WASHINGTON (WWJ) – Chrysler CEO Sergio Marchionne is eager to start talking about changes to the auto industry’s two-tier wage scale, and he doesn’t want to wait until we get into formal contract talks next summer.
“I think we’re gonna start the discussion right now, a year before the contract’s up,” said Marchionne at a Brookings Institute conference in Washington DC.
Retiring UAW President Bob King is expected to be replaced with current Secretary-Treasurer Dennis Williams at the union’s convention next month. Marchionne says he’d like to start talking with Williams right away about replacing the system that sees new employees earn half of veteran workers.
Marchionne says he tried to work out something during the 2011 contract talks.
“We couldn’t get it done because we ran out of runway.”
Marchionne has suggested grandfathering veteran workers into their higher pay scale, and developing a new compensation plan that allows newer workers to share the wealth in good times, and share the pain in tough times.
“When you have a bumper year, you pay them as much as a tier one would make, if not more,” he said. “If I’m in the toilet…then I think at the end of the day you share the pain with the company.”
The UAW, which hasn’t commented, is expected to use the profitability of the industry as evidence that, after years of concessions, workers deserve a pay raise.
The conference took a look back at the auto bailout, and how far GM and Chrysler have come in the past five years.
There were no alternatives to government help, said Marchionne, who told the conference he had to start from scratch, spending eight billion dollars to turn around a company that had seen little investment, and had no new products ready to go.
The Chrysler CEO says he was “walking a tightrope” the first few years, as he saw market share fall, and worked to get new products in the pipeline. Marchionne says Chrysler had little margin of error, as terms of its bailout were far less generous than GM’s.
“I got a raw deal because somebody said the other guy was going to survive and I wasn’t,” said Marchionne. “That kind of genetic selection, I despise.”
That, says Marchionne, put the two companies on very different turnaround paths.
“The leash on the other side was incredibly long. You could do a lot of mistakes in that world. I think the urgency to change, that came with the loans, did not exist on the other sides.”
Steven Rattner, who lead President Obama’s Auto Task Force says they considered letting Chrysler go out of business. But, instead, decided to give the company limited assistance.
“We felt that as stewards of the taxpayers money, we could not put more money into Chrysler than the minimum we thought was reasonable for it to have a chance to succeed.”
While there had been discussion of merging Chrysler and General Motors, Rattner said GM’s CEO at the time, Rick Wagoner, rejected the idea, saying he didn’t want to add Chrysler brands as he was eliminating GM brands.
Chrysler came closer than many think to going out of business.
“Sergio’s analysis that we would have been out of our minds to let it go may be right, but it was a close decision,” said Rattner. “The thing that was absolutely central to our thinking is that it had to have a world class management team. If we’d not had Sergio, actually we would have let it go.”
On other subjects, Marchionne said he agreed to bring the Fiat 500 to the United States because the Auto Task Force insisted on it. He said the “iconic, symbolic car” will not be a volume player, but did help the company get a fuel-efficient vehicle in its lineup.
Future fuel economy standards will be met by increased electrification, said Marchionne. He predicted that by 2025 more than half of vehicles sold will have some sort of hybrid system. He was less bullish on electric vehicles, saying he lost $14,000 on each electric Fiat sold, and saying he didn’t believe GM made money on the Chevy Volt.
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