UAW Rallying Support for Fiat Chrysler Contract with Promise of Higher Wages – Wall Street Journal

Posted: Friday, October 09, 2015

Fiat Chrysler Automobiles CEO Sergio Marchionne, left, and United Auto Workers President Dennis Williams.
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NV, agreed to boost a top wage rate as it gradually overhauls a controversial factory-worker pay system, handing a victory to the United Auto Workers union that had threatened to strike.

The tentative agreement, which is expected to be presented to local UAW officials on Friday and put to a union vote later, would raise the maximum pay of newer hires to $29 an hour, similar to the top rate for veteran workers, according to people familiar with the deal.

The four-year deal allows Fiat Chrysler plenty of time to close the gap between newer and veteran workers’ pay, phasing in raises over an eight-year period that could keep its wages below its bigger Detroit rivals.

Union approval would empower UAW President Dennis Williams to push for a similar deal with Ford Motor Co.
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and General Motors Co.
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, which are both operating under contract extensions.

Investors cheered the deal sending Fiat Chrysler’s stock up 4.6% to $15.50 in 4 p.m. trading on Thursday.

Last week, Fiat Chrysler workers rejected a proposal that didn’t immediately end the two-tier wage system by a nearly two-thirds majority, forcing the union and company back to the negotiating table and under a strict deadline. The UAW on Tuesday warned it might strike if an agreement wasn’t reached by midnight on Wednesday.


The new proposal provide for a maximum hourly rate that is a roughly 16% improvement over the $25 an hour wage offered in the earlier proposal. The top rate for newer workers is about equal to the hourly rate offered to workers with greater seniority.

Two-tier pay has been a flash point for UAW members. Union workers for years pushed to eliminate separate pay rates for the same work, shouting their demands loudly at union conventions and wearing T-shirts with the slogans: “no more tiers” or “bridge the gap.”

Some workers signaled that the eight-year period is too long. “The contract expires in four years,” said Brian Keller, a 46-year-old Fiat Chrysler worker. “That means they can renegotiate that.”

Detroit auto makers embraced the wage system as a way to lower their fixed costs. Last decade, they embraced two-tier wages along with the increased use of temporary workers and swapped fixed pay hikes for one-time bonuses or profit-sharing checks.

The average U.S. auto worker earns about $27.50 an hour today, down from an hourly rate of $29 a decade ago, according to the U.S. Labor Department. But that is still higher than the roughly $20 an hour earned by other manufacturing workers.

Profit-sharing has soared as U.S. auto makers once again collect rich margins from soaring demand for their pickup trucks and sport-utility vehicles. Checks worth thousands of dollars now are a typical part of an auto worker’s life, handed out shortly in January after the fiscal-year end.

GM and Ford still have higher wage costs than their largest foreign rivals, and the Fiat Chrysler deal sets a steep precedent. As U.S. union auto workers get raises, Toyota Motor Corp.
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, Honda Motor Co.
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and others could benefit.

“We are just trying to maintain our standard of living,” said Melvin Thompson, a veteran factory worker at Fiat Chrysler’s Warren, Mich., truck plant who hasn’t an hourly raise in eight years. “We are just looking for some fairness here.”

The contract is a throwback in other ways as well. The latest Fiat Chrysler deal restores free legal services for union members and provides double-time pay on Sunday—two benefits that had been cut out of past contracts.

Analysts estimated the previous deal, which capped entry-level worker pay at about $25 an hour, would have increased the company’s hourly labor costs by at least 10%, or about $500 million, in the first year of the contract, bringing them closer to $54 an hour. With a higher cap, the labor bill will likely be higher without any other cost concessions.

Write to Jeff Bennett at jeff.bennett@wsj.com and Christina Rogers at christina.rogers@wsj.com

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