A major union-management feud is brewing between the New York City Opera and the American Federation of Musicians over a production of "Candide."

The opera company plans to use an outside, commercial Broadway producer, the Nederlander Organization, to present its hit version at the opera company's Lincoln Center home. But, according to union officials, the Nederlander Organization has said it does not plan to use the opera company orchestra or chorus.

Under an unusual arrangement, the Nederlanders have agreed to donate all of their profits, if any, to the NYCO, according to a Nederlander official.

An NYCO spokeswoman said the opera company farmed out "Candide" because "we don't feel NYCO is in any kind of financial position to take the risk."

Orchestra leaders and union executives have scheduled a strategy meeting for Friday morning to deal with the issue.

Neither the orchestra nor the chorus now has a contract with the NYCO, and both unions have alleged that the opera company is trying to avoid paying opera house wages, to avoid hiring the full orchestra and chorus and to avoid negotiating new contracts at this time.

The Nederlanders operate under a "Broadway Contract"--which allows for the hiring of fewer singers and musicians than did the now-expired NYCO contracts.

Further, the NYCO's contracts required overtime payments for any week in which union members performed more than six times. The "Broadway Contract" allows for up to eight performances a week without overtime.

The NYCO, in a letter to the musicians, claimed the Nederlanders are willing to hire about three-fourths of the opera company orchestra--as individual musicians.

John Palanchian, the newly elected vice president of the musicians' union--and himself formerly a player in the NYCO orchestra--said he was dismayed by the opera company plan.

"They want us to use the 'Broadway Contract,' and that won't do in my view. It seems to be totally improper," he said.

Beverly Sills, director of the opera, was at a board meeting last night and, through a spokeswoman, declined to comment.

Susan Woelzl, the opera spokeswoman, said, regarding union allegations, "we're not commenting."

She added, "I don't know anything about" the arrangement with the Nederlanders. "I don't know whether there's any agreement."

A senior official of the Nederlander Organization maintained, "We're not really producing it, we're presenting it for the City Opera. Whatever Jimmy Nederlander makes, he will donate it to the City Opera. He loves New York and he always does things for the city."

Nederlander recently joined the New York City Opera board.

The official emphasized that the Nederlander Organization had no knowledge of union objections and was unaware of current hostility between the Opera Company and unions.

Gene Boucher, national executive secretary of the American Guild of Musical Artists--the opera singers' union--says the NYCO arrangement on "Candide" is "gimmickry and I hate the whole approach."

Yet Boucher said his union has yielded to NYCO's contention that, as a Nederlander "Broadway Contract" production, all singers in "Candide" will fall under the jurisdiction of Actors' Equity instead of his union.

Equity wage scales allow the producers to pay singers substantially less for an eight-performance work-week than do the union's scale. Such a deal frightens the opera's unions because, they claim, it effectively lowers the singers' wage scale at the New York City Opera.

"It's circumventing us, thoroughly. We're not happy about it, but NYCO jobbed 'Candide' out and Equity has jurisdiction. We've been shafted," Boucher maintained.

Last fall, the NYCO offered the world premiere of the substantially expanded and revised opera-house version of the Leonard Bernstein-Stephen Sondheim Broadway musical. The production received rave reviews and played to sold-out houses at the New York State Theater at Lincoln Center.

After the opera company's fall season ended in November, director Sills began plans to run "Candide" on an eight-performance-a-week basis for up to six weeks to help raise money for the financially troubled opera company and to fill the February-May time during which NYCO used to perform at Lincoln Center.

But opera company employes say its version of "Candide" used so many singers and musicians to enhance the work that, even with capacity business, there wasn't much profit to be made from a continuous run, although there was plenty of work for the NYCO singers and orchestra members.

Auditions for singers for a cut-down version of "Candide" started Wednesday.

Supporters of Sills within the NYCO company Sills say she feels her need to put the company back on its feet financially overrides any union demands. Further, in published interviews she has alleged that the orchestra's contract demands in previous years threatened the future of the company.