Does Chrysler Face a Strike and Shutdown?

The threat may be more immediate than either side has let on publicly. Karl Brauer, a senior analyst at Kelley Blue Book, said:

With just over 24 hours before the current contract ends there’s a lot of pressure on both sides to reach a new agreement, yet some major issues have to be resolved in that timeframe. The largest issue, the two-tier pay structure, impacts FCA the most because of its low profit margins and large number of low-pay workers. But Sergio Marchionne has shown support for consolidating into a single pay rate, which is probably why the UAW picked FCA as the lead automaker in the negotiations. With a UAW strike already authorized there’s substantial pressure on both sides to finalize an agreement in these last remaining hours.

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The UAW lost a great deal during the recession. One thing was a pay structure favorable to all union members, not just the most senior ones. Another was extremely good health care benefits.

Among the arguments the union has made, which gives it some degree of leverage, is what the CEOs of the Big Three have been paid and the substantial profits each has enjoyed over the past two years. Management will make the argument that without relatively low labor costs, some of those profits vanish, and with them go the margins that allow them to match the Japanese. These are the same contentions that have gone back and forth for years.

One of the calculations Fiat Chrysler has to make is how long it can be without newly manufactured cars and light trucks. It has tens of thousands of cars on dealer lots, and more that have already been are made on the way. Union workers out on strike will be paid from UAW funds, but a strike sets off anxiety about how long those funds will last.

It has been years since a major strike drove a wedge between the UAW and large car companies. There may be a new one soon.

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