UAW Intent on Closing Wage Gap at FCA

DETROIT – The auto industry’s return to profitability and the general upturn in the economy have strengthened the UAW’s hand heading into this year’s contract negotiations, union President Dennis Williams says as talks with FCA US begin in Detroit.

“We’re in a strong position,” Williams tells reporters after an opening ceremony during which he exchanged some friendly banter with Sergio Marchionne, CEO of FCA US.

Williams says he views the negotiations as an opportunity to resolve problems, which include stagnant wages for long-term employees and the lack of a clear wage progression that would serve to elevate the hourly pay of entry-level workers until it matched those of veteran employees. The 2-tier wage system was a stopgap measure adopted to help the industry through the crisis of the late 2000s and should be phased out, he says.

The inequity is sharper at FCA than at General Motors or Ford because 43% of the automaker’s blue-collar workers are assigned to a tier twice as high as that of its larger rivals. Entry-level wages range from $15.78 an hour to $19.28, compared with $28 an hour for older employees.

“Profit sharing has helped,” Williams says, but the pay for FCA’s second-tier workers still falls short of supporting a middle-class lifestyle and new employees “feel like second-class citizens.”

Adds UAW Vice President Norwood Jewell, the union’s lead bargainer in talks with FCA: “We’re here to share the prosperity (that) collaboration has benefited all of us. We must work together, but it’s our time to bridge the gap. Manufacturing sets the tone for the entire economy, and we will forge a contract we can all win.”

No Strike Target Yet

Williams says the union plans to stick to its tradition of pattern bargaining, in which a contract negotiated with one automaker is adopted by the others. The UAW has not yet singled out a company, which typically also is named a strike target if the talks falter.

Marchionne says he would consider a strike against FCA a “personal failure” on his part. The collaboration between the union and the old Chrysler Group has benefited both sides, leading to the creation of 10,000 new jobs and North American profit of $3.5 billion in 2014.

The collaboration also helped save the health-care benefits of thousands of Chrysler blue-collar retirees by creating a Voluntary Employee Beneficiary Assn. that raised $11 billion to relieve the bankrupt automaker of the cost of those benefits.

Nevertheless, Marchionne makes it clear FCA has no choice but to be mindful of the competitive pressures on the company. “We have to make a profit to pay people, to put it crassly,” he says, adding the contract must be structured to protect the automaker during a slump in sales.

“The downturns in this business can kill you,” he says.

Marchionne also emphasizes that while he still believes consolidation is necessary in the auto industry, none of the mergers he has contemplated, including one with GM, would eliminate blue-collar jobs.

The implementation of FCA’s world-class manufacturing system with the help of the union also has been a major success, eliminating waste and improving productivity, the CEO says.

For the first time since 2007, when the union staged a brief walkout over terms at Chrysler, the UAW will be allowed to call a strike at midnight Sept. 14 if there is no agreement and FCA has been selected as the target. The terms of the 2009 federal bailout of the bankrupt Chrysler Group, which has morphed into FCA US under Marchionne, prohibited a strike the last time the company and union negotiated a contract in 2011.