Fiat's Labor Troubles Won't Affect Chrysler's UAW Talks, Marchionne Says

Fiat SpA’s troubles with Italian labor unions won’t impact Chrysler Group LLC’s contract negotiations with the United Auto Workers next year, the companies’ top executive said.

Sergio Marchionne, chief executive officer of both Fiat and Chrysler, has dealt with labor unrest in Italy for months as he’s tried to implement an unprecedented attempt to curb strikes, shorten sick leave and increase productivity at a factory near Naples as part of a plan to boost production in Fiat’s home market by more than half.

“The degree of transparency and openness and acceptance of change that we have seen out of the American side is something which is commendable and should be adopted,” Marchionne told reporters at the Paris Motor Show. The relationship with the UAW “cannot be better,” he said.

Marchionne met this week with UAW President Bob King, who was in Italy as part of a trade mission by Detroit-area leaders to lure Fiat suppliers to Michigan.

“The message was very clear that this is a new UAW, this is a flexible one, this is one that will work with you to give you value added,” Robert Ficano, Wayne County executive, said of the trip in a telephone interview from Turin this week. The county he governs includes Detroit.

The King visit comes about a year before official negotiations are expected to begin between the UAW and Detroit automakers over a new labor contract. The four-year contracts expire in 2011.

Italian Struggles

Marchionne’s efforts to improve productivity in Italy, which lags behind the company’s plants in Brazil and Poland, have angered Italian labor.

Fiat, the country’s biggest manufacturer, plans to invest 20 billion euros through 2014 to improve factories and vehicle development in exchange for changes in work rules. Marchionne wants to lift production in Fiat’s home market to as many as 1.4 million passenger cars a year by 2014.

While a majority of workers at the Pomigliano factory near Naples approved the deal, more than a third of them voted against it, saying it violated their constitutional right to strike.

“Fiat is making an unprecedented attack on workers’ rights in Italy. Our response should be calling on a general strike,” said Maurizio Landini, head of the FIOM Union, in a statement yesterday.

Marchionne said he will go ahead with the plan, called “Fabbrica Italia” or “The Italian factory,” only if unions agree to lift productivity in a new labor contract.

“I’m totally optimistic,” Marchionne said today.

Uncharacteristic Strain

The CEO’s strained ties with some elements of Italian labor haven’t always been the case, said Harley Shaiken, a labor expert at the University of California at Berkeley.

“Marchionne made his mark by having a good relation with Italian unions, so what’s taking place right now is not necessarily indicative of what might happen next year” with the UAW, Shaiken said.

U.S. and Italian labor unions operate differently, Gary Chaison, a professor of industrial relations at Clark University in Worcester, Massachusetts, said in a telephone interview.

“In Italy, it’s constant guerilla warfare when you’re dealing with a labor union,” he said. “In the United States, dealing with the United Auto Workers is just part of management’s decision-making model.”

Across Atlantic

The strife hasn’t gone unnoticed by labor unions in North America and comes about a year after they faced difficult negotiations involving Chrysler’s bankruptcy reorganization.

Ken Lewenza, president of the Canadian Auto Workers union, said he’s followed the Italian labor issue closely but doesn’t see similarities in the situation with Canadian workers.

“It’s a complicated process and it’s a complicated culture in Italy,” he said in a telephone interview. “You have a situation that’s much different in Canada then in Italy. In Canada, when we ratify a collective agreement by the majority then that collective agreement applies.”

The CAW and Chrysler have their differences but “we’ve had some pretty open dialogue with Marchionne and his entire management team,” Lewenza said. “They’re very accessible.”

Said Lewenza: “The relationship has been good.”

King, in an Aug. 19 interview, said he didn’t know anything more about the Italian labor situation than what he read in news reports.

“We’re very supportive of the Italian unions. And we’re very supportive of Marchionne’s plan in the U.S. and his world- class manufacturing,” King said. “I don’t know, other than what I read in the paper. We’ve not been asked to get involved at this point.”

Fiat’s Stake

Marchionne and Fiat’s 20 percent ownership stake will be a new variable in the 2011 labor negotiations.

The previous round of contract negotiations in 2007 involved a strike by then-General Motors Corp. workers and strong vocal opposition by Chrysler workers about the negotiated agreement.

The agreement made history: It ushered in a two-tier wage that pays new hires half as much as previous workers and shifted the union retirees’ health-care obligations to a trust fund.

The union and companies went through difficult concession negotiations again last year tied to the U.S. government bailouts of the two automakers, including the elimination of the so-called jobs bank that paid laid-off workers their normal wages.

Tensions rose between Marchionne and then-UAW President Ron Gettelfinger during last year’s negotiations, said Steven Rattner, who led President Barack Obama’s auto task force at the time. In his book “Overhaul” about the bailout, is a scene in which the CEO lectures Gettelfinger “about the need for the autoworkers to accept a ‘culture of poverty’ instead of a ‘culture of entitlement.’”

In Paris, Marchionne said his relationship with the UAW was based on the “pretty intensive dialogue” in 2009.

“I think that there were a number of things that were cleared up at the time on the future of the car industry in the U.S.,” Marchionne said. “Now those conditions have changed. It’s a matter of fact that relations have strengthened.”

He reiterated that the interactions with the UAW should be a model of cooperation for European labor.

“Even though I said publicly that I think hopefully the Europeans can take that as a model of collaboration, we keep on running into obstacles,” Marchionne said.

-- With assistance from Jeff Green in Southfield, Michigan, and Sara Gay Forden in Washington. Editors: Jamie Butters, Kenneth Wong.

To contact the reporters on this story: Tim Higgins in Southfield, Michigan at Thiggins21@bloomberg.net; Tommaso Ebhardt in Milan at tebhardt@bloomberg.net.

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net.

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