UAW, FCA talks take center stage, but easy agreement not guaranteed

Eric D. Lawrence | Detroit Free Press

Two down. One to go.

With the ratification of a tentative agreement by Ford workers Friday evening, the focus of the UAW's contract talks with the Detroit Three shifts to Fiat Chrysler Automobiles.

Things could proceed smoothly. Or not.

Both sides have already witnessed a spectrum of possibilities leading to ratification — a 40-day General Motors strike versus three days of focused bargaining between Ford and the UAW ahead of a tentative agreement.

UAW negotiations with FCA should fall somewhere in between.

FCA and UAW negotiators have already been meeting, and the two sides have issued statements emphasizing those efforts without shedding much light on how far apart they might be from agreement.

The possibility of a strike remains, but as acting UAW President Rory Gamble said recently, he does not negotiate with that end in mind. Rather, "that’s a trigger you pull when you hit the wall and you can’t do any more."

Several workers told the Free Press they do not foresee a strike against FCA, but those workers also said they have clear expectations for any tentative agreement, including a ratification bonus that is higher than previous FCA contracts (traditional workers received $4,000 in 2015) and a reasonable wage increase. Permanent GM workers are receiving $11,000 with their agreement, but several FCA employees noted that they had to strike for that. Permanent Ford workers are receiving $9,000.

Workers also know that FCA has experienced solid growth and profits in recent years powered by America's thirst for pickups and SUVs, despite a slight loss in the most recent quarter. FCA, including its Chrysler predecessors, was long viewed as the weakest of the Detroit Three, but has benefited from its earlier shift away from small passenger car production in North America, and its Ram 1500 now outsells the Chevy Silverado.

'Money hand over fist'

"They're making money right now pretty much hand over fist, so I can't see them upsetting the apple cart too much," said Kenneth Mefford, a third-generation autoworker at FCA's Warren Truck Assembly. "They know the UAW's not going to change what Ford and GM got just for Chrysler. They're stuck with what the other two got within reason."

That pattern established first with GM and then with Ford means FCA must account for expectations influenced by negotiators from auto companies with different realities. FCA's heavier reliance on temporary workers, for instance — 4,800 compared with 4,100 at GM and 3,400 at Ford as of last year — means the company would be more sensitive to the impact of contract changes affecting temps.

"(Any) increase for those people is going to disproportionately impact FCA's labor cost," said Kristin Dziczek, vice president of Industry, Labor and Economics at the Center for Automotive Research in Ann Arbor, noting the way expectations are set. "Pattern bargaining is 'me, too.' We want what they got and maybe a little more."

Colin Lightbody, a former director of labor economics for FCA who is now president of HR & Labor Guru, a consulting firm in Windsor, said companies can find ways to offset those contract changes.

“It's often difficult to change the economics of the pattern, but there may be some opportunities to tweak some of the operational items," such as by increasing the use of temporary workers, he said.

FCA has had an explosion of hiring since 2009, the year Chrysler emerged from bankruptcy, going from 24,421 to 47,200 hourly and salaried workers as of the end of December. But so-called in-progression employees — permanent workers hired since late October 2007 — also represent a different class of worker with substantial differences in pay and benefits from traditional workers.

That highlights how the company would be more sensitive to improvements for lower-paid workers, who have helped it maintain an hourly labor cost advantage over GM and Ford. That hiring, however, also showcases the message that the company wants to tout, that it is growing, with $8 billion in announced investments compared with its $5.2 billion commitment in 2015. A massive expansion in Detroit, for example, includes a new assembly plant for Jeep SUVs, and the estimated creation of almost 5,000 jobs.

So, while GM helped fuel worker anger by pre-emptively announcing what became the closure of plants in Lordstown, Ohio; Warren; and the Baltimore area, FCA has been able to point to its investments in the United States.

Merger effect

But the recently announced merger proposal between French automaker PSA Groupe, which owns the Peugeot and Citroen brands, is expected to make job security more of a focus in the talks than it otherwise might have been. The announcement of a merger partner provides some certainty in an evolving automotive industry for a company that has long been viewed to be on the market, but it raises questions as well.

"I would expect that the PSA stakeholders, including the French government, will be lobbying to protect their European footprint, therefore I'd assume that the UAW will be interested in having discussions about job security and future product commitments," Lightbody said.

More: Bonuses Ford, GM retirees have received for years vanish in new UAW contracts

More: FCA, Peugeot maker PSA Groupe plan 50-50 merger

More: UAW to sell ex-president's lavish Up North cabin as part of ethics cleanup

While the scale of the entity would make it the fourth-largest automotive group in the world and the companies say they could save $4.11 billion (3.7 billion euro) annually without plant closures, some workers worry that they will be put at odds with their counterparts in Europe. One described the effect as a whipsaw, saying the company and union would try to convince workers to accept a bad deal or see jobs shipped away.

Erik Gordon, a law professor at the University of Michigan's Ross School of Business, also suggested another potential outcome.

"Workers should worry about the possibility of a FCA-PSA combination that results in imports of PSA cars that replace tired, low-selling Chryslers and Dodges," Gordon said.

Others, however, have said FCA's U.S. workforce should be largely insulated from any downsizing associated with the merger because workers here make the vehicles, the Jeeps and Rams, that generate the bulk of the profits for the automaker.

A worker at the Belvidere Assembly Plant in Illinois who asked that his last name not be used said stability is his major concern.

"Job security is No. 1 by far. I know the auto industry is slowing down. That’s a given. We lost a shift back in May, and I know that sales (of the Jeep Cherokee) are still going down a little bit," he said. "I feel I'm safe, but I still know that there are going to be cuts somewhere."

Corruption clouds talks

Brian Keller, who works at FCA’s Mopar Sherwood distribution center in Warren, said he expects the sides to reach agreement and for FCA workers to ultimately ratify a deal even though he hopes they reject it like they did initially in 2015. He's concerned by what autoworkers have lost in previous contracts, from cost-of-living increases to pension benefits, and he wants to see a tentative agreement which dismantles the tier system.

Keller, who was one of the named plaintiffs in a lawsuit filed against FCA and the UAW over accusations of collusion between then-FCA and UAW officials related to bargaining, is also focused on corruption. The scandal, which has led to charges against 13 people, including the one-time lead labor negotiator for FCA and ex-UAW vice presidents, continues to weigh on the minds of workers who must ratify a deal.

In particular, they remember the infamous hug at the start of talks between the late Sergio Marchionne, the former FCA CEO, and ex-UAW President Dennis Williams, who has been implicated although not charged in the scandal.

Acting UAW President Gamble has been credited for his announcement of ethics reforms at the union, but the stench of scandal is not easily eliminated and it influences how the rank-and-file view their union negotiators. Workers may ultimately vote yes on ratification, but more than a few might have misgivings.

"As of right now, I don’t trust them, but I have to," said Jim, the worker from Belvidere.

Contact Eric D. Lawrence: elawrence@freepress.com. Follow him on Twitter: @_ericdlawrence. Jamie L. LaReau contributed to this report.