UAW Touts Retooled FCA Deal to Skeptical Membership

After suffering a stinging defeat when the first proposed contract was decisively rejected by UAW members, the union is getting ready to sell a revamped deal with FCA US to a still-skeptical rank and file.

Union bargainers insist they have addressed key objections to contract, which was rejected by a 65%-35% margin earlier this month, by offering workers what it calls a“clear path” away from the unpopular 2-tier wage system the union accepted in 2007.

UAW President Dennis Williams, who was embarrassed by the rejection of the first tentative agreement, says the union has won several important changes that should make the new deal more palatable to FCA’s blue-collar employees.

“We returned to bargaining with a clear mandate to fight for a contract that gives all members a clearly defined path to fair pay and a decent standard of living,” Williams said in announcing the retooled proposal last week.

The changes include a major pay increase that effectively will eliminate the second tier by guaranteeing workers will reach the top pay grade after eight years of service. A substantial portion of workers now on the second tier would reach the first tier by the end of the proposed contract in 2019, UAW representatives say.

Nevertheless, the proposed contract still faces significant hurdles, including the doubts of workers who feel shortchanged under the current contract and believe the union has lost its traditional independence as it helped the then-Chrysler Group recover from its 2009 bankruptcy.

Harley Shaiken, a labor expert at the University of California-Berkeley, says UAW leaders have been aware for some time about the need to put the union on a more independent footing at FCA. He points to the changes pushed by former UAW President Bob King, who shuffled personnel inside the union’s Chrysler Dept. before he retired as evidence the UAW was aware of complaints it had become too close with FCA management led by CEO Sergio Marchionne.

During the UAW’s bargaining convention last spring, delegates, including many shop-floor workers, complained about grueling work schedules and lack of family time that was eroding morale inside the FCA production machine.

Narrowing Wage Gap

In addition, while Marchionne said he didn’t like the 2-tier system, either, FCA management was content to leave it in place because it opened a $10-per-hour wage gap in the automaker’s favor over archrivals General Motors and Ford, according to data compiled by the Center for Automotive Research in Ann Arbor, MI.

CAR estimates GM’s average hourly labor cost in the U.S., including benefits, is $58, while Ford’s is $57 and FCA’s is $48. Toyota’s average cost is $48 per hour and Nissan’s is $42.

While labor today accounts for only 7%-8% of the cost of a vehicle, the gap still gives FCA an extra bit of margin to use in the ongoing marketing wars in the booming truck segment.

FCA’s production plans also could become an issue as the voting unfolds, particularly at big assembly plants in Toledo, OH, and around Detroit where workers are uncertain about future plans and of the impact of those plans on seniority, which after wages is the most important issue among individual workers.

The issue could be particularly critical in Toledo, where more than 80% of the workers voted against the first proposed contract and now is faced with the loss of Jeep Cherokee production and only vague promises of a replacement.

Bill Parker, former president of UAW Local 1700 in Sterling Heights, MI, says workers also don’t want to see FCA car production move to Mexico, as the automaker has indicated it might do as it concentrates truck output in its U.S. plants.

Union leaders hope to overcome the objections with a combination of persuasion and warnings that a second rejection could lead to a strike in which there would be no winners. Williams also is promising the UAW will be consulted before products are shifted around.

The union also will stress financial gains in the proposed contract, starting with the fact that current members “in progression” – that is, in the second wage tier – under the current contract would see an hourly pay increase of more than 50% from the $19.50 currently paid to workers with four years of service.

“In-progression employees with four years of service will be paid traditional wages by the end of this contract,” according to a statement from the UAW. ‟That’s more than $10 per hour in wage increases for many. In-progression members with two years of service will receive more than $8 per hour in base wage increases by the end of the contract.”

The union has negotiated other improvements from FCA, including a richer profit-sharing formula paying each employee $800 for every 1-percentage-point increase in North American profit margin and an increase in the ratification bonus, which is paid immediately, to $4,000 from the $3,000 in the rejected contract.

The revamped proposal also includes an increase in the company’s 401(k) contribution rate to 6.4% for second-tier workers not eligible for the traditional defined-benefit pension plan that is part of the compensation package for workers hired before 2007.

The defined-benefit plan itself is bolstered by FCA’s promise to provide a $1.7 billion contribution to the pension fund over the life of the 4-year contract.

UAW negotiators also responded to workers’ concerns about the alternative work schedules employed by FCA, which have been the source of complaints and protests over the past two years. Union members say those complaints were not addressed in the rejected contract.

UAW and FCA representatives will meet to consider other alternative schedules within 60 days of ratification of the tentative contract.

The union says the revised proposal places new limits on the number of consecutive Fridays members scheduled for daily 10-hour shifts, four days a week, can be required to work.