2-tier wages, health care part of UAW-FCA agreement

In a tentative agreement hammered out Tuesday night, the UAW and Fiat Chrysler Automobiles agreed to work to eliminate the thorny issue of a two-tier wage structure over time and to address the need to reduce rising health care costs that could threaten the future vitality of the industry.

The details of the 4-year agreement, which affects FCA’s 39,000 unionized employees, must be ratified by the union membership.

Williams said the tentative agreement sets a pattern he feels GM and Ford can match, but suggested he will seek more economic gains from the larger and more profitable companies. The UAW president said agreements can differ but still be part of a pattern. He did not say which company he will choose to focus talks on next.

In a quickly called and jubilant news conference in Detroit, FCA CEO Sergio Marchionne and UAW President Dennis Williams confirmed they reached the agreement.

The news conference was unprecedented for having the heads of the union and company at the same table to announce completion of a tentative deal.

The two men said they would not release details ahead of meetings with union leadership, who will in turn take the terms to their locals.

But in broad strokes, Marchionne said the inequity of paying entry-level workers a lower wage for the same work, a disparity referred to as two-tier wages, is addressed in the agreement. Under the new contract, Marchionne said the automaker’s workers will be provided with a path to a higher wage and suggested that the two-tier wage structure, put in place in 2007, will eventually go away.

What Marchionne and Williams did not say is how long that will take.

“There were some broad concepts that underpinned the negotiations, one of which had to do with the inequitable nature of this tier one arrangement that we have had in our system now since 2007,” Marchionne said. “So, I think that the team has crafted what I consider to be a very carefully thought-through process whereby that issue will go away.”

Trey Durant, a 20-year employee at a Fiat Chrysler Mopar parts facility near Chicago, said getting equal wages for his colleagues is a top issue.

“Working in the same facility, side by side with someone who has a different wage than you was a bad idea, even though I know why they had to do it when times were tough," Durant said. “I want my brothers and sisters to be at full wage also.”

Durant wonders if the solution is to follow the lead of Canadian auto workers who achieve the top wage after 10 years — but he would like to see a shorter grow-in period.

Also key to the pact is the need to reduce health care costs. Williams has made public his vision of a health care benefits co-op that pools the active workers at all three companies for purchasing clout in dealing with heath care providers in an effort to secure cost savings.

“I wholeheartedly shared Dennis’ view about this,” Marchionne said. “We need to find a cost effective way of managing health care costs.”

Williams said all three companies (FCA, GM and Ford) are interested in the idea of a co-op for active workers to reduce those costs.

News of the agreement came about 19 hours after the union and company agreed to extend the current four-year contract beyond its expiration time of Monday at 11:59 p.m. Monday.

Both Marchionne and Williams said one of the key dynamics enabling them to reach a deal a day after the contract expired was the relationship of trust, honesty and openness built over a period of years.

"Our value, if we have any to society …is that we act as incredibly effective safety valves,” Marchionne said. “The safety valves worked…and we never got off track.”

“I believe the tentative agreement is balanced and still keeps us in a competitive place,” Williams said. “The UAW set three goals when we started this process and we will continue this process in the next two stages of negotiations. One, we wanted to start giving a path to our membership. We wanted to reward the UAW members for their sacrifices over the past several years. And finally, we wanted to find a way to deal with escalating costs of health care. We believe that we have met those goals.”

Karl Brauer, senior analyst at Kelley Blue Book, said, “The relatively quick resolution to the UAW contract negotiations is somewhat surprising, particularly given the major issues that needed to be resolved around two-tier wage structures and health care benefits. Marchionne appeared to support the UAW on eliminating the two-tier wage structure and his willingness to resolve that issue was probably a key factor in how quickly and painlessly a tentative agreement was reached. If the UAW membership, Ford and GM all agree to the terms of the contract this will go down as one of the least contentious labor negotiations in recent memory.”

On Sunday, Williams decided to concentrate on FCA to hammer out an agreement that forms the framework that GM and Ford, at least on the economic issues, will be expected to match or perhaps exceed. Marchionne canceled plans to attend the Frankfurt auto show to take part in the bargaining.

The union’s priorities have been to erase or shrink the gap between the wages paid to workers hired before and after 2007. Newer workers could earn up to $19.28 an hour under the current contract, while their more senior co-workers earn about $28.50, a rate that has not been increased in the last two contracts, covering nearly a decade.

Negotiations continue at GM and Ford, but could only proceed so far without Williams. The threat of a strike was alleviated at the two companies when UAW leadership extended the Ford deadline Monday afternoon. General Motors followed suit at 9 p.m. Monday night.

Williams did not say which company he will focus negotiations on next. His immediate priority: 10 hours of sleep after a lengthy bargaining session.

Details of the tentative agreement will be shared with the union’s international executive board in the morning and then union leadership from across the country will come to Detroit to learn the contents which that they will take back to their locals for a ratification vote.

The UAW’s selection of Fiat Chrysler as the lead target among the Detroit Three on Sunday was viewed as an odd choice by some because the union has typically selected the financially healthiest automaker and Fiat Chrysler’s profits have been the smallest of the three.

What happens next:

Details of the agreement will be presented leaders of UAW local unions from FCA's U.S. plants.

Ratification votes will be held at each plant over the next week to 10 days.

Then bargaining will resume at the second automaker, which UAW President Dennis Williams is expected to name soon.