DETROIT (Reuters) - Fiat Chrysler Automobiles (FCHA.MI) (FCAU.N) will get the first shot at setting a pattern for wages and benefits for more than 140,000 unionized factory workers at the Detroit Three automakers, the company and the United Auto Workers union said Sunday.
FCA Executive Sergio Marchionne has been the most vocal among Detroit CEOs in calling for an end to the current wage system under which recently-hired UAW workers earn about 40 percent less per hour than union veterans on the assembly line.
UAW leaders have called for narrowing or eliminating the pay gap, pointing to the robust profits rolling in from sales of the trucks and sport utility vehicles UAW members build.
If FCA and the UAW cannot come to terms, the union could order strikes, potentially hobbling FCA’s production of its highest-profit U.S. models.
The UAW’s lead negotiator at Chrysler, Norwood Jewell, has said in messages to members that job security and pay increases are his top priorities.
Looming over the UAW’s negotiations with FCA, GM and Ford are the growing number of U.S. auto plant workers who are not members of the union and work for European and Asian automakers in the southern United States.
The more flexible work rules at non-union factories, and in certain cases lower wages and benefits, could put limits on the UAW’s aspirations, analysts said.
Contracts for all three Detroit automakers expire late Monday night.
“All three companies are working hard toward a collective bargaining agreement. At this time, the UAW has selected FCA US LLC (the U.S. unit of Fiat Chrysler) to be the lead bargaining company,” Dennis Williams, president of the UAW, said in an emailed statement.
FCA officials had no comment other than to confirm the company is the lead in ongoing talks. Ford and GM said Sunday they will continue their negotiations.
The selection of FCA is a setback for GM and Ford, but Kristin Dziczek, labor analyst at Center for Automotive Research, said the two larger companies “are not going to choke on a Fiat Chrysler pattern.”
The two-tier pay system is one of several, interlocking issues on the table between the UAW and FCA. Currently, veteran UAW workers make about $28 per hour, while newly-hired workers make between $15.78 and $19.28 per hour.
Marchionne has said he would consider a deal that lets current top-tier workers keep their higher pay rates during a transition to a new system under which all workers would make the same basic hourly wage. Marchionne has indicated he would set that base rate below the current top tier, but offer the potential for larger profit-sharing checks when times are good.
“I firmly believe in wealth distribution,” Marchionne said in July when the talks formally started.
About 45 percent of FCA’s hourly U.S. workforce of about 36,000 earn second-tier pay, while at Ford lower-paid workers account for 28 percent and at GM 20 percent.
The automakers and the union have said they are discussing a cost-saving healthcare collective that would pool all 142,000 active UAW members at the Detroit Three into a single plan. Adding UAW retirees to the pool would mean a collective about 1 million strong with considerable bargaining power.
Ford, GM and FCA say they must protect against a downturn in a cyclical industry. But the cost of labor is less and less important to a vehicle’s overall cost, according to economist Sean McAlinden of the Center for Automotive Research. Labor’s share of vehicle price for the Detroit Three last year was 6.7 percent, down from 15 percent in 2008, he said.
Editing by William Hardy and Nick Zieminski