The Sergio Marchionne-Bob King show is about to resume.
Will it be more "Smackdown" or "Let's Make a Deal"?
Chrysler CEO Marchionne can take unresolved issues to binding arbitration, a risky step that could prolong a settlement with the UAW and take it out of both sides' direct control.
Marchionne has cooled down since releasing a letter Sept. 14 in which he scolded UAW President King for leaving Chrysler's table to bargain first with General Motors. King never responded publicly to the letter.
Marchionne's negotiating track record is impressive. He convinced the Obama administration to give Fiat control of Chrysler in 2009 for no cash.
Chrysler's recovery -- the company lost $254 million in the first half of 2011 -- isn't as far along as GM's or Ford's.
Arbitration could result in bigger savings for Chrysler, but it could upset a workforce that so far has been grateful for the progress Marchionne has achieved. Workers can't ratify any arbitrator's decision.
"Marchionne is making the case that the pattern set at GM has to be custom-tailored for Chrysler," said Gary Chaison, an industrial relations professor at Clark University. "But he's more likely to get that through collective bargaining than arbitration."
Now the UAW shifts to Chrysler, where CEO Sergio Marchionne can choose to follow the pattern set at General Motors and Ford or gamble that an arbitrator will cut him a better deal than he could get at the bargaining table.
UAW President Bob King went to Chrysler's headquarters in Auburn Hills Wednesday, according to a person familiar with the discussions. The automaker's 2009 government-backed bankruptcy required that unresolved labor issues would be resolved through binding arbitration.
If the company submits any issue to arbitration, the UAW also may submit an issue of its choosing to the same arbitrator.
General Motors had the same option, but chose not to use it. But Marchionne, who is negotiating his first contract with the UAW, convinced the U.S. government to give control of Chrysler for no cash. This past June, he convinced the government to sell its remaining 6% stake in Chrysler for $500 million.
King wants to avoid turning anything over to a third party because an arbitrator's decision will not be subject to ratification by the union's rank-and-file. Marchionne sees it as a valuable tool.
In his now-famous Sept. 14 letter to King, Marchionne referred twice to arbitration.
Last week in Italy, he said, "I'm sure there will be an agreement because if we don't get one, there's compulsory arbitration."
Consider health care. The UAW agreements with GM and Ford don't increase UAW workers' contribution to their annual health care premiums, which range from 5% to 7% of the cost.
The average private sector worker contributes about 33% toward his or her health care premiums, according to the Bureau of Labor Statistics.
Chrysler might look at that and conclude the odds are good an arbitrator would say Chrysler's UAW workers should contribute more.
"If they go to arbitration, typically arbitrators look at things like comparability and ability to pay," said Richard Block, a retired professor of labor relations at Michigan State University. "He would ask why should Chrysler, with agreements with the other two in place, be different from GM and Ford?"
One difference is that Chrysler doesn't have cash. In fact, Chrysler's debt exceeded its cash by $2.1 billion as of June 30. Ford had $8 billion more cash than debt at that point. GM's cash exceed debt by $15.8 billion at the end of June.
Chrysler is also more dependent on the North American market, although Fiat is helping boost sales of Chrysler vehicles in Europe.
Arbitration would take time and prolong uncertainty for the company and workers.
By contrast, GM and Ford will have moved on with labor peace and investments that preserve or add jobs over the next four years.
"The process is undefined and untested, and the potential costs in time, money and worker discontent are greater than the potential gains," said Kristin Dziczek, a labor analyst with the Center for Automotive Research in Ann Arbor.
Binding arbitration is extremely uncommon in the private sector, according to labor experts, but it is frequently used to resolve disputes between government and public employee unions.
During World War II, unions voluntarily surrendered the right to strike because striking would halt production of planes, tanks and ammunition troops needed. Binding arbitration was the alternative method for resolving disputes during that period.
Michael Whitty, professor of business at University of Detroit-Mercy, predicted Marchionne will avoid arbitration because the UAW will be flexible.
"Marchionne's dealt with the Italian Communist Party and the unions in Europe," Whitty said. "Those are groups that can be far scarier than Bob King."
Most Popular Stories
- SEO Traffic Lab Celebrate Wins at Digital Marketing Event 'Internet World 2013' in London
- Social Media Initiatives Should Follow Customers' Lead
- Apple CEO: Offshore Units Not a 'Tax Gimmick'
- U.S. Senate Accuses Apple of Large-scale Tax Avoidance
- UTEP Water Recycling Project Wins Venture Titles
- Marketo Makes a Mint in IPO: Stock Shoots Up More than 50 Percent
- Bieber Booed at Billboard Awards
- Crude Oil Up, Gasoline Down
- Austin Startup Compare Metrics Raises $3.5 Million for Expansion
- Why So Many Top 'Car Guys' Are Actually Women