Bloomberg News

Chrysler’s Marchionne Jilted Again by a North American Union

September 18, 2012

Chrysler Group LLC CEO Sergio Marchionne

Chrysler Group LLC Chief Executive Officer Sergio Marchionne. Photographer: Nelson Ching/Bloomberg

Sergio Marchionne, Chrysler Group LLC’s chief executive officer, was jilted again in his bid to be picked as the company to set the wage-and-benefit pattern in contract talks with a major labor union.

The Canadian Auto Workers selected Ford Motor Co. and reached an agreement the union now is seeking to impose on General Motors Co. (GM:US) and Chrysler. Last year, the United Auto Workers selected GM to set the pattern, triggering an emotional letter from Marchionne to UAW President Bob King, saying, “I know that we are the smallest of the three automakers here in Detroit, but that does not make us less relevant.”

Now Marchionne is crying foul again. Chrysler said in a statement that it’s “very concerned” about the CAW’s selection of Ford. (F:US) “We don’t think they are in the best position to take on this role given the significant reduction in their Canadian footprint.” Chrysler makes more models in Canada than Ford, which closed a factory in Ontario last year. Marchionne also has taken a hard line, suggesting he may move work elsewhere.

“Sergio has developed a reputation for being less flexible than his counterparts,” said Harley Shaiken, a labor professor at the University of California at Berkeley. “Certainly his rhetoric is tougher. That may have had a perverse impact on his goal. It isn’t exactly a welcome mat to being the target.”

Contracts Expiring

Contracts covering about 18,000 CAW members at GM, Ford and Chrysler were set to expire at 11:59 p.m. yesterday. Ford plants will continue operating while ratification votes are scheduled for the weekend. GM and Chrysler negotiations are continuing, CAW President Ken Lewenza said last night.

The automakers have said that their Canadian labor costs are among the highest in the world, driven by the strong Canadian dollar and higher wages for Canadian workers than for their U.S. counterparts.

“Nobody in their right mind would continue to create an unlevel playing field in its own organization,” Marchionne told the Toronto Globe and Mail Sept. 7. “It’s impossible. We have other plants, other options.”

The automakers had sought to make permanent a two-tier wage structure in Canada, based on a similar agreement it reached with the UAW in 2007. The CAW opposed two-tier wages and Ford agreed to a 10-year progression from hiring to the full wage.

The tentative agreement between Ford and the CAW mostly eliminates cost-of-living raises for workers and for retirees, the union said in a conference call yesterday. Workers will get C$2,000 ($2,050) lump-sum payments in lieu of raises and a C$3,000 ratification bonus.

The union may have seen Ford as the best company to establish a deal that all three companies can live with, Shaiken said.

‘Sergio’s Interest’

“The notion that Chrysler is the only appropriate target certainly reflects Sergio’s interest, but not necessarily the broader interests of the whole industry and the union itself,” Shaiken said. “Sergio is a key actor, but he is not the director of labor relations in Canada.”

Canadian-produced models accounted for 28 percent of Chrysler’s U.S. sales so far this year, according to researcher Autodata Corp. of Woodcliff Lake, New Jersey. The Auburn Hills, Michigan-based automaker produces its Dodge Grand Caravan and Chrysler Town & Country minivans in Windsor, Ontario. It also builds the Chrysler 300 and Dodge Challenger cars in Canada.

Made-in-Canada GM vehicles, which include the Chevrolet Impala and Cadillac XTS sedans, accounted for 15 percent of its U.S. sales this year through August, according to Autodata.

Ford’s Canadian-built models, which include the Edge sport- utility vehicle and Flex wagon, have accounted for 7.5 percent of its U.S. sales this year, Autodata said.

‘Pivotal’ Negotiations

“These negotiations are pivotal in shaping the future of the automotive landscape in this country,” Chrysler said in its Sept. 16 statement. “Chrysler’s goal in these negotiations is to develop an agreement that is conducive to long-term job security in Canada.”

Fiat fell 4.3 percent to 4.53 euros ($5.91) at the close in Milan. The shares have gained 28 percent this year.

Shaiken said he suspects Marchionne is uncomfortable with the North American labor tradition of pattern bargaining, especially since Chrysler hasn’t had the chance to establish the economic framework for contracts in the U.S. or Canada. That isn’t the tradition in Italy, where Marchionne is also CEO of Fiat SpA (F), which controls Chrysler.

“In Italy, Fiat is the only game in town,” Shaiken said. “The pattern begins and ends at Fiat.”

To contact the reporter on this story: Keith Naughton in Southfield, Michigan, at knaughton3@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net


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