UPDATE: UAW passes new labor contract with Fiat Chrysler

The United Auto Workers union has approved a new four-year contract with Fiat Chrysler.

UAW members at Fiat Chrysler's U.S. factories voted 77 percent in favor of the agreement, the union said. The contract covers 40,000 workers at 23 U.S. factories.

It's the second time in a month that Fiat Chrysler's union members voted on a contract. A previous deal was soundly rejected largely because it didn't eliminate a much-hated two-tiered pay system.

Fiat Chrysler employs about 7,100 UAW workers in Kokomo. A source at UAW Local 1166 told the Detroit Free Press that 89 percent of the production employees and 90 percent of the skilled-trades workers at the 1,100-worker Kokomo Casting plant voted to approve the contract.

A source at UAW 685, which represents Fiat Chrysler transmissions plants in Kokomo, said 88 percent of the production workers and 82 percent of the skilled-trades workers approved the contract, the newspaper said.

A union local in Belvidere, Illinois, with 4,200 workers voted 81 percent in favor of the new deal, according to its website. The plant makes the Dodge Dart compact car. Also, 84 percent of production workers at a metal stamping plant in Sterling Heights, Michigan, north of Detroit also voted yes. Skilled trades workers at the plant voted 64 percent in favor, according to postings on the union website.

The new agreement gives raises to all workers and eliminates the two tiers over eight years.

The union is expected to use the Fiat Chrysler deal as a template for talks with Ford and General Motors. It was unclear Thursday whether the union would pick one company to focus on or try to negotiate with both.

UAW President Dennis Williams said Ford and GM make more money and should be able to pay more, a statement that conflicts with company goals of cutting labor costs to bring them more in line with foreign automakers with U.S. factories.

The new agreement with Fiat Chrysler would gradually eliminate the tiered pay system that the union agreed to in 2007 when all three Detroit automakers were in financial trouble, bringing all U.S. factory workers to the same wage over eight years. But members have resented the varying pay, and the company's current CEO, Sergio Marchionne — who took over when Chrysler merged with Italian automaker Fiat in 2009 — has called the two-tier wages "unsustainable."

Under the new agreement, workers with four or more years of experience would make the top $29 hourly wage within four years; workers with less experience would make between $22.50 and $28 in four years and top wages in eight years.

About 45 percent of FCA's U.S. hourly workers are lower-tiered workers who now make wages as low as $15.78 per hour. For a typical member with two years in, the UAW said the agreement is worth $44,000 over four years.

Like the previous agreement, the new contract promises the first raises in nine years for the highest-paid workers, who now start at $28 per hour. Top-tier workers will get a $4,000 bonus if the agreement is ratified; lower-tier workers will get $3,000. The previous contract promised $3,000 bonuses for all workers.

Workers from both tiers banded together to defeat the previous contract, saying they deserved a bigger share of Fiat Chrysler's profits after giving up raises and bonuses when the company was struggling.

The new agreement calls for a $5.3 billion investment in U.S. plants, as the previous agreement did, but this time the UAW spelled out which plants would get that investment.

Please enable JavaScript to view this content.

Editor's note: IBJ is now using a new comment system. Your Disqus account will no longer work on the IBJ site. Instead, you can leave a comment on stories by signing in to your IBJ account. If you have not registered, please sign up for a free account now. Past comments are not currently showing up on stories, but they will be added in the coming weeks. Please note our updated comment policy that will govern how comments are moderated.