Chrysler-UAW Labor Pact Solves All The Big Problems Except One

Joann Muller ,

FORBES STAFF

Fiat Chrysler Automobiles CEO Sergio Marchionne, left, and UAW President Dennis Williams (AP Photo/Paul Sancya, File)

Fiat Chrysler Automobiles and the United Auto Workers union Tuesday reached a tentative deal on a new four-year labor contract that includes plans for an industry co-op to manage rising health care costs and provides a path for lower-paid workers to improve their living standard.

Health care and the controversial two-tier wage structure adopted in 2007 were among the most vexing issues facing the two sides, which reached a deal Tuesday evening after a marathon bargaining session.

At a hastily called news conference, UAW President Dennis Williams and FCA Chief Executive Sergio Marchionne were deliberately vague on details, saying they need to give union leaders and members an opportunity to review the contracts. But Williams and Marchionne both said the deal achieved their respective goals.

“I believe the tentative agreement is balanced and still keeps us in a competitive place,” Williams said. “The UAW set three goals when we started this process…One, we wanted to start giving a path to our membership (to higher wages). We wanted to reward the UAW members for their sacrifices over the past several years. And finally, we wanted to find a way to deal with escalating costs of health care. We believe that we have met those goals.”

Marchionne suggested the inequities of the widely hated two-tier wage scale were addressed in the new contract by providing “a trajectory of career development” for new hires. “I think that the team has crafted what I consider to be a very carefully thought-through process whereby that issue will go away over time,” he said, declining to provide further details.

The CEO also praised Williams’ initiative in trying to create an industry-wide health care co-op that would achieve greater purchasing power by covering a larger population of workers. Marchionne said a health care co-op is “embedded in spirit of the agreement and I certainly hope it is approved.”

Still, Marchionne seemed unsatisfied by the impact of the labor deal on his company’s overall business. “The economics of the deal are almost irrelevant,” he said, quickly adding that he knows the details are “important to the people.”

But he said the most difficult issue – the industry’s waste of money by developing similar versions of the same technology – “is something the remains unsolved.”

Labor costs “pale in comparison” to the magnitude of the synergies FCA could achieve if it merged with another automaker, he said. Now that a tentative labor deal has been reached, Marchionne said he will shift his focus to “the remainder of my objective, which now becomes my first priority.”

Marchionne has been a crusader for industry consolidation, saying he thinks General Motors would make a perfect merger partner for FCA. But GM chief executive Mary Barra told reporters Tuesday in Frankfurt that GM’s board had studied the idea and concluded a merger was not in the best interests of GM shareholders.

As for the tentative labor agreement, it still must be ratified by the union’s rank-and-file members over the next couple of weeks.

Meanwhile, the UAW will turn its attention to winning contracts at GM and Ford Motor. Williams said the tentative agreement with Chrysler sets a pattern he feels GM and Ford can match, but suggested those automakers, which are more profitable than FCA, can afford to share more of their wealth with workers.

“I don’t want people to think for one minute that I’m not looking at the other companies and the amount of money they’ve made,” said Williams. He did not indicate which company the UAW will focus on next.