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UAW rejects Fiat Chrysler contract; strikes loom

Fiat Chrysler Automobiles (FCA) CEO Sergio Marchionne (R) and United Auto Workers (UAW) union President Dennis Williams shake hands during a news conference in Detroit, Michigan, September 15, 2015. REUTERS/Rebecca Cook

By Bernie Woodall

DETROIT (Reuters) - Fiat Chrysler Automobiles NV's (FCAU.N) (FCHA.MI) U.S. workers soundly rejected a four-year contract the automaker had agreed with the UAW, the union said on Thursday, setting the stage for at least localized strikes against the automaker.

The tentative agreement was voted down by 65 percent of the 40,000 unionized workers who work at the 37 plants of Fiat Chrysler, the smallest of the three major Detroit automakers.

UAW President Dennis Williams is holding a meeting with 300 representatives from Fiat Chrysler union halls on Thursday to consider next steps.

"We will gather the issues together and notify (Fiat Chrysler) that further discussions are needed," Williams said in a statement.

In the aftermath of the rejection, which reflects growing discontent among auto workers about stagnant pay, some Fiat Chrysler locals are preparing to send workers out on strike.

Alternatively, the United Auto Workers (UAW) union may invite Fiat Chrysler back to the negotiating table, or the could decide to turn its attention to one of the other Detroit Three companies - GM or Ford.

During the General Motors (GM.N) Global Business Conference on Thursday CEO Mary Barra said the company has had regular dialogue with the UAW. "It is their choice how they resolve" the contract with Fiat Chrysler, she added.

There has not been a sustained UAW strike in decades, and this makes the first time a national contract negotiated between the UAW and a major car maker has been rejected since 1982. It is the first time since 1976 that a contract with the company chosen by the union for pattern bargaining has failed.

Fiat Chrysler said it was disappointed by the tentative pact's rejection. (http://bit.ly/1M48PxF) "The Company will make decisions, as always, based on achieving our industrial objectives, and looks forward to continuing a dialogue with the UAW," the company said in a statement.

A localized strike against Ford Motor Co (F.N) was a possibility even before the Fiat Chrysler vote. The UAW’s top negotiator at Ford on Tuesday said he has authorized a strike as early as Sunday by 7,500 workers at a factory near Kansas City, Mo. that builds the company’s best-selling F-150 pickup truck, a linchpin of Ford’s global profits.


HEALTHCARE WORRIES

Fiat Chrysler union members who voted "no" said they were motivated by concerns about the carmaker's two-tiered pay system, under which recently hired workers earned about $19 an hour, while workers hired before 2007 earned base wages of $28 an hour.

Fiat Chrysler has the highest share, among top automakers, of second-tier workers, 45 percent of its production workforce, and therefore has lower labor costs.

The proposed Fiat Chrysler deal would have narrowed, but not closed the gap between the two tiers of workers.

In addition, their hopes were disappointed that the new contract failed to cap at 25 percent the number of lower-paid, second-tier workers in the company's workforce.

Union leadership had previously pledged to pursue such a cap when it was pushing for ratification of a prior contract that took effect in 2011.

Members also said they needed further clarification of the contract's proposed system of cooperating with workers at the other two Detroit automakers to cut healthcare costs. Workers said they are concerned about a pending increase in federal tax on premium health care, which will affect them after it takes effect in 2018.

"People wanted to know why they stand to lose benefits or pay more money when the premium health care tax kicks in," said Bill Parker, a veteran worker at a plant in Sterling Heights, Michigan.

Talks leading to the now-failed tentative agreement also broached the idea of moving production of Fiat Chrysler cars to Mexico and concentrating the more profitable SUV and truck production in the United States, a source with knowledge of the talks said, adding that was just one of several options on product placement the company presented to the union. The UAW said Fiat Chrysler plans to invest $5.3 billion in U.S. locations based on market conditions. 

Fiat Chrysler reached the tentative deal with the union on Sept. 15 and its workers at its U.S. plants have been voting on the contract through Wednesday.

Results from some of the biggest plants have been revealed by local leaders of rank-and-file members officially, or unofficially, on social media.

Fiat Chrysler shares rose 2.3 percent to close at $13.52 on the New York Stock Exchange.




(Additional reporting by Meredith Davis in Chicago, Arunima Banerjee in Bengaluru; Editing by David Greising and Christian Plumb)