New Chrysler deal echoes GM pact

Chrysler LLC and the United Auto Workers ended a six-hour strike after agreeing on a contract that echoes last month's historic accord on retiree health care between the union and General Motors Corp.

The UAW and Chrysler, the third-largest US automaker, announced a settlement late on Wednesday that brought workers back to plants yesterday. In a similar showdown last month, GM employees staged a two-day strike before reaching a deal.

The agreements attempt to narrow the cost gap between the US automakers and Japanese rivals Toyota Motor Corp and Honda Motor Co. Chrysler will spend $11 billion to finance a union-run health fund and will pay beginning employees lower wages while protecting the jobs of others, people with knowledge of the negotiations said.

"Chrysler's labor costs will be a lot like those at Japanese automakers in the US," said Dan Luria, an analyst at the Michigan Manufacturing Technology Institute in Plymouth, Michigan, after being told of the terms. "In return, the UAW gets a certain amount of jobs, but it isn't all the jobs they have now."

Under the contract, Chrysler's $11 billion would create a trust fund giving the UAW control of an estimated $19 billion in future retiree healthcare liabilities. Chrysler's investment, amounting to 60 percent of those obligations, takes the retiree liabilities off its books.

'Consistent' with GM

GM, the biggest US-owned automaker, agreed last month to finance a $50 billion fund, called a Voluntary Employee Beneficiary Association, with an investment of $29.9 billion. The commitment matches Chrysler's on a percentage basis. GM's contract was approved yesterday by two-thirds of voting union members.

Michele Tinson, a spokeswoman for Auburn Hills, Michigan-based Chrysler, declined to comment on the contract details. Roger Kerson, a UAW spokesman, didn't return calls seeking comment. The deal must by approved by Chrysler's 45,000 UAW members.

UAW President Ron Gettelfinger had sought a Chrysler contract modeled after GM's, including job guarantees in exchange for the healthcare trust. The contract is "consistent" with the GM pattern, Chrysler President Tom LaSorda said in a statement.

LaSorda ceded his position as chief executive officer after Chrysler's new owner, Cerberus Capital Management LP, named former Home Depot Inc chief Robert Nardelli as CEO in August.

Like their GM counterparts, Chrysler workers will receive a $3,000 bonus in the first year, a 3 percent bonus in the second year, 4 percent in the third and 3 percent in the fourth, the people said.

In 2005, the UAW agreed with GM and Ford Motor Co to divert $1 an hour in future pay increases to finance retiree- health care. To provide the same concession to Chrysler now, the UAW will divert $1 an hour in pay increases triggered by future inflation to health care, the people said.

Under the new agreement, 11,000 positions will be labeled as "non-core", and pay about half as much as current UAW members earn at Chrysler, the people said. The jobs, including sweepers and forklift drivers, won't provide a full UAW pension or retiree health care. GM applied the same label to "in excess of 16,766" workers.

Buyout scheme

To make room for these workers, Chrysler will offer a "special attrition program", or buyouts, to entice long-time workers to leave, the people said.

GM also assured future work for at least 55 of 82 UAW plants, in some cases starting in 2013 and extending well into the next decade. Chrysler told existing factories that they'll continue to build the products they're assigned now and provided weaker assurances than GM about future vehicles, the people said.

The Chrysler agreement lacks the same commitment as GM's to "in-source" jobs now being performed by outside suppliers, the people said. In part because of the resolution of the strike, Chrysler agreed to a moratorium on sending work to outside suppliers, the people said.

In addition, Chrysler reversed plans to sell its Mopar parts operation and Chrysler Transport, which together employ about 1,300 UAW workers, the people said. Future workers at these units will be designated as "non-core", while existing workers won't see a change in their pay and benefits, the people said.

Unlike GM, Chrysler didn't agree to permanently hire temporary workers now filling the third shift at its Belvidere, Illinois, car assembly plant, the people said.

"Neither side can really afford a long strike, so it's no surprise they settled quickly," said David Lipsky, a labor relations professor at Cornell University in Ithaca, New York, in an interview.

Bloomberg News

(China Daily 10/12/2007 page16)