YOU ARE HERE: LAT HomeCollectionsContracts

Chrysler makes deal with union

The automaker reaches a contract agreement, including a healthcare fund, after a six-hour strike by workers.

October 11, 2007|Martin Zimmerman | Times Staff Writer

The United Auto Workers reached a tentative contract agreement with Chrysler on Wednesday afternoon, calling off its six-hour strike against the No. 3 U.S. automaker.

The sudden end of one of the shortest auto strikes ever left many industry observers scratching their heads.

"Maybe all they needed was to have a lunch break and it just got misconstrued as a strike," said Jeremy Anwyl, chief executive of data tracker "It's really bizarre."

Details of the agreement were being withheld until a vote by UAW Chrysler workers.

But Auburn Hills, Mich.-based Chrysler said in a statement that it had agreed to contribute to a trust fund that would provide healthcare for retirees.

Those benefits have been a major drag on the finances of U.S. automakers. The pledge by market leader General Motors Corp. to pay $35 billion into a similar trust fund was a key feature of the agreement that ended a two-day strike against that company last month.

The GM contract was ratified by the UAW rank and file Wednesday.

Chrysler's pact with the union "balances the needs of our employees and company by providing a framework to improve our long-term manufacturing competitiveness," Chrysler Vice Chairman Tom LaSorda said.

A UAW official said the tentative contract "protects jobs for our communities and also protects wages, pensions and healthcare for our active and retired members."

The union will now turn its attention to Ford Motor Co., the No. 2 U.S. automaker.

About 49,000 UAW members work in the U.S. for Chrysler, which produces Chrysler, Dodge and Jeep vehicles.

Some analysts had predicted that Cerberus Capital Management, the private equity firm that bought 80% of Chrysler this year, would be reluctant to contribute to a healthcare trust fund because it wanted to pay down debt.

Now analysts will be waiting to see how much Chrysler actually pays into the fund, which would take over Chrysler's estimated $18 billion in retiree healthcare obligations.

Another key issue is job security. GM committed to building specific vehicles at U.S. plants, providing strong assurances that workers at those plants would continue to have jobs.

At Chrysler, the pipeline for new vehicles is less certain than at GM, making it harder for the company to provide specific job guarantees.

"They're not in a position to know what their product plans are going to be that far into the future," Anwyl said.

"It's hard for them to make real commitments in absence of that."

News of the agreement came as a shock for another reason. This marked the first time in many decades that one of the Big Three U.S. automakers went to the bargaining table as a private company.

Many analysts reckoned that Cerberus would pursue its own agenda in the talks rather than follow the lead of the GM agreement -- the usual auto industry pattern.

Cerberus' agreeing to the healthcare trust fund indicates that in at least one major respect, the private equity firm acted true to industry form.

There was some pressure to reach a quick settlement. A lengthy strike would have disrupted the rollout of the all-new Chrysler Town & Country minivan, one of the automaker's most important product launches in years.

The union faced pressures of its own. Economic conditions are weak in Michigan and other auto-making areas, and getting by on $200 a week in strike pay wasn't a cheerful prospect for many Chrysler workers.

The strike began at 8 a.m. Pacific time after a union-imposed deadline passed without a deal.

The U.S. automakers say retiree health costs are a major reason their hourly costs run $25 to $30 an hour higher per worker than at U.S. plants operated by their Japanese rivals.

GM, Ford and Chrysler lost a combined $15 billion last year as relentless competition from Toyota Motor Corp. and other Asian automakers eroded their market share and pricing power.

Chrysler has managed to stabilize its U.S. market share at just under 13%. But it has slipped to fourth place in terms of domestic sales as Toyota increased sales here.

Los Angeles Times Articles