Industrial Relations and Social Dialogue

At the Investor Day held in Auburn Hills on May 6, 2014, FCA presented its 2014-2018 Business Plan to members of the international financial community, dealers, suppliers and media. In addition, as confirmation of the importance the Group places on social dialogue, representatives of the most represented trade unions at Group plants in Europe, the and Brazil were also invited to attend.

At the European level, EU regulations require that all Community-scale undertakings establish a European Works Council (EWC), which ensures workers the right to information and consultation. Fiat S.p.A., the predecessor of FCA, first established an EWC in 1997 on the basis of the establishing agreement signed in 1996 and subsequently renewed (with amendments and modifications).

During 2014, FCA and the IndustriALL - European Trade Union (The European federation of metalworking, chemical and textile sector trade unions) jointly agreed on solutions to issues, primarily related to the absence of affiliated trade unions in certain Member States, that had prevented the proper establishment of a European Works Council in implementation of the renewal agreement signed in June 2011. The FCA EWC held its first meeting on 19-20 November 2014, with 16 members representing workers in each of the European member states where the Group has a significant presence. Also present were representatives of the trade unions signatories to the establishing agreement. During the meeting, management presented information relating to the Group’s financial performance, changes in workforce, current market conditions and sales performance for each of the Group’s main businesses. Participants were also given an overview of the 5-year business plan for EMEA, as presented on May 6, as well as the corporate reorganization and creation of FCA completed during the year.

Collective bargaining

Collective bargaining, conducted in accordance with local law and practice, resulted in various agreements with trade unions on both wage and employment conditions.

Worldwide, approximately 90% of FCA employees are covered by collective bargaining agreements. Also of major significance in this area are the supplementary pension and health care schemes, which are the result of negotiations and continuous dialogue between FCA and the trade unions.

In Italy, where all employees are covered by collective bargaining, FCA and the trade unions reached an agreement for 2014, which included a €260 one-time payment to all personnel in the company’s employ on the date of the agreement, an in-principle agreement on the employment conditions already negotiated and a commitment to conclude a 3-year collective labor agreement with changes in current wage and employment conditions that reflect the operating requirements of the 2014-2018 business plan. Negotiations for renewal of the collective labor agreement, initiated in late 2014, are still ongoing.

Outside Italy, an average 81% of employees are covered by collective bargaining agreements. That percentage varies from country to country on the basis of local practice and regulations.

For FCA companies in the European Union, wage negotiations in 2014 took into account the fact that the Group’s operations in the region were still loss-making. Plants were operating below capacity and the auto market remained weak as many European economies continue to struggle with low levels of inflation and, in some cases, even deflation. Accordingly, in 2014 the Group worked to contain the cost of labor without reducing activities or personnel.

In Poland, company-level wage negotiations were limited to payment of a one-time amount for employees at Group companies where activity levels had been increased.

In France, the annual negotiation (Négociation Annuelle Obligatoire) concluded with no general wage increases except for the Magneti Marelli plant in Châtellerault, where the reference parameters for 2014 had already been agreed to with the trade unions in 2012.

In Serbia, the 3-year collective agreement for employees of Fiat Automobili Srbija d.o.o in Kragujevaç was renewed at year end, bringing it into line with new labor legislation that came into effect in July 2014. In December, the company defined criteria for the determination of the “Christmas Bonus,” which is based on actual employee hours worked. Following the establishment of trade union representation at Magneti Marelli d.o.o. Kragujevac and pending initiation of negotiations for a company-level agreement, the company will continue to apply the company’s Internal Rulebook, which has been updated to reflect the requirements of the new labor legislation. At Fiat Services d.o.o Kragujevac, trade union representation was established during the year and negotiations for a company-level agreement to replace the Internal Rulebook were initiated. The parties agreed to an extension of the original negotiating deadline to incorporate changes relative to the new labor legislation and negotiations were completed in January 2015.

In Spain, an agreement was reached with trade unions in September to extend the collective labor agreement at Mecaner S.A.U., which expired at year-end 2014, for a further two years. Under the new agreement, wages will be increased by 0.5% in 2015 and 0.9% in 2016.

In Brazil, FIEMG (Federação das Indústrias do Estado de Minas Gerais) and metalworking sector trade unions for the State of Minas Gerais completed wage negotiations in November with agreement to increase the “database” (Minimum wage) in line with inflation. Agreements were also negotiated at the company level that provided one-time amounts additional to the sector-level agreement.

In Mexico, the annual contractual negotiation at Teksid Hierro de Mexico concluded with workers being awarded a 4.3% increase in hourly employee wages, in line with inflation. At the Comau facility in Tepotzotlan (since relocated to San Martin Obispo), workers received a 4.5% increase.

In 2014, the level of labor unrest at Group companies in Italy, including local labor actions, was negligible in terms of the number of instances and level of employee participation.

Outside Italy, the overall level of labor unrest was negligible and mostly related to local issues at individual plants.

Management of Production Levels

The Group’s 2014 financial results demonstrated once again the importance of the contribution of FCA US LLC (formerly Chrysler Group LLC) and the global diversification of the Group’s businesses. During the year, the Group was able to respond to higher demand in several markets through the use of flexible labor mechanisms. As part of the 2014-2018 Business Plan presented in May, the Group set out a new industrial strategy for EMEA, where production will be increased to support the planned growth in global sales for the premium brands (Maserati, Jeep, Alfa Romeo) and the 500 family. On the basis of that plan, the Group expects its plants in EMEA will achieve full capacity utilization by 2018 thanks to 40% of total production destined for markets outside Europe. With the European auto market only beginning to shows signs of a recovery in the fourth quarter, work stoppages remained necessary in 2014. The Group maintained its policy of protecting jobs through the use of temporary layoff benefit schemes, where possible or other mechanisms provided under collective bargaining agreements or company policy.

In Italy, Group companies continued to utilize temporary layoff schemes to manage weak demand levels and to implement various restructuring and reorganization activities linked to new investment. There was, however, a 22.1% decrease in utilization of these schemes versus the prior year, reflecting the gradual upturn in production and return of workers to the plants.

Elsewhere in Europe, minimal stoppages were directly related to fluctuations in demand. There were no significant restructurings or reorganizations during the year.

In LATAM, Group shipments were down year-over-year due to continued weak trading conditions across the region.

In Brazil, where the Group maintained its market leadership, the realignment of production levels to changes in market demand was primarily managed through the use of flexible labor mechanisms and reorganization of shifts, in agreement with the unions.

In 2014, FCA US increased vehicle production through revised operating patterns at its NAFTA facilities in response to market demand. To support the increase in production output, the company has correspondingly increased staffing levels, including manufacturing employees to support current and anticipated production volumes, as well as additional engineering, R&D and other highly-skilled employees to support product development, sales, marketing and other corporate activities.