Proposed Fiat Chrysler UAW pact gradually ends two-tier pay

By Bernie Woodall

DETROIT (Reuters) - The new proposed four-year contract for Fiat Chrysler Automobiles NV's U.S. unionized workers would over time eliminate the much-maligned two-tier pay structure, allowing new hires to reach top pay within eight years, sources said.

The proposal agreed by United Auto Workers and Fiat Chrysler negotiators late Wednesday night would also increase the top pay for the more experienced second-tier workers to $29 in the course of the pact, up from their current pay of about $19 per hour, sources said. That would also be up from about $25 top pay for second-tier workers that was in the proposed contract rejected last month by a nearly 2-to-1 margin of Fiat Chrysler UAW workers.

There is no cap on the percentage of second-tier workers in the new deal. If one had been enacted that could have created a permanent second tier while raising some to first-tier pay level, analysts said.

The new proposal shortens the time for workers to get to top pay. A five-year veteran who makes the lower tier of pay would reach the new top pay in three years, the sources said.

About 45 percent of Fiat Chrysler's 40,000 UAW workers are second-tier. Those second tier workers have been hired since the two-tier pay system went into effect in 2007 when all three of the Detroit automakers were struggling financially.

The pay proposals for the first-tier of UAW Fiat Chrysler workers remained the same as in the recently rejected contract, which is 3 percent raises in years one, and 3- and 4-percent lump sum payments in years two and four, the sources said.

The UAW and the company declined to comment on the proposed contract, which will be presented to UAW local leaders on Friday and if approved then will go to a ratification vote of all Fiat Chrysler UAW members.

The two-tier structure was put in place so the Detroit Three, which includes General Motors Co and Ford Motor Co , would remain competitive on labour costs with non-union Japanese, German and South Korean automakers with U.S. plants.

A ratification bonus of $3,000 remains the same in the newly proposed contract, sources said.

Plant workers said the two-tier pay scale was one of the major reasons for rejecting the previous agreement that had reached in mid-September by union and company leaders.

The rise in pay for the second tier of workers was reported earlier on Thursday by Bloomberg News.

(Reporting by Bernie Woodall; Editing by Nick Zieminski)