Hoping for the Best Deal, UAW Targets Fiat Chrysler for First Contract Talks

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Fiat Chrysler

Few things could keep Fiat Chrysler CEO Sergio Marchionne from holding court in one of the highest-profile auto industry venues on his home continent, the Frankfurt International Motor Show that begins this week.

But after the United Auto Workers (UAW) targeted Fiat Chrysler as its preferred member of the Detroit Three for reaching a new labor contract first, Marchionne canceled his appearance in Frankfurt and headed back to Michigan.

Not surprisingly, the UAW on Sunday indicated that it had selected Fiat Chrysler as what used to be called a “strike target.” Few expect the union to strike Fiat Chrysler—or General Motors or Ford, for that matter—this year, even though the UAW’s existing four-year pacts with the industry are set to expire at midnight.

What this designation has come to mean is that the union wants to reach agreement with one of the companies first because UAW leadership believes it can then impose its preferred aspects of the deal on the other two members of the traditional Big Three.

Fiat Chrysler gained favor with union brass as this year’s target in large part because the company employs the biggest percentage of UAW members who receive only a second-tier compensation package, several dollars an hour lower than first-tier workers.

Fiat Chrysler

It is also the only one of the three companies with no cap on how many second-tier workers it can hire, as each of the automakers struck somewhat different deals with the UAW as part of the industry bailouts and reconfiguration in 2009.

And, importantly, Marchionne has already indicated his distaste for the overall two-tier system as destructive to company morale and even immoral, in the sense that it is unconscionable for a company to pay two employees standing side-by-side different wages for doing the same work. So the UAW might be reasoning it could get best deal with Fiat Chrysler rolling back second-tier wages, which it has indicated is a top priority for this round of new contracts.

Also, the UAW has reported that its local union outposts already have reached plant-level deals with Fiat Chrysler at most locations, another factor favoring this decision.

There are a few mitigating factors here, however. First of all, Marchionne’s dislike for two-tier wages doesn’t mean he wants to raise all boats to immediately eliminate the troubling wage differential in the industry. He is said to favor holding the line on first-tier wages, maybe in part by relying more on profit-sharing, so that the second tier gradually gets eliminated.

Another potential fly in the ointment for the UAW is that Fiat Chrysler is the least well off financially of the three automakers, making it somewhat less qualified to meet the union’s financial demands. Marchionne has been long and loud in making it clear that Fiat Chrysler, in fact, may not be viable over the long run without a big-pocket partner like General Motors.

And while Marchionne may be concerned about the discouraging psychological effects of a lower tier of wages for hourly workers, he hasn’t seemed to be worried that he could be hurting morale with his frequent remarks about how Fiat Chrysler might not be able to make it on its own.

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