Some or all of FCA's U.S. workers could strike as soon as tomorrow morning, bringing assembly lines like this one in Detroit to a halt. Such a strike could cost FCA billions. Image source: Fiat Chrysler Automobiles
What's happening: Fiat Chrysler (FCAU +0.00%) may be facing a massive strike as early as tomorrow morning.
FCA and its hourly workers are at an impasse. Two-thirds of the workers voted against a proposed new four-year contract that was worked out after weeks of negotiations between FCA executives and representatives of the United Auto Workers (UAW).
The workers have been working under an extension of their old contract, which expired last month. On Tuesday, the UAW formally informed FCA that it was canceling that extension as of 11:59 p.m. Eastern time on Wednesday. Workers could strike any time after that.
Why this is a very big deal
A strike that shut down most or all of its U.S. factories could cost FCA as much as half a billion dollars a week, according to some estimates. (Read why workers rejected the proposed contract.) But it's likely that the workers wouldn't shut down all of the factories. Instead, they may choose to target a factory that makes critical components -- most likely FCA's giant transmission plant in Kokomo, Indiana.
A strike at Kokomo would slow or shut down many of FCA's North America assembly lines within a few days, including those that make critical high-profit products like the Ram pickups, and many Jeep models. But it was learned last night that the UAW has posted strike notices in many of FCA's U.S. plants, making it unclear exactly where -- or if -- it intends to strike.
A limited strike is likely, simply because that allows the workers to inflict maximum damage at a relatively small cost. Workers on strike can't collect unemployment benefits; their only income would be a weekly payment of $200 from the UAW's strike fund. But a targeted strike would allow workers at other plants to continue collecting wages -- or to collect full unemployment benefits if their factories are shut down because of parts shortages.
What happens next
A UAW spokesperson told Reuters on Wednesday that union officials and FCA executives had returned to the negotiating table in hopes of hammering out a workable agreement before the 11:59 p.m. deadline. It's possible that they'll get to a deal before midnight. But it's also possible that FCA CEO Sergio Marchionne will continue to resist giving in to the workers' demands on the ground that FCA simply can't afford them.
FCA's net profit last quarter was just 197 million euros (about $222 million). A strike that halted most of the company's U.S. production for even two or three days could dent its fourth-quarter revenue by that much, or more.
At the same time, that slim profit points up the reality: FCA genuinely may not be able to afford all of the concessions that the workers want. Either way, for FCA, there's little margin for error. Stay tuned.
