STLA Stellantis NV

By Nora Naughton 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (December 2, 2019).

The United Auto Workers said Saturday it has reached a new tentative labor deal with Fiat Chrysler Automobiles NV, an important step toward ending a grueling round of labor talks in Detroit.

The proposed deal, which must be ratified by Fiat Chrysler's workers, is the last of three new labor contracts the UAW has negotiated with the Detroit car companies. The agreement, covering about 47,000 union-represented factory workers at the company's U.S. factories, includes $4.5 billion in new plant investments and 1,400 previously unannounced new jobs, said Cindy Estrada, UAW vice president and lead negotiator with Fiat Chrysler. The new investment adds to the $4.5 billion Fiat Chrysler said earlier this year it would spend on its U.S. plants as part of a plan to build a new Jeep plant in Detroit.

Fiat Chrysler confirmed in a statement that it had reached a tentative agreement with the UAW but declined to provide details.

The union didn't further disclose terms, though its leaders have said a tentative agreement at the Italian-American auto maker would be closely modeled after labor pacts struck earlier at Ford Motor Co. and General Motors Co., as is typical in what is known as pattern bargaining.

Company and union negotiators have been trying to secure a new labor deal at Fiat Chrysler as a federal investigation into alleged corruption pierces the UAW's top ranks. A culture of bribes and kickbacks has tainted the bargaining process in years past, according to prosecutors.

The criminal probe, which became public in 2017, formed the basis for GM to sue Fiat Chrysler last week in a civil racketeering case, alleging that the company gained a labor-cost advantage by paying off UAW officials to give it more favorable contract terms.

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

The company, meanwhile, is attempting to forge a $50 billion merger with France's PSA Group to create one of the largest global auto companies -- a proposed tie-up that UAW Acting President Rory Gamble has said will be a consideration at the bargaining table.

GM was the first auto maker to reach a contract deal with the UAW in October, following a bruising 40-day strike that brought the company's U.S. factories to a standstill. The UAW next pivoted to Ford, where bargaining moved swiftly, concluding the negotiation and ratification process within weeks. In both the GM and Ford contracts, the UAW won wage increases, better pay for new hires and a path to full-time employment for temporary workers.

But negotiators at Fiat Chrysler faced a tougher set of issues.

The company has a higher percentage of temporary workers and employees not yet earning the top wage, making it more costly for Fiat Chrysler to replicate some of the terms reached at GM and Ford.

The UAW was also recently rocked by the departure of its president, Gary Jones, who took a paid leave of absence shortly before talks turned to Fiat Chrysler and resigned last week after the union's governing board began taking procedural steps to oust him from office.

The UAW said it had uncovered evidence of Mr. Jones allegedly falsifying expense reports and concealing the misconduct. Mr. Jones hasn't been charged with a crime, and his lawyer said the former president made the decision to resign before learning of the board's accusations against him.

GM's lawsuit makes it harder for Fiat Chrysler to avoid the costly pattern set by its larger Detroit rivals, especially on new-hire wages, said Art Wheaton, a labor-studies professor at Cornell University.

In the suit, GM argues that a bribery scheme run by then-Chief Executive Officer Sergio Marchionne corrupted the bargaining process in 2011 and 2015 and resulted in contracts that took Fiat Chrysler's labor costs well below its larger competitor -- a difference that hurt GM's business. Mr. Marchionne died in 2018.

As Fiat Chrysler headed into contract talks this summer, its labor costs, including wages and benefits, averaged about $55 an hour, about $8 an hour less than at GM, according to the Center for Automotive Research.

"This weakens Fiat Chrysler's hand in negotiations because GM has shone a very bright, white spotlight on how they have not been following the pattern," Mr. Wheaton said.

(END) Dow Jones Newswires

December 02, 2019 02:47 ET (07:47 GMT)

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