The United Auto Workers has targeted Fiat Chrysler Automobiles (FCA) as lead negotiator on a new wages and benefits contract for over 140,000 unionised factory workers at the Detroit Three automakers, the automaker and union announced at the weekend. The UAW did not elaborate on its decision to choose FCA to set the pattern for new master contracts it will negotiate later with General Motors and Ford.
A Reuters report noted FCA chief executive Sergio Marchionne has been the most vocal among Detroit CEOs in calling for an end to the current wage system under which recently-hired UAW workers earn about 40% less per hour than union veterans on the assembly line. UAW leaders have called for narrowing or eliminating the pay gap, pointing to the robust profits rolling in from sales of the trucks and sport utility vehicles UAW members build. If FCA and the UAW cannot come to terms, the union could order strikes, potentially hobbling FCA's production of its highest-profit US models.
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The news agency report noted the UAW's lead negotiator at Chrysler, Norwood Jewell, has said in messages to members that job security and pay increases are his top priorities. Looming over the UAW's negotiations with FCA, GM and Ford are the growing number of US auto plant workers who are not members of the union and work for European and Asian automakers in the southern United States.
The more flexible work rules at non-union factories, and in certain cases lower wages and benefits, could put limits on the UAW's aspirations, analysts told Reuters.
Contracts for all three Detroit automakers expire late Monday night (14 September).
Kristin Dziczek, labour analyst at the Center for Automotive Research, told Reuters the two larger companies "are not going to choke on a Fiat Chrysler pattern."
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By GlobalDataThe two-tier pay system is one of several, interlocking issues on the table between the UAW and FCA. Currently, veteran UAW workers make about US$28 per hour while newly-hired workers make between $15.78 and $19.28 per hour.
Marchionne has said he would consider a deal that lets current top-tier workers keep their higher pay rates during a transition to a new system under which all workers would make the same basic hourly wage. Marchionne has indicated he would set that base rate below the current top tier, but offer the potential for larger profit-sharing cheques when times are good.
"I firmly believe in wealth distribution," Marchionne said in July when the talks formally started.
According to Reuters, about 45% of FCA's hourly US workforce of about 36,000 earn second-tier pay while lower-paid Ford workers account for 28% and at GM the lower rung is 20%.
The automakers and the union have said they are discussing a cost-saving healthcare collective that would pool all 142,000 active UAW members at the Detroit Three into a single plan. Adding UAW retirees to the pool would mean a collective about 1m strong with considerable bargaining power, Reuters said.
Ford, GM and FCA say they must protect against a downturn in a cyclical industry. But the cost of labour is less and less important to a vehicle's overall cost, according to economist Sean McAlinden of the Center for Automotive Research. Labour's share of vehicle price for the Detroit Three last year was 6.7%, down from 15% in 2008, he told Reuters.
