Chrysler Group’s UAW Members Approve Four-Year Labor Contract

Chrysler Group LLC’s U.S. hourly workers ratified a new four-year contract, completing the United Auto Workers’ negotiations with U.S. automakers.

Chrysler workers voted 55 percent in favor of the agreement in balloting over the past two weeks, the UAW said yesterday in an e-mailed statement. The tally included skilled-trades workers, who voted 56 percent against the accord, the Detroit-based union said.

“It’s not everything our members deserve, but we did the best we could in these uncertain times,” General Holiefield, vice president of the UAW’s Chrysler department, said in the statement. The contract “will ensure Chrysler’s viability so that we can share in its economic success once it has regained financial stability.”

Chrysler Chief Executive Officer Sergio Marchionne negotiated a deal that pays smaller signing bonuses to UAW members compared with those at General Motors Co. and Ford Motor Co.

UAW President Bob King got wage increases for entry-level workers and ensured a cap on the percentage of such lower-paid employees goes into place in 2015. King, 65, won changes to the company’s profit-sharing to simplify the program and base payouts on the results of Chrysler’s North American operations.

“A sign of a good agreement is that they both came with wins and they both came away with losses,” said Art Wheaton, a labor expert with Cornell University.

Skilled Trades

The UAW’s International Executive Board investigated why skilled-trades workers voted against the agreement and found the reasons “were predominantly economic and not unique” to those members, according to the union’s statement.

King said yesterday a major complaint among the UAW’s Chrysler members was that the contract calls for half of the ratification bonus to be withheld until Chrysler achieves achieves certain financial metrics.

“You want to protect the rights of the minority, but you can’t let the minority overrule the rights of the majority,” King said on a conference call with reporters.

Auburn Hills, Michigan-based Chrysler, majority-owned by Fiat SpA, agreed to add 2,100 jobs and invest $4.5 billion, according to the union’s contract summary released Oct. 12. The signing bonuses are smaller than GM’s $5,000 and Ford’s $6,000.

Chrysler’s Contingencies

“Chrysler’s agreement has many more contingencies in it,” said Kristin Dziczek, a labor analyst with the Center for Automotive Research in Ann Arbor, Michigan. “It’s recognition that Chrysler has not made its turnaround.”

Marchionne is pushing Chrysler, after a net loss of $652 million last year, to turn a profit this year of $200 million to $500 million, excluding costs associated with paying off U.S. and Canadian government loans.

The agreement rewards workers for “the current and potential future success of the company while ensuring Chrysler Group will be able to remain competitive,” Marchionne, 59, said in a statement posted yesterday on Chrysler’s website.

Chrysler will invest in Belvidere, Illinois, and Sterling Heights, Michigan, assembly plants, the union said, as well as engine, machining and other factories.

The contract also includes annual bonuses of $1,000 for meeting performance and quality goals and up to $1,000 for meeting metrics associated with Fiat’s manufacturing system, the union said in its contract summary.

Remain Competitive

“Everyone who was around the table perfectly knew that we couldn’t repeat the mistakes of the past, which led the company to bankruptcy,” Marchionne said Oct. 24 in Turin, Italy, where Fiat is based. “We all have worked with the same target: To create a path which will reward workers for the company’s success and grant, at the same time, Chrysler to remain competitive.”

GM, Ford and Chrysler agreed to boost hourly pay for entry-level workers. The starting wage had been about half of the $28 an hour that senior workers get. Chrysler’s entry-level workers will now be paid $15.78 an hour and can earn as much as $19.28 by the end of the contract.

The UAW gave up its ability to strike Chrysler and GM as part of their U.S.-backed 2009 bankruptcy reorganizations, meaning unresolved issues would’ve gone to arbitration. The ratification vote avoids arbitration.

The U.S. Treasury Department and Canadian government exited their stakes in Chrysler in July when Fiat paid $625 million to boost its stake to 53.5 percent on a fully diluted basis. Fiat plans to own 58.5 percent by year’s end.

King has pledged to organize a U.S. plant owned by Asian or European automakers this year to expand the UAW’s bargaining power. He said the union has made progress in negotiating with additional companies, which he declined to name because the discussions have been private.

“I’m not ready to give up on 2011 yet,” King said yesterday. “I know my clock is ticking, but I’m the eternal optimist. I’m not giving up.”


Before it's here, it's on the Bloomberg Terminal. LEARN MORE