Saved in the nick of time: Fiat Chrysler Automobiles (NYSE:FCAU) and the United Auto Workers (UAW) came to an agreement on a new, tentative four-year labor contract late last night.
The agreement was apparently reached moments before a UAW-imposed deadline. For now at least, it spares FCA from strikes that would have caused expensive disruptions to the company's U.S. manufacturing.
But it's still far from a done deal.
Version 2.0 of a "tentative" new deal
This is the second attempt by the UAW and FCA to come up with a contract that UAW members would approve. The first deal was shot down by workers who complained that it didn't come close to addressing their long-standing concerns. That sent the two parties back to the negotiating table -- and led the UAW's leadership to lay the groundwork for a major strike against FCA.
The union had made preparations to strike if there was no agreement by 11:59 p.m. on Wednesday night. The UAW's plans were unclear, but it was believed that the union would likely stage a walkout at a critical transmission factory in Indiana.
A work stoppage at that factory would cause component shortages that would likely force many of FCA's most important U.S. assembly lines to shut down within days.
But the prospect of a strike has been averted, at least for now. Shortly after midnight, the UAW announced that it had "secured significant gains" in a new deal with FCA.
"We heard from our members, and went back to FCA to strengthen their contract," UAW President Dennis Williams said in a statement on Thursday. "We've reached a proposed tentative agreement that I believe addresses our members' principal concerns about their jobs and their futures. We have made real gains."
The UAW's leadership thinks it has a good deal. Now, it has to convince the workers to accept it.
Now, the UAW's leaders have to sell it to the workers
FCA workers rejected the initial attempt at a contract because they felt that it didn't do enough to address long-standing concerns. (Read why here.)
In a nutshell, the workers want to see a "two-tier" pay system abolished over time, they want FCA's complex shift-scheduling system to be made more worker-friendly, and they want some concrete assurances about future products for FCA's U.S. factories.
We don't know yet whether the UAW leadership managed to address those concerns in ways that the workers will accept. All of the details of the agreement will be kept secret (by both parties) until it is presented to workers.
As I write this on Thursday, the UAW is referring to the contract as a "Proposed Tentative Agreement." It will be presented first to the UAW's National Chrysler Council, which is made up of leaders from the UAW locals in FCA's factories.
The Council is set to meet on Friday. If the Council votes to approve the agreement, it becomes a "Tentative Agreement" that is then presented to workers. Over the next couple of weeks, the locals at FCA facilities will vote on whether to accept the new agreement.
If a simple majority of the workers approve, then it becomes the new four-year contract.
A good deal is in everyone's interest -- if FCA can afford it
It's hard to know what will happen if the workers don't approve this second attempt at an agreement. The UAW could choose to strike FCA, hoping to force a still-better deal. Or it could turn to Ford or General Motors instead.
The UAW's traditional method is to get an approved contract with one of the three Detroit automakers and then use that contract as a "pattern" or "template" for deals with the other two.
The old contracts expired in September. UAW members at Ford and GM are working under extensions of the old deals -- but you can bet that they're watching the developments at FCA with great interest.
Labor peace is in everyone's best interest. Keeping the Detroit automakers' cost structures competitive with nonunion rivals is also in everyone's best interest. If there's a way to give the workers what they want most without hurting the companies' competitiveness, it's likely that the UAW and the automakers will be able to find a way forward. We'll soon know whether this contract fits the bill.
John Rosevear owns shares of -- and The Motley Fool recommends -- Ford and General Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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