By: Dan Cohen – 10/21/15
After workers at Fiat Chrysler resoundingly voted down the tentative agreement reached by the Company and UAW on September 15, 2015 the parties came together just before the midnight strike deadline of October 7, 2015 and reached a new tentative agreement. The tentative agreement averted a walk-out by 40,000 unionized workers, which could have cost FCA as much as $300,000,000 per day. The workers started voting on the tentative agreement yesterday and will be completing the voting process today.
The primary difference from the rejected deal lies in the two tier wage policy. This tentative agreement allows the second tier of employees (those hired after 2007) to reach the full contractual wage rate of $29 in eight years. Second tier employees with four years of service will receive more than a $10/hour increase by the end of the contract and those with two years of service will receive more than an $8/hour increase. The UAW had previously indicated that one of its priorities was the elimination of the two tier wage system. If employees ratify this tentative agreement, the UAW will be well on its way to achieving its goal. Nearly half of FCA’s unionized workforce (45%) is part of the second tier.
If ratified, both tiers will receive lump sum ratification bonuses of $4000 for the first tier and $3000 for the second tier. The first tier will receive its first general wage increase in over 9 years and take home nearly $20,000 more over the next 4 years. Health care will not change and all workers will continue to pay no premiums for their healthcare, a rarity in today’s health care world. The profit sharing pool will be funded based on the new formula of $800 for every 1% in North American profit margin and will be based on hours of work. Thus, the more hours an employee works, the bigger his/her share of the profit sharing pool will be. The second tier will receive an increased employer contribution to their 401(k) plans, increased dental and vision insurance. There is also increased pension funding in the tentative agreement. Finally, FCA has agreed to invest $5.3 Billion in its U.S operations and has agreed to a Moratorium on Outsourcing.
Many on the outside consider this a huge win for the second tier, and it probably is. However, keep in mind that the second tier workers have sought to reach full contract wage rates by the end of the 4 year contract. The tentative agreement doubles the time it will take second tier workers to achieve full contract wages. They also do not receive retiree health care benefits. Some close to the industry say that even if all FCA workers were at the Tier One wage, FCA’s union costs would still be less than Ford and GM and in line with costs at Toyota and Honda. Many question whether this tentative agreement will pass. Certainly, the UAW is not taking any chances. It has reduced the ratification process from two weeks after the first tentative agreement was reached to just two days. This should prevent early local results from influencing others. The UAW has also stepped up its social media messaging to further influence the ratification vote. If ratified, it will be on to Ford and GM, which have had higher profits than FCA for much of the post-recession period. If the tentative agreement is rejected, the UAW will be in unchartered territory and things could get quite interesting.