Fiat Chrysler, UAW Reach Tentative Agreement

Fiat Chrysler Automobiles (NYSE:FCAU) and the United Auto Workers said on Thursday they had reached a new tentative four-year labor agreement that averted a threatened strike of the automaker’s U.S. operations.

The agreement must be ratified by a vote of Fiat Chrysler's 40,000 union workers in the United States. A previous proposed contract was rejected by rank and file UAW workers at Fiat Chrysler in voting late last month.

Carl Durham, 45, a UAW worker at Fiat Chrysler's transmission plant in Kokomo, Ind., said his support for the new contract would depend on whether it did more than the previous deal to narrow or eliminate the roughly $9-an-hour gap in pay between veteran workers and more recent hires. He said he voted against the previous agreement.

"I want to know all the details and what everyone is going to get, not a lot of ifs," he said.

Neither the union nor the company disclosed details of the new tentative pact. It's not clear whether Fiat Chrysler will spend more than it would have under the proposal it offered the UAW last month.

Workers have said they turned down the previous contract because many wanted a two-tier wage and benefit system eliminated. Short of that, they sought a cap on that lower-paid second tier at 25 percent of the total union workforce. Many workers also wish to undo some of the concessions they have given since 2007 to keep the company competitive.

If this agreement is ratified, the UAW will try to use the pact as a template for negotiations with the U.S. operations of General Motors (NYSE:GM) and Ford Motor (NYSE:F).

The UAW Chrysler Council will meet in Detroit at 11 am EDT on Friday to discuss the agreement and vote on it, the union said.

The previous proposed agreement would have narrowed the gap between the pay of veteran UAW workers, who earn about $28 an hour, and more recent hires, who are paid about $19 an hour. This two-tier wage system, which the UAW agreed to in stages over the past decade as the Detroit automakers grappled with grave financial losses, has become a focus of discontent among many UAW members who want all workers to be paid the top tier wage.

Aaron McCune, 21, a recent hire at the Kokomo complex who makes $15.78 an hour, said he was concerned the previous proposed contract was unclear, especially about health insurance. "But I have a family to feed and I can't get by without a job. I would have gone on strike, but I'm happy I get to keep on working," he said early Thursday.

The previous agreement was opposed by 65 percent of Fiat Chrysler's UAW workers, even though the company promised $5.3 billion in investment in UAW-represented plants during the four-year life of the contract. UAW workers said the investment promises were not specific, and also questioned proposed changes to their healthcare plans.

The UAW's decision, for the second time, to try to avoid a strike at Fiat Chrysler highlights the continued threat to UAW jobs, despite the robust recovery of the U.S. automakers since the financial crisis of 2008-2009. The sudden collapse in U.S. auto sales during that period forced the former Chrysler and GM into government-funded bankruptcies, while Ford undertook a painful, self-financed restructuring.

Now, the Detroit automakers are making strong profits, though Fiat Chrysler's U.S. operations are the weakest financially of the Detroit Three. Further, the UAW remains under pressure from the threat that the automakers could move more jobs to lower cost Mexico or overseas. Fiat Chrysler and Ford have both signaled plans to shift production of certain models to Mexico, UAW members have said.

U.S. labor unions have launched fewer than 20 major strikes in each year from 2008 to 2014, according to the U.S. Labor Department. In 1979, U.S. unions launched 235 major strikes. The number of strikes started to fall dramatically after 1981, when then-President Ronald Reagan fired U.S. air traffic controllers who had gone on strike. During the subsequent years, U.S. companies moved to relocate jobs overseas or to states with weak unions.

(Additional reporting by Agnieszka Flak in Milan; Editing by Ken Wills)