long resisted unionization. The UAW recently scored a big victory when it was authorized to sign up workers at the VW plant in Chattanooga, Tennessee.
Now, by showing it was able to make big gains without confrontation, the UAW hopes it can up workers at other foreign-owned factories.
Proponents of organized labor also hope that the success of UAW talks in Detroit will embolden workers in other industries where pay has stagnated in the face of economic uncertainty and global competition.
“The stakes go well beyond Detroit and the automotive industry," said Harley Shaiken, a long-time labor analyst and author based in California.
Paul A. Eisenstein contributed to this report.
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