F Ford Motor Company

By Christina Rogers And John D. Stoll 

The United Auto Workers is threatening to strike Fiat Chrysler Automobiles NV by Wednesday night, signaling a breakdown in efforts to salvage a labor deal widely rejected by members last week.

The UAW, representing 40,000 Fiat Chrysler employees in the U.S., said it plans to strike if it can't reach a deal by Wednesday at midnight, at which time a contract extension expires. If the union follows through on its threat, it would represent the first walkout in a contract against a U.S. auto maker since before the Detroit car companies filed for bankruptcy in 2009.

The UAW was barred from striking General Motors Co. and Fiat Chrysler since 2009 as part of the Treasury Department's bailout deal with the auto makers and its biggest union. That restriction was lifted this year.

The union carried out a short strike against GM in 2007. At that time, the UAW's strike fund was nearing $1 billion, but it has shrunk after leaders used a big portion of that account to fund unsuccessful organizing drives in southern states. The strike fund equaled about $600 million at the end of 2014, enough to support a prolonged walkout.

The UAW has a spotty track record when it comes to playing tough with Chrysler. Nearly a decade ago, then- DaimlerChrysler AG Chief Executive Dieter Zetsche was shot down in his call for health-care cost cuts. The German auto giant responded by putting Chrysler up for sale, a move that likely hastened the unit's path to bankruptcy court.

Now run by Fiat Chrysler Chief Executive Sergio Marchionne, the company has been aiming to find a partner to help shoulder development costs and boost scale. Mr. Marchionne expected UAW President Dennis Williams to deliver a deal that was favorable to that pursuit, but the prospect now appears to be fragile.

Mr. Williams earlier this week told UAW workers his leadership team would do a better job of communicating with them about proposed contract changes. While the proposed deal offers factory workers raises and bigger bonus checks, it fails to eliminate a controversial two-tier wage structure that has angered many members and made none of the new investment pledges customary in such deals, prompting worries about job security.

Fiat Chrysler and the UAW extended a four-year labor pact in mid-September, and came to a tentative agreement shortly after the extension. Last week, UAW members rejected the offer, marking the first time in 30 years a master labor contract from a Detroit auto maker had been shot down by the rank-and-file.

The union's brass is indicating time is running out on bargaining for a new deal. GM and Ford Motor Co. have extended contracts as well past a Sept. 14 deadline, but both are waiting on a Fiat Chrysler deal to be ratified before they resume bargaining.

The strike notice comes after UAW bargainers, meeting with Fiat Chrysler officials Monday, hit a roadblock with the company refusing to sweeten the tentative deal struck last month, according to a person familiar with the process.

At this point, it is unclear if the UAW would strike all of Fiat Chrysler's 18 assembly and parts plants in the U.S., or employ targeted stoppages that hit strategic production pinch points. UAW officials have told workers at the company's transmission plant in Indiana for a work stoppage, for instance, a move that would shut down plants that make Jeeps and Ram trucks--the most profitable of Fiat Chrysler's vehicle lines in the world.

A prolonged walkout would deliver a blow, denting a huge chunk of its revenue and hurting profitability at a time when its North American margins are already far behind those of its two larger U.S. rivals. Based on its most recent financial report, shutdown of North American production could cost more than $300 million a day in lost revenue, or $18 million a day in lost operating profit. The auto maker's U.S. unit posted a 6% operating margin in the second quarter.

"The company continues to work with the UAW in a constructive manner to reach a new agreement," a Chrysler spokeswoman said.

Fiat Chrysler was formed in 2009 following the bankruptcy of Chrysler, and has rebounded amid a broader comeback for the U.S. auto industry. In September, the Italian-U.S. auto maker posted its 66th-consecutive sales increase; low gasoline prices are boosting demand for Jeep SUVs and Ram pickup trucks.

The auto maker appears to have a robust supply of inventory, however. As of Sept. 30, Fiat Chrysler's days' supply in the U.S. stood at 77, well above the 59 days' average for the industry. But auto sales are tracking at a decade-high pace, and stocks can quickly deplete.

Auto makers book revenue when a vehicle is assembled, not when it is sold at a dealership. That adds force to the UAW's threat.

Jeff Bennett contributed to this article.

Write to Christina Rogers at christina.rogers@wsj.com and John D. Stoll at john.stoll@wsj.com

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(END) Dow Jones Newswires

October 06, 2015 14:38 ET (18:38 GMT)

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