The United Auto Workers (UAW) has chosen Fiat Chrysler Automobiles NV (NYSE:FCAU) for negotiating a new labor agreement. The move came as a surprise as Fiat Chrysler is the smallest of the three auto makers in Detroit. The move also dodges the union’s tradition of negotiating with the strongest company to extract the best terms for its members. The union will likely not be able to get as good a deal as it could with other auto makers, however the agreement reached between the UAW and the company is most likely to be accepted by other companies making it less likely that the union will have to reach separate accord with each.
UAW’s President Dennis Williams said that the union will focus on negotiating with Fiat Chrysler while working with other companies to reach a collective bargaining agreement. The UAW expects to get paid back for the wages and benefits cuts that helped the auto makers during tough times. The union points to the strong sales to justify their demands and the negotiations are expected to be tough.
The negotiating strategy of UAW for decades has been to select one company for negotiation which sets up a template for other two keeping wages and benefits on parity. The decision to choose Fiat Chrysler this year is seen as a way to improve the agreement terms with bigger companies like General Motors Company (NYSE:GM) and Ford Motor Company (NYSE:F).
UAW is seeking the first raise in about a decade for the most senior auto workers, the companies meanwhile are reluctant so as to keep the costs low to compete with foreign rivals. The auto makers are unwilling to concede too much to the union after getting deep concessions from them. The auto makers hope to keep the entry level wages at less than $28 per hour and are seeking even lower wages for new tier according to sources. This is expected to be tough sell to the UAW.
A strike is unlikely this time around according to Gary Chaison, a labor professor at Clark University in Massachusetts as the union does not want to appear hostile to foreign automakers like Volkswagen AG and wants to create an impression as a problem solving union rather than a confrontational one.