F Ford Motor Company

By Jeff Bennett And Christina Rogers 

United Auto Workers union members widely rejected a tentative contract offered by Fiat Chrysler Automobiles NV, dealing a blow to the union's president after he championed the deal as a fair bargain that addressed the inequities workers complained about.

The union confirmed Thursday the rank-and-file turned down the agreement with 65% voting against the deal.

"We don't consider this a setback; we consider the membership vote a part of the process we respect," UAW President Dennis Williams said.

Fiat Chrysler issued a statement saying it was disappointed with the results.

"The cyclical nature of the automotive business demands that while we must recognize the need for rewarding employees during times of prosperity, we must also protect against the inevitable market downturn, " the company said. "This agreement accomplished both of these objectives."

It is the first time a tentative national labor contract has been rejected by UAW members in 30 years, underscoring the level of discontent among factory workers and uncertainty about product commitments from the U.S.-Italian auto maker. UAW President Dennis Williams now needs to go back to the bargaining table to redraw an agreement that can be used as a pattern with General Motors Co. and Ford Motor Co.

Mr. Williams is slated to huddle with hundreds of UAW local officials on Thursday in Warren, Mich., to discuss the union's next step and whether flash-point issues with his membership can be resolved if he were to return to bargaining with Fiat Chrysler Chief Executive Sergio Marchionne.

Hourly workers cited several problems with the proposed pact, including frustration with a lack of clarity when a two-tier pay structure would be eliminated. Concerns about health-care benefits and a lack of U.S. investment commitments also weighed on workers.

"We built 511,000 vehicles last year in Toledo and we got a catered meal of hot dogs and hamburgers as our thanks while others, I'm sure, got big bonuses," said Phil Reiter, 44, who has been working at the Toledo, Ohio manufacturing plant for two years. "This is our time now. The UAW has given back and given back, making concessions after concessions. I think Sergio may have a hard lesson to learn here but we are ready for that."

The deals defeat became an all but certain outcome when workers soundly rejected the tentative agreement late Wednesday at a plant in Illinois. A UAW spokesman said the union will publish a final tally Thursday morning.

"This is a tremendous embarrassment here for the UAW and I think Mr. Williams has no other option but to go back and try and get a deal done, " said Gary Chaison, a professor of industrial relations at Clark University in Worcester, Mass. "He is in a real bind. The younger workers are revolting."

Mr. Williams had hoped to use Fiat Chrysler's contract--which includes a $3,000 signing bonus and a modified version of its two-tier wage structure--to wring higher payouts from the financially stronger Ford and GM. Both auto makers were already balking at the Fiat Chrysler accord saying it was "too rich" and would erode its competitiveness with the foreign auto makers.

But as voting got under way last week, it was clear Fiat Chrysler workers were taking issue with the UAW's inability to end the two-tier wage system during the life of the proposed four-year contract. Workers have been irked over the system that pays new hires about $9 less than veterans who are doing the same work.

Under the new proposal, assembly line jobs would 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. Workers hired within the last eight years, whose hourly pay is now capped at $19.28, would also get raises under the new wage progression but it would take longer for them to top out.

UAW Local 685 President Carl Greenwood said his local voted down the contract in large part to the two-tier wages. He will now travel to the Detroit area Thursday to be briefed on the union's next steps.

"Let's face it, if you and I work on the line and you get $28 and I get $16 and we do the same job, there is nothing fair about that," said Mr. Greenwood, whose local represents workers at the Kokomo, Ind., transmission plant. "I wanted to see the second tier have a road map to get to traditional wages and I don't mean over eight to 10 years, but in this contract."

A second flash point emerged when Mr. Marchionne said the company would move the majority of Fiat Chrysler's car production to Mexico but bulk up the U.S. plants with pickup truck and SUV production. For example, production of the Jeep Cherokee would be moved from the Toledo, Ohio plant to a factory in Belvidere, Ill.

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

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(END) Dow Jones Newswires

October 01, 2015 12:51 ET (16:51 GMT)

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