DETROIT — The UAW’s proposed contract with Fiat Chrysler Automobiles brings labor costs among the Detroit 3 more into balance, narrowing an advantage General Motors says FCA gained over the past decade by bribing union officials.
If the deal is ratified this week, it also would conclude one of the most chaotic and contentious rounds of contract negotiations in the union’s history, allowing newly installed UAW President Rory Gamble to focus on reforming the tarnished organization and staving off a possible federal takeover.
The FCA-UAW deal gives less-experienced hourly workers the same health care coverage as veteran employees, raises profit-sharing payouts and lets new hires earn top wages four years sooner. Almost two-thirds of FCA’s hourly workers were hired recently enough that they didn’t get top pay and the best health benefits under the old contract.
GM, in the racketeering lawsuit it filed last month, argues that FCA tipped the playing field in its favor by corrupting the union’s previous two contracts. The legal wrangling could take years to play out, but FCA’s edge over its domestic rivals — improperly attained or not — could be largely negated by expensive concessions the company designed to win support from distrustful workers.
It’s the only one of the new Detroit 3 labor contracts to meaningfully increase bonuses and health benefits. Still, there’s no guarantee it will pass.
FCA workers learned four years ago that they could get a better deal by rejecting the first one offered to them, but the gains in the agreement could be hard for some to pass up. A Warren Truck Assembly Plant worker, Ken Mefford, said the big checks workers would get this month alone — $9,000 for ratifying the deal, plus a 4 percent bonus — should be enough to make the contract sail through.
Art Wheaton, a labor expert at Cornell University, said FCA had little choice but to absorb extra expenses to reduce the risk of a contract rejection as it attempts to merge with France’s PSA Group. He said the cost gap FCA has enjoyed is shrinking.
“They need to make sure they’re keeping pretty close to the pattern,” Wheaton told Automotive News, “or you risk not ratifying it, and what is the cost in the PSA merger for not getting an agreement?”
FCA has had an $8-an-hour edge over GM over the past four years, compared with a $5.35 disadvantage for Chrysler in 2006.
“A lot of that is related to the level of in-progression employees, and FCA has quite a few more than GM and Ford,” said Colin Lightbody, a former FCA negotiator who is president of consulting firm HR & Labor Guru. “By reducing the wage progression period to four years from eight, that will quickly close that gap.”
FCA’s in-progression employees — the 64 percent of its workers who were hired since 2011 — no longer would have reduced health care, dental and vision coverage under the new contract. Temps, who make up around 13 percent of the work force, would get prescription drug coverage for the first time. The UAW estimates about 3,800 FCA temps would attain full-time status in 2020.
The tentative agreement, reached Nov. 30, calls for FCA to create 7,900 jobs with $9 billion in U.S. manufacturing investments through 2023. The figures include 6,500 jobs and $4.5 billion previously announced.
The UAW valued the deal at an extra $29,500 over four years for an average production worker, matching the economic gains in the Ford Motor Co. contract ratified last month. Like the GM and Ford deals, FCA workers will get 4 percent bonuses this year and in 2021 and 3 percent wage increases in 2020 and 2022.
Profit-sharing payouts would rise 13 percent, to $900 per 1 percent of FCA’s North American profit margin. FCA paid significantly less in profit-sharing under the previous contract than Ford and GM, which use a different formula and have generally posted higher profits.
“It’s good for GM, Ford and Fiat Chrysler to have similar benefits structures and packages for the long-term profitability for all three companies,” Wheaton said. “Chrysler is, like, on their fourth or fifth either bankruptcy or buyout or shake-up or merger, so they’ve always been a little harder to bring into the pattern.”
GM’s lawsuit alleging FCA compromised prior contracts and the ongoing federal investigation into former UAW and FCA officials added pressure for UAW negotiators to secure gains for the membership.
The union last week announced financial reforms aimed at preventing future misdeeds. The changes, and others by Gamble, who was appointed to serve the remainder of Gary Jones’ term as UAW president last week, are aimed at restoring the union’s stability and dignity while simultaneously finishing negotiations.
“There are difficult decisions that will need to be made in the coming months for our members,” Gamble said last week. “But I promise one thing, when I retire and turn over this office, we will deliver a clean union on solid footing.”
The UAW’s continued independence might hinge in part on the success of that effort.
U.S. Attorney Matthew Schneider in Detroit last week said a government takeover of the UAW is a possibility. Gamble has admitted he’s “worried” federal authorities might place the UAW into receivership if they file racketeering charges.
Michael Martinez contributed to this report.