UAW Pact With Fiat Chrysler Lifts Wages, Profit-Sharing
September 17 2015 - 05:30PM
Dow Jones News
The United Auto Workers union's new tentative labor pact with
Fiat Chrysler Automobiles NV will boost pay for hourly workers and
recast the profit-sharing formula so factory employees get bigger
profit-sharing checks in good times, say people familiar with the
matter.
While it appears labor costs will go up, Fiat Chrysler is
looking to offset the increase by moving some U.S. car production
to Mexico where labor costs are cheaper, according to one person
briefed on the plans. The Italian-American auto maker will then
backfill those factories with more lucrative trucks and
sport-utility vehicles, this person said.
The agreement, which must be ratified by membership vote, will
reshape the way Fiat Chrysler's 36,000 hourly workers are
compensated and set a high bar for larger Detroit rivals General
Motors Co. and Ford Motor Co. to match during this round of
contract talks.
Under the proposal, assembly line jobs will get a new starting
wage of $17 an hour—about $1 higher than it is now—and newer hires
will top out at about $25 an hour, the people say.
Workers hired within the last eight years, whose hourly pay is
now capped at $19.28, will also get raises under the new wage
progression but it will now take them longer to top out, these
people said. Today, they hit the wage cap after four years.
Veteran workers—those hired before 2007—will get pay increases
through a combination of lump sums and base-wage increases. That
will raise their hourly pay to over $30 during the life of the
contract, up from $28 now, these people say. Their higher wage,
however, will gradually disappear as they retire or leave the
company, replaced by the new pay scale.
As a sweetener, the agreement offers workers a $3,000 signing
bonus if the deal is ratified and pledges $5.3 billion in new
investment at its U.S. plants over the next four years, say sources
briefed on the deal.
UAW President Dennis Williams says the deal gives newer workers
a path to better pay, rewards members for their sacrifices in
tougher times and takes steps to curb fast-rising health care
costs.
"We believe that we have met those goals, but ultimately our
membership will make the final decision," Mr. Williams said.
But it's a risky strategy for Fiat Chrysler, which is banking on
strong SUV and truck demand to hold up in a cyclical industry
vulnerable to gas price fluctuations.
UAW members will be briefed on the contract details in the
coming days and shortly after, vote on whether to ratify it. A UAW
spokesman didn't immediately respond to a request for comment.
Union and company leaders are hoping the new pact will address
one of the membership's biggest gripes: a contentious two-tier wage
structure that has lowered labor costs for the U.S. auto makers but
has frustrated many workers.
The arrangement, adopted in 2007 to keep the then-financially
distressed companies afloat, pays newer hires about $9-an-hour less
than their more senior co-workers for doing the same job.
About 45% of Fiat Chrysler's hourly workers earn the lower wage,
compared with less than 25% at GM and Ford.
The new labor deal doesn't eliminate the old two-class wage
structure immediately but rather phases it out over time—a move
that could be a sticking point for UAW leaders looking to get the
contract ratified.
At rallies and conventions, UAW workers have loudly called for
its elimination in this agreement.
To bridge the pay gap—a phrase favored by UAW leaders—the pact
will give newer hires a richer profit-sharing formula, allowing
them to outearn their veteran counterparts in good years.
The formula will be tied to company profitability, targeting
margins of 8% to 10%, said one person familiar with the
details.
As part of the agreement, Fiat Chrysler will move production of
two cars, the Chrysler 200 and Dodge Dart, to Mexico, following a
move this summer by Ford to do the same with its Michigan-built
Focus compact car.
Fiat Chrysler will then reshuffle Ram truck and Jeep production
to fill the voids.
Trade publication Automotive News first reported the
car-production shift Thursday.
Write to Christina Rogers at christina.rogers@wsj.com and Jeff
Bennett at jeff.bennett@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
September 17, 2015 17:15 ET (21:15 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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