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Fiat Chrysler, U.S. union contract narrows pay gap

Fiat Chrysler Automobiles (FCA) CEO Sergio Marchionne (front 2nd R) and United Auto Workers (UAW) union President Dennis Williams (front 2nd L) announce a tentative agreement during a news conference in Detroit, Michigan, September 15, 2015. REUTERS/Rebecca Cook

By Bernie Woodall

DETROIT (Reuters) - The lowest paid U.S. factory workers at Fiat Chrysler Automobiles NV (FCHA.MI) (FCAU.N) would get the biggest raises and the most generous profit sharing checks under a new four-year labor contract, according to details of the proposed agreement released on Friday.

United Auto Workers union leaders are meeting Friday to start the drive to win ratification of the contract from 40,000 UAW workers at Fiat Chrysler.

The current contract allows for a gap of more than $12 per hour between the lowest- and highest-paid assembly line workers. That gap will drop to less than $8 per hour by the end of the new four-year agreement.

Fiat Chrysler Chief Executive Sergio Marchionne has said he believes in "wealth distribution," and the pact would offer the lower-paid "second tier" workers the chance to make more in profit-sharing bonuses than more senior "first-tier" workers. About 45 percent of Fiat Chrysler's 36,600 hourly workers are second-tier.

The company has another 3,400 salaried UAW-represented employees who are affected by some aspects of the proposed pact, a company spokeswoman said.

Veteran workers will get 3 percent raises immediately and in September 2017, and $2,500 lump sum payments in 2016 and 2018. By not giving per-hour base pay hikes in two of the four years in the contract, Fiat Chrysler saves because the rates are not compounded.

Second-tier workers could also get bigger profit sharing bonuses than veteran UAW members if the company achieves at least an 8 percent North American annual profit margin. In its most recent quarter, Fiat Chrysler's North American profit was 7.7 percent, which pales next to Ford Motor Co's (F.N) 11.1 percent margin and the 10.5 percent earned recently by General Motors Co (GM.N).

A veteran Fiat Chrysler worker can make an extra $7,200 if the company achieves a 9 percent profit margin, while a second-tier worker would get $9,200.

By September 2017, hourly pay for top-tier workers would be $29.76, up from $28.05. Starting pay for newer second-tier workers at ratification would rise to $17 from $15.78 currently. By 2018 the starting pay for second tier workers would rise to $22 per hour. Top pay for a worker with six to seven years seniority would be $25.35 per hour by 2018.

(Reporting by Bernie Woodall; Editing by Tom Brown)