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By Bloomberg

With negotiations kicking off this month between U.S. carmakers and their main domestic labor union, talks involving Fiat Chrysler Automobiles NV are poised to be the most contentious.

On one side is a United Auto Workers bargaining team that wants a pay bump for veteran assembly workers, who have been paid $28 an hour for almost a decade, as well as a better deal for the lower-paid, entry-level employees who make up almost half of FCA’s workforce.

On the other side is Chief Executive Officer Sergio Marchionne, who in April said his company needs a merger partner just to be competitive in the next decade.

While the union would prefer to get rid of the lower-paid second class of workers and elevate everyone who works on the assembly line to the top tier, Marchionne would like to phase out the old guard and staff his plants with younger, cheaper labor, said a person familiar with the matter. He’s said that with profit-sharing bonuses, union members’ total pay in the best years could be as high as the first tier gets now. But union members are skeptical and some observers, such as Kristin Dziczek, director of the Industry & Labor Group at the Center for Automotive Research, say FCA is the most likely to endure a strike.

“There seems to be greater discontent among workers at FCA,” said Dziczek, who is based in Ann Arbor, Michigan. “Workers want a raise, and they had the narrowest ratification vote last time when they got an agreement that wasn’t as rich as Ford or GM’s.”

The union and FCA will formally kick off talks today, a day after UAW President Dennis Williams held a handshake ceremony with General Motors Co. CEO Mary Barra. Ford Motor Co.’s will be next week. The current contracts with all three automakers expire in September.

Rare Strikes

Strikes have been rare for the past decade, the last being in 2007 when union workers walked out of GM plants for two days and Chrysler plants for six hours.

Workers may choose to strike Fiat Chrysler as they see their peers at other automakers receiving bigger profit-sharing bonuses even while FCA has lower labor costs and a higher percentage of lower-paid laborers. The union members approved the last contract with just 55 percent in favor when they weren’t allowed to strike and may be anxious over Marchionne’s persistent calls for industry consolidation. Ford and GM deals got at least 63 percent of the vote last time, and whatever is debated at the other two, Ford and GM have each made it clear they aren’t looking for a dramatic restructuring.

Williams has said in recent months that one of his top priorities is wages, especially for the so-called Tier 2 entry- level workers who start at $15.78 an hour and top out at $19.28. Under the current contract, they can’t graduate into the veteran wage of $28 an hour at GM or FCA. They can at Ford, because the company has a cap -- put in place before the bankruptcies of old GM and Chrysler -- that says a maximum of 28 percent of its labor force can be Tier 2 workers.

The union chief stressed that he isn’t looking for a strike and even said that he doesn’t see FCA as the most likely target.

“A strike is a failure of the bargaining teams and it’s one of the worst things you have to do,” Williams said. “I’m not afraid of confrontation, but I don’t want one.”

Wage Gap

FCA doesn’t want a cap on how many entry-level workers it can hire, which the union is likely to seek, said two people familiar with the matter, who asked not to be identified because bargaining strategy is private.

With 45 percent of its U.S. workers at the entry-level wage, FCA enjoys the lowest average labor costs of the big U.S. automakers. FCA’s average hourly labor cost is $47 an hour, compared with $55 at GM and $57 at Ford, according to the Center for Automotive Research.

Despite their differences, Marchionne doesn’t forecast a strike.

“That’s not the spirit with which we are entering this process,” he told reporters in Toronto last week. “But, look, who am I to say?”