By Bernie Woodall and Joseph White
DETROIT (Reuters) - A tentative labor contract covering 40,000 U.S. workers at Fiat Chrysler (NYSE:FCAU) Automobiles NV (MI:FCHA) (N:FCAU) could eventually end a controversial two-tier pay system and could offer a new approach to curbing medical costs, the company's chief executive officer said Tuesday.
FCA CEO Sergio Marchionne said the two-tier pay system "will go away over time." Under the old contract recently hired union workers are paid a top wage of $19.28 an hour, while veterans earn $28 an hour. Analysts expect raises for UAW members at both levels, but the new pay rates were not disclosed.
Marchionne also said the proposed contract will contain ways to curb rising healthcare costs, and suggested that the idea of pooling health plans for Detroit's "Big Three" automakers - FCA, General Motors Co (N:GM) and Ford Motor Co (N:F) - is broadly part of the pact. Neither Marchionne, nor UAW President Dennis Williams elaborated during their press conference.
Marchionne and Williams hugged at one point during the joint presentation. Their endorsement of the pact is important as UAW leaders try to win ratification from UAW-FCA workers.
"Expectations are very high for raises for everyone," Kristin Dziczek, labor analyst with the Center for Automotive Research, said Tuesday before the agreement was announced. She said she expected the agreement to raise pay for new hires into the mid-$20 an hour range, and offer a 50 cent-an-hour raise to veteran workers.
At FCA, about 45 percent of the hourly UAW workers earn lower-tier wages.
Winning pay hikes could help revive the UAW's sputtering effort to organize non-union auto plants in the southern United States, and possibly embolden workers in other industries.
"The stakes go well beyond Detroit and the automotive industry," said Harley Shaiken, a labor expert at the University of California-Berkeley.
UAW workers at the Detroit Three earn more in wages and benefits than workers at U.S. factories operated by Volkswagen AG (DE:VOWG_p), Nissan Motor Co Ltd (T:7201) and BMW AG (DE:BMWG), according to the Center for Automotive Research.
Many Detroit auto executives view the lower wage costs at foreign-owned plants as a threat.
The terms of the deal with Fiat Chrysler, if ratified, will set the pattern for subsequent labor agreements at General Motors and Ford, the UAW has said. The union has extended contracts at Ford and GM pending the outcome of talks at FCA.