By Bernie Woodall
DETROIT (Reuters) - The United Auto Workers union said early Tuesday it will keep talking with Fiat Chrysler (NYSE:FCAU) Automobiles (N:FCAU) (MI:FCHA) to reach a new contract for the automaker's U.S. factory workers, delaying a possible strike at its most profitable operations.
The company and the union had agreed to extend the current contract, which had expired at midnight, "on an hour by hour basis" and will continue bargaining, the UAW said.
The decision to extend the contract covering about 40,000 FCA workers in the United States is a sign the two sides are making progress on complicated pay and benefits issues.
UAW President Dennis Williams and his chief negotiator with FCA, Norwood Jewell, could call on members to stop work if talks hit an impasse.
At issue are proposals to overhaul a two-tier pay system the UAW wants eliminated and to restructure company health plans to curb rising costs, people familiar with the process said.
The UAW has at least three options now that the contract has expired.
It could call a company-wide strike or stage limited walkouts that could cripple the firm's operations without forcing hefty payments to workers from union strike funds. It could also opt to extend the current contract and allow time for a settlement.
The terms of any deal with Fiat Chrysler would be used to set the pattern for subsequent labor agreements at General Motors Co (N:GM) and Ford Motor Co (N:F), the UAW has said.
Sergio Marchionne, chief executive officer of the Italian-American company, canceled an appearance at the Frankfurt auto show this week to try to seal a deal.
Labor expert Arthur Schwartz said on Monday that FCA must offer a raise to veteran first-tier workers who have not seen one in a decade to get workers to ratify any tentative deal.
First-tier workers make about $28 per hour while the second tier tops out at $19.28 per hour.
Schwartz said FCA workers would not ratify a contract without a pay hike for more senior workers earning the top wage scale.
Marchionne has said he wants to eliminate the two-tier wage system, but he has suggested base wages be set lower than the current top tier, and wants to offer union workers more in the form of profit sharing or bonuses when the company's profits are high.
At FCA, about 45 percent of the company's hourly UAW workers earn lower-tier wages.
That gives FCA's U.S. operations an $8 to $10 an hour labor cost advantage over Ford, where 28 percent of the UAW workers are in the lower-tier wage group, and GM, where 20 percent of workers are in the lower-wage tier.
Ford and GM on Monday agreed with the UAW to extend their current contracts, the union and the companies said.
