UAW Mulls Next Move

The rejection of the tentative contract with FCA by UAW rank-and-file may mean CEO Sergio Marchionne has lost his bid to set the pattern for Detroit automakers.

Joseph Szczesny

October 2, 2015

5 Min Read
Cordial relationship between Williams left and Marchionne may have led some workers to believe UAW didnrsquot fight hard enough
Cordial relationship between Williams (left) and Marchionne may have led some workers to believe UAW didn’t fight hard enough.

Following a stinging setback administered by its own members, the UAW executive board is struggling with the selection of a bargaining target as it tries to reach agreement on a new pattern contract covering some 142,000 workers at the Detroit-based automakers.

While the union has withheld the actual vote totals, it confirmed this week 65% of the 40,000 members at FCA US operations rejected the tentative agreement reached last month.

The tentative agreement was considered flawed by union members, and Harley Shaiken, a labor expert at the University of California-Berkeley, tells WardsAuto FCA CEO Sergio Marchionne undoubtedly muddied the waters with his ill-timed comments praising the pact prior to a ratification vote.

Also clouding the waters for the union rank-and-file are murky product-allocation plans at key plants, including FCA’s big Jeep operation in Toledo, OH, and several Michigan facilities.

Now the UAW faces a choice of going back to FCA to renegotiate the fine points or move on to negotiations with Ford or General Motors. The latter would mean that Marchionne would lose the opportunity the UAW had offered him at the start of September to help set the pattern for the 2015 contracts.

“I honestly don't know what they are going to do,” says Shaiken, who suggests the union's executive board will take a few days to review its strategic options, then move quickly on a course of action.

“It's embarrassing but it's not a disaster,” he says. “Contracts have been voted down before.”

A strike, even a limited one, appears to be the last option, Shaiken adds.

The UAW’s Chrysler Council – the union hasn't caught up to the nomenclature change imposed by Italian ownership – met after the contract rejection was announced and UAW President Dennis Williams allowed every local involved to present a laundry list of issues that came up during the ratification vote.

The meeting was closed to outsiders but took hours to complete, as Williams tried to reinforce the idea the union is willing to listen closely to its constituents, observers say.

Among the biggest issues for members who voted down the contract is the absence of a cap on the number of workers that can be paid at the lower Tier 2 rate, says Bill Parker, a former president of UAW Local 1700 at the Sterling Heights Assembly plant and former top negotiator, who voted against the proposed agreement.

Chrysler Group was believed to have agreed in 2011 that only 25% of the company's workers would be paid second-tier wages, but union rank and file reportedly were told prior to voting that provision could not be found in the current contract and therefore was not carried over to the tentative pact.

“Everybody knew the language was in there,” Parker says. Currently, 43% of FCA's workers are paid Tier 2 wages.

Imposing the cap would have meant hundreds of FCA U.S. workers would have moved up to Tier One, where they would have been paid $28 per hour rather than $16.50, according to the Autoworkers Caravan, which was instrumental in lobbying for rejection of the tentative agreement.

Healthcare Uncertainty a Factor

Shaiken describes the UAW health-care benefits, which cover almost all health-related expenses with only a minimum of co-pays, as the “crown jewel” of the benefits negotiated over the years by the union.

Williams, in his comments during bargaining, voiced concern the rising cost of health-care in general was making it difficult for the union and the automakers to sustain that level of coverage and pay for other demands such as wage increases.

The language about the health-care in the tentative contract must be replaced, says Wendy Thompson, one of the Autoworkers Caravan’s principal organizers. The language about a health-care co-op is so vague and ill-defined it could have triggered a contract rejection at GM or Ford anyway, she suggests.

“Nobody wants another VEBA,” Thompson says, referring to the independent trust that now pays for the health-care of retired UAW workers from GM, Ford and Chrysler.

FCA U.S. has been through a lot over the past few years and both the company’s management, starting with Marchionne, and the union have underestimated the dissatisfaction among the workers, Shaiken says.

But the signs were evident as far back as the union bargaining convention earlier this year when some of the most pointed criticism by delegates was aimed at FCA’s World Class Manufacturing system, which was installed by the automaker to boost productivity.

Tensions have risen at both GM and Ford in recent months too, as workers have expressed increasing dissatisfaction with the pace of work, lack of downtime and rising executive bonuses that have exacerbated the pay gaps at all three companies.

“High expectations and lack of trust in leadership,” also have had an impact in the negotiations, says Kristin Dziczek, a labor expert and analyst for the Center for Automotive Research in Ann Arbor, MI.

Dziczek tells WardsAuto in an e-mail the rejection of the tentative pact at FCA U.S. already is having an impact on the negotiations at GM and Ford.

“The strike authorization at Ford Kansas City is evidence of that,” she says, referring to the announcement by Jimmy Settles, the UAW vice president in charge of negotiations at Ford, and the union’s most experienced auto-industry bargainer approved a local strike at Ford’s critical Kansas City, MO, F-Series truck plant as early as next week.

Over the years, the union’s top negotiator with each company always has made a case for their company to go first in the contract talks. Settles’ approval of the strike threat at Kansas City suggests he may be making his case with other members of the UAW executive board that Ford, rather than FCA, now should be the target for setting the pattern agreement.

With inventories of the fast-selling F-150 hovering around 60 days, any kind of a walkout at Kansas City would sting immediately and indicates Settles now prefers to bargain at arm’s length with Ford’s management.

“I think we’ll see a distancing from the closeness with management that was projected in the UAW-FCA negotiations,” Dziczek says.

Meanwhile, GM CEO Mary Barra said this week her company has a healthy, ongoing dialogue with the UAW, but declined to comment on the potential fallout from the dramatic rejection of the tentative agreement at FCA US.

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