By Nora Naughton 

A new labor agreement at Fiat Chrysler Automobiles NV offers blue-collar workers better pay and health care for new hires and bigger profit-sharing checks, endangering the company's long-held labor cost advantage over its two Detroit rivals.

Under the new contract proposal, workers hired within the last eight years will get the same health care benefits as veteran employees and will advance to the top pay rate in about half the time that it took them previously, according to details released Wednesday.

The new terms on health care will bring Fiat Chrysler's benefits closer to what General Motors Co. and Ford Motor Co. offer their less-senior employees, a change they both made in 2015.

Fiat Chrysler has also agreed to change the profit-sharing formula for its unionized workforce, bringing it closer to what is provided to workers at GM and Ford, the details show. The tentative agreement covers about 47,000 workers at Fiat Chrysler's U.S. factories and facilities who are represented by the United Auto Workers union.

For years, Fiat Chrysler benefited from lower labor costs compared with GM and Ford, a difference that became the focus of a lawsuit filed last month by GM accusing company executives of bribing union officials to gain more favorable contract terms.

Fiat Chrysler has said it plans to fight the lawsuit, which it says is without merit.

The rest of the new labor deal largely mirrors terms struck in earlier agreements with GM and Ford, including providing temporary workers with a path for gaining full-time employment.

Fiat Chrysler's UAW-represented workers must still vote on the new contract proposal, a process that will begin Friday and is scheduled to wrap up Wednesday, the union said.

The changes to new-hire pay are expected to hit Fiat Chrysler's labor costs much harder than at its two crosstown competitors because it has a higher percentage of workers still making less than the top pay rate of about $30 an hour. Those workers will get bigger raises during the contract period than under the previous labor agreement.

Fiat Chrysler also uses more low-cost temporary workers, so committing to hire more of them as full-time employees is likely to inflate labor costs further, industry analysts say.

Heading into contract talks this summer, Fiat Chrysler's labor costs were about $55 an hour, compared with $63 at GM and $61 at Ford, according to the Center for Automotive Research.

"The gap will close somewhat with the other two," said Kristin Dziczek, a labor expert at the center.

The proposed labor contract is the last of three secured by the UAW since bargaining officially began in July and marks the final stretch of contract talks in Detroit, which included a 40-day strike at GM's U.S. factories. This round of negotiations fell against the backdrop of a widening federal investigation into union corruption that has ensnared top union officials and led to the resignation last month of UAW President Gary Jones.

In a surprising move last month, GM filed a civil racketeering lawsuit against Fiat Chrysler, alleging former CEO Sergio Marchionne led a bribery scheme to pay off UAW leaders and corrupt the bargaining process in 2011 and 2015. Mr. Marchionne died last year.

In the suit, GM alleges Fiat Chrysler forged an alliance with UAW officials to ensure it got special benefits over its two Detroit competitors, including more flexibility to hire full-time workers on the lower-rung of the pay scale and fewer limits on using less-expensive temps. That led it to lower its overall workforce expenses, giving it a competitive advantage over GM, the lawsuit charges.

The UAW has said it is taking steps to prevent misconduct from occurring again and that it is confident labor contracts negotiated over the past decade weren't compromised.

Fiat Chrysler, in its latest labor deal, has also promised $4.5 billion in new plant investment to create about 1,400 new jobs over the next four years. If the contract is ratified, UAW-represented workers will also receive a $9,000 signing bonus.

The Italian-American auto maker, which has spent several years looking for a merger partner, is attempting to forge a $50 billion tie-up with France's PSA Group to create one of the world's largest car companies.

The UAW said that in addition to secure new jobs, its new tentative agreement with Fiat Chrysler preserves provisions built into previous contracts that require the union to review any changes in corporate structure and mergers, and any new owners to accept the UAW contract.

--Ben Foldy contributed to this article.

 

(END) Dow Jones Newswires

December 04, 2019 17:06 ET (22:06 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.
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