Workers go on strike at Chrysler

In the second strike to hit a U.S. automaker in two weeks, workers at most of Chrysler’s U.S. auto plants began walking off the job this morning after talks on a new four-year contract stalled.

Members of the United Auto Workers union began leaving Chrysler plants shortly after a union-imposed 8 a.m. Pacific time deadline passed without an agreement. About 49,000 UAW members work for Chrysler, which produces Chrysler, Dodge and Jeep vehicles at 24 U.S. plants. The strike wasn’t expected to affect five plants that have been idled in an effort to reduce a surplus inventory of vehicles.

It was a repeat of scenes from Sept. 24, when the UAW went on strike against General Motors Corp. The strike followed several marathon bargaining sessions between UAW and Chrysler negotiators at the company’s headquarters in Auburn Hills, Mich.

There was no immediate word from Chrysler or the union regarding the walkout. It was also unclear whether workers were leaving their jobs at all of Chrysler’s American plants.

The strike wasn’t expected to have an immediate effect on the availability of Chrysler cars, trucks and minivans. The company has a backlog of unsold vehicles that analysts estimate could last dealers anywhere from three weeks to three months.

However, the hot-selling Jeep Wrangler could face shortages, analysts said. And a lengthy work stoppage could snarl the debut of the newly redesigned Town and Country minivan – considered a crucial product launch for Chrysler.

In addition, analysts estimate the strike will cost Chrysler $50 million a day versus $100 million a day for GM.

It wasn’t immediately clear what specific issue triggered the walkout. But Chrysler, like GM and Ford Motor Co., is seeking substantial healthcare cost savings in their new UAW contracts so they can be more competitive with Asian rivals like Toyota Motor Corp. and Honda Motor Co. In addition, the UAW is seeking job security for its workers.

The GM strike lasted less than two days. But there are already indications that the Chrysler situation is different.

The UAW typically forges a contract with one of the three U.S. automakers and then uses the agreement as a template for talks with the other two. But that didn’t happen this year.

“The problem this time around is that the automakers have very different needs,” said Aaron Bragman, an industry analyst for the consulting firm Global Insight. “So what worked very well for GM and got them a good contract is not necessarily going to work at Chrysler and Ford.”

One particular sticking point for Chrysler: GM pledged to contribute $35 billion to a newly created healthcare fund for UAW retirees. While this move helped shore up GM’s balance sheet – a key concern for a publicly owned company – a similar arrangement likely would be much less appealing to Chrysler’s new owners, Cerberus Capital Management, which needs cash to service the billions in debt used to buy an 80% stake in the automaker earlier this year.

“At a private company like Chrysler, all it does is soak up an incredible amount of cash in return for a long-term gain, and there’s no guarantee that Cerberus is a long-term owner,” said Bragman

He estimated the cost to Chrysler of such a fund at $13 billion. That’s money the automaker could use to develop new products, fund employee buyouts or consolidate plants.

Chrysler is also thought to be seeking the same healthcare concessions that the UAW agreed to give Ford and GM in 2005. Chrysler, then part of the German auto conglomerate DaimlerChrysler, didn’t get those concessions.

To get an agreement with the UAW, GM also agreed to produce specific vehicles at 16 U.S. plants. It would be hard for Ford or Chrysler to make similar pledges because they aren’t as far along as GM in rolling out a line-up of new vehicles.

Cerberus’ reluctance to budge on those issues, combined with its backlog of vehicles, could make the company more willing to take a lengthy strike than GM was. However, given the weak economic climate in Michigan and other nearby auto manufacturing areas, analysts question whether UAW members receiving $200 a week in strike pay will be willing to endure a lengthy work stoppage.

Besides new ownership, there’s also new management at Chrysler. Cerberus hired Bob Nardelli, the controversial former Home Deport head, as chief executive, and lured Jim Press away from the top ranks of Toyota’s U.S. operations. But former Chrysler CEO Tom LaSorda has been heading the company’s negotiating team, and he’s a known quantity to the UAW.

Like its Detroit rivals, Chrysler has struggled in recent years to make a profit with a much higher cost structure than its Japanese rivals, mainly the result of so-called legacy costs such as pensions and retiree healthcare.

Wages and benefits for Chrysler’s unionized workers average $75 an hour, versus $48 for workers at Toyota’s U.S. assembly plants, which are largely non-union.

Chrysler said in February that it would cut 13,000 jobs, including 2,000 salaried jobs. It now plans to cut an additional 1,500 white-collar jobs.

Chrysler has managed to stabilize its U.S. market share at just under 13%. However, it has slipped to fourth place in the United States as Toyota has increased sales here.