Fiat Chrysler, UAW Reach Tentative Contract Deal

AutoAssociated Press

The United Auto Workers union and Fiat Chrysler (NYSE:FCAU) have reached a tentative deal on a new contract for about 40,000 workers that will serve as a pattern for pacts with General Motors (NYSE:GM) and Ford (NYSE:F).

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Terms of the deal were not disclosed Tuesday, but both sides said a news conference would be held later in the evening with UAW President Dennis Williams and Fiat Chrysler CEO Sergio Marchionne.

The union was seeking hourly pay raises for longtime workers who haven't had one in a decade. It also wanted to at least close the gap between new hires who start at about half the $29 per hour that longtime workers are paid.

Fiat Chrysler wanted to hold its hourly labor costs steady while GM and Ford wanted to cut theirs to be more competitive with foreign automakers.

Contracts with all three companies expired Monday night but were extended while talks continued.

The deal came after a furious 48 hours of bargaining that included an all-night session from Monday to Tuesday.

The union's contract with the Italian-American automaker officially expired at 11:59 p.m. EDT Monday, but both sides agreed to extend it on an hour-by-hour basis while talks continued toward a new four-year agreement.

Fiat Chrysler, or FCA, was picked as the lead company in the talks this year, making it the focus of bargaining and a potential strike target if talks hit a snag. Also Monday, General Motors and Ford extended their contracts with the UAW indefinitely as bargaining continued.

The main issue in the talks appears to be pay raises. The current wage gap between entry-level workers and veteran employees benefits FCA the most, since 45 percent of its hourly workers make entry-level wages. Only around 20 percent of workers at Ford and GM make the lower wage.

Marchionne has been outspoken about wanting to eliminate the wage gap. But he has indicated the top wages should come down in favor of fatter profit-sharing checks. All three companies also want to stick with profit-sharing instead of increasing hourly labor costs. Over the past four years, FCA workers have gotten annual profit-sharing checks totaling $9,000 per worker.

The union is also seeking guarantees that new vehicles will be built in U.S. factories and not in Mexico, where companies have been moving some of their production.

But automakers, especially GM and Ford, want to cut labor costs to stay competitive. FCA is the only one of the Detroit Three whose U.S. labor costs are lower than foreign competitors like Toyota; Ford and GM think that's an unfair advantage and want to be on par with FCA.

To fund some of the union demands, UAW President Dennis Williams has proposed a giant health care pool to save money for the union and the three companies. Currently a union-run trust pays most health insurance costs for about 600,000 retirees and their spouses, and the companies fund health care for about 551,000 hourly and salaried workers and their families.

Marchionne canceled plans to attend the Frankfurt International Motor Show in Germany Tuesday and instead stayed in the U.S., a strong sign that a deal was near.

All three companies officially kicked off bargaining for new four-year contracts in July. The contracts cover around 140,000 U.S. factory workers.

Williams and Marchionne, who greeted each other with a hug as the negotiations began in July, have both said they would consider it a failure if they can't reach an agreement and workers strike. Workers at FCA - known as Chrysler before its 2009 merger with Fiat - went on a seven-hour strike during contract negotiations in 2007 but were prohibited from striking in 2011 under terms of a government-funded bankruptcy.