Sergio Marchionne: International Union-Buster

Considering the United Auto Workers’ VEBA fund is still Chrysler’s second-largest shareholder, CEO Sergio Marchionne is taking an amazingly hard line with the union. With a GM deal long done, and Ford’s deal moving towards approval, Chrysler is the last automaker on the UAW’s to-do list… and Marchionne tells Bloomberg he’s up for a fight if necessary, saying

I sincerely hope that we don’t have to get to arbitration. But if necessary, Chrysler will go there. We and GM are completely different

Marchionne is reportedly pushing the UAW for a number of tough concessions, including a mere $3,500 signing bonus (compared to $5k at GM and a reported $6k at Ford), and the elimination of a planned 2015 cap on entry-level “Tier Two” workers (at 25%). And though both of these are tough asks, he’s using UAW boss Bob King’s concept of union internationalism as a cudgel against the UAW, playing Italian unions off their American counterparts. And as a result, he could earn Chrysler a favored place among America’s unionized autoworkers.

The key to Marchionne’s Italian strategy was to threaten Italian unions with the prospect of Fiat pulling out of its home market and retrenching in lower-cost production centers like Poland and Brazil. That agreement eventually went through, and, as Bloomberg reports

Marchionne reached three labor agreements in less than a year as part of his strategy of raising productivity at Fiat’s domestic plants. The deals at all three factories include measures to limit strikes and curtail absenteeism.

Fiat also won approval to introduce longer shifts and run plants on a six-day workweek. In addition to more hours, workers get shorter breaks and postpone lunch until their shift’s end.

The changes at Mirafiori, Fiat’s oldest plant, in January were won with a 54 percent majority and set a milestone in Italian labor relations.

And to prove how serious he is, Marchionne has even withdrawn Fiat from Confindustria, Italy’s largest business organization, over difficulties in applying those reforms uniformly across its Italian production base. Says Marchionne in his withdrawal letter

Fiat, which is engaged in the creation of a major international group with 181 plants in 30 countries, cannot afford to operate in Italy in an environment of uncertainty that is so incongruous with the conditions that exist elsewhere in the industrialized world

And, having manhandled the Italian unions, Marchionne is not only asking the UAW for tough concessions, but he’s also setting a deadline that could send negotiations into arbitration (since the UAW has a no-strike agreement with Chrysler). Which gives Berkley professor and UAW mouthpiece Harley Shaiken cause to warn Marchionne that

He’s rolling the dice

But with Marchionne approving new products, including a 5-door Alfa-Romeo MiTo, and small Fiat and Jeep SUVs, for the Mirafiori plant, he’s offering carrots as well as sticks. And the longer the UAW waits to get a deal with Chrysler, the more carrots could be distributed around the globe… which means fewer carrots for the UAW. And at this point, the UAW’s Chrysler employees can’t afford to hurt their employer, which has largely funded their benefits with its own stock. Look for Marchionne to come out of this negotiation looking like the smartest guy to ever take on the UAW.