2-Tier Wages, Health Care Part of UAW-FCA Agreement

In a tentative agreement hammered out Tuesday night, the UAW union and Fiat Chrysler Automobiles agreed to work to eliminate the thorny issue of a two-tier wage structure over time and to address the need to reduce rising health-care costs that could threaten the future vitality of the industry.

The details of the 4-year agreement, which affects FCA’s 39,000 unionized employees, must be ratified by the union membership.

UAW President Dennis Williams said the tentative agreement sets a pattern he feels GM and Ford can match, but suggested he will seek more economic gains from the larger and more profitable companies. He said agreements can differ but still be part of a pattern. He did not say which company he will choose to focus on next.

Williams and FCA CEO Sergio Marchionne  confirmed they reached the agreement during a quickly called and jubilant news conference in Detroit.

The news conference was unprecedented for having the heads of the union and company at the same table to announce completion of a tentative deal.

The two men said they would not release details ahead of meetings with union leadership, who will in turn take the terms to their locals.

But in broad strokes, Marchionne said the inequity of paying entry-level workers a lower wage for the same work, a disparity referred to as two-tier wages, is addressed in the agreement. Under the new contract, Marchionne said the automaker’s workers will be provided with a path to a higher wage and suggested that the two-tier wage structure, put in place in 2007, will eventually go away.

What Marchionne and Williams did not say is how long that will take.

“There were some broad concepts that underpinned the negotiations, one of which had to do with the inequitable nature of this tier one arrangement that we have had in our system now since 2007,” Marchionne said. “So, I think that the team has crafted what I consider to be a very carefully thought-through process whereby that issue will go away.”

Also key to the pact is the need to reduce health-care costs. Williams has made public his vision of a health care benefits co-op that pools the active workers at all three companies for purchasing clout in dealing with heath-care providers in an effort to secure cost savings.