UAW Threatening Strike at Fiat Chrysler -- 2nd Update
October 06 2015 - 2:53PM
Dow Jones News
By Christina Rogers And John D. Stoll
The United Auto Workers is threatening to strike Fiat Chrysler
Automobiles NV by Wednesday night, signaling a breakdown in efforts
to salvage a labor deal widely rejected by members last week.
The UAW, representing 40,000 Fiat Chrysler employees in the
U.S., said it plans to strike if it can't reach a deal by Wednesday
at midnight, at which time a contract extension expires. If the
union follows through on its threat, it would represent the first
walkout in a contract against a U.S. auto maker since before the
Detroit car companies filed for bankruptcy in 2009.
The UAW was barred from striking General Motors Co. and Fiat
Chrysler since 2009 as part of the Treasury Department's bailout
deal with the auto makers and its biggest union. That restriction
was lifted this year.
The union carried out a short strike against GM in 2007. At that
time, the UAW's strike fund was nearing $1 billion, but it has
shrunk after leaders used a big portion of that account to fund
unsuccessful organizing drives in southern states. The strike fund
equaled about $600 million at the end of 2014, enough to support a
prolonged walkout.
The UAW has a spotty track record when it comes to playing tough
with Chrysler. Nearly a decade ago, then- DaimlerChrysler AG Chief
Executive Dieter Zetsche was shot down in his call for health-care
cost cuts. The German auto giant responded by putting Chrysler up
for sale, a move that likely hastened the unit's path to bankruptcy
court.
Now run by Fiat Chrysler Chief Executive Sergio Marchionne, the
company has been aiming to find a partner to help shoulder
development costs and boost scale. Mr. Marchionne expected UAW
President Dennis Williams to deliver a deal that was favorable to
that pursuit, but the prospect now appears to be fragile.
Mr. Williams earlier this week told UAW workers his leadership
team would do a better job of communicating with them about
proposed contract changes. While the proposed deal offers factory
workers raises and bigger bonus checks, it fails to eliminate a
controversial two-tier wage structure that has angered many members
and made none of the new investment pledges customary in such
deals, prompting worries about job security.
Fiat Chrysler and the UAW extended a four-year labor pact in
mid-September, and came to a tentative agreement shortly after the
extension. Last week, UAW members rejected the offer, marking the
first time in 30 years a master labor contract from a Detroit auto
maker had been shot down by the rank-and-file.
The union's brass is indicating time is running out on
bargaining for a new deal. GM and Ford Motor Co. have extended
contracts as well past a Sept. 14 deadline, but both are waiting on
a Fiat Chrysler deal to be ratified before they resume
bargaining.
The strike notice comes after UAW bargainers, meeting with Fiat
Chrysler officials Monday, hit a roadblock with the company
refusing to sweeten the tentative deal struck last month, according
to a person familiar with the process.
At this point, it is unclear if the UAW would strike all of Fiat
Chrysler's 18 assembly and parts plants in the U.S., or employ
targeted stoppages that hit strategic production pinch points. UAW
officials have told workers at the company's transmission plant in
Indiana for a work stoppage, for instance, a move that would shut
down plants that make Jeeps and Ram trucks--the most profitable of
Fiat Chrysler's vehicle lines in the world.
A prolonged walkout would deliver a blow, denting a huge chunk
of its revenue and hurting profitability at a time when its North
American margins are already far behind those of its two larger
U.S. rivals. Based on its most recent financial report, shutdown of
North American production could cost more than $300 million a day
in lost revenue, or $18 million a day in lost operating profit. The
auto maker's U.S. unit posted a 6% operating margin in the second
quarter.
"The company continues to work with the UAW in a constructive
manner to reach a new agreement," a Chrysler spokeswoman said.
Fiat Chrysler was formed in 2009 following the bankruptcy of
Chrysler, and has rebounded amid a broader comeback for the U.S.
auto industry. In September, the Italian-U.S. auto maker posted its
66th-consecutive sales increase; low gasoline prices are boosting
demand for Jeep SUVs and Ram pickup trucks.
The auto maker appears to have a robust supply of inventory,
however. As of Sept. 30, Fiat Chrysler's days' supply in the U.S.
stood at 77, well above the 59 days' average for the industry. But
auto sales are tracking at a decade-high pace, and stocks can
quickly deplete.
Auto makers book revenue when a vehicle is assembled, not when
it is sold at a dealership. That adds force to the UAW's
threat.
Jeff Bennett contributed to this article.
Write to Christina Rogers at christina.rogers@wsj.com and John
D. Stoll at john.stoll@wsj.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
October 06, 2015 14:38 ET (18:38 GMT)
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