Fiat Chrysler CEO skips auto show, continues talks with UAW

By MoneyTimes

Sep 16, 2015 01:06 AM EDT

Sergio Marchionne, Chief Executive of Fiat Chrysler Automobiles (FCA), has decided to drop his participation in the Frankfurt auto show as FCA is leading the labor talks with United Auto Workers (UAW). Marchionne was scheduled to address the media at the auto show on Tuesday.

Marchionne is the most influential vocal among Detroit CEOs in bringing a win-win solution to the ongoing talks with labor union UAW.

With FCA leading the discussions with United Auto Workers (UAW) representing over 141,000 at Detroit-based automakers, several key labor welfare aspects will be finalized in the latest round of discussions shortly. Along with FCA, General Motors (GM) and Ford Motor Co are part of the discussions. The discussions will finalize labor wages, healthcare, working conditions, etc. The united auto workers chose Fiat Chrysler Automobiles to lead the discussions on several factors related to labor welfare.

Marchionne is calling for an amicable conclusion to the current wage system. UAW is demanding for removal of disparities in the wage structure.

The ongoing discussions on several labor issues are expected to bring an amicable solution to the two-tier pay system, which has been a contentious factor ever since it was instituted in 2007. FCA, GM and Ford Motor Co are all Detroit-based automobile majors.

The issue has become such a major factor that automobile manufacturers are divided over it and made a distinguish divisions in their factories to take advantage of the two-tier pay system.

Managements of automobile units agree that it saved them when the auto industry was reeling under crisis. Fiat Chrysler Automobiles didn't divulge any information as the discussions are going on. 

The recently-recruited workers under the umbrella of UAW are getting wages 40 percent lower per hour than union veterans on the assembly line. UAW has been taking the issue with top managements of automakers to bridge the gap by removing the pay gap. 

UAW leaders also cite the reasons of high profitability of automakers from truck sales and sport utility vehicles (SUV) for raising wages for the workers. Sergio Marchionne, FCA Executive, has been playing a vital role in bringing an amicable solution to the problem.

Norwood Jewell, the lead negotiator from UAE at discussions led by Chrysler, says that job security and pay rise are top priorities in the ongoing talks. 

Over the decades, UAW has been following a practice of choosing one automaker and other automobile companies will follow the suit. The final agreement with the chosen company will become a template for other automobile companies to follow it.

UAW is demanding for wage rise for the first time in the past one decade. However, this demand comes at a time when the US automobile companies, banking on the lower production costs, are turning confident to compete with foreign brands.

American automobile manufacturers are facing tough competition from foreign brands such as Toyota. Fiat Chrysler, Ford and GM prefer to have labor costs on par with the US operations of foreign brands.

For instance, Ford's average labor cost per hour stands at $57 and this is $10 higher than US operations of Fiat Chrysler or Toyota Motor Corp and $2 more than GM, according to Center for Automotive Research in Ann Arbor, Mich.

The three companies that have Detroit-based factories want to have $28 per hour wage for entry level workers. These companies are open to a new tier for lower paid workers in the US factories as well. But, UAW is against too many tiers in the wage structure. 

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