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Chrysler, UAW Reach Agreement, Boosting Prospects for Fiat Alliance

The deal alters Chrysler’s financial obligations to the union’s retiree health care plan and comes four days before a U.S. deadline for Chrysler to tie up with Fiat.

April 27, 2009
Related Topics: Downsizing, Compensation Design and Communication, Miscellaneous Legal Issues, Latest News
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Chrysler and the United Auto Workers have agreed to revised labor terms that may help the automaker forge an alliance with Fiat and qualify for additional U.S. rescue loans.

The deal will alter Chrysler’s financial obligations to the union’s retiree health care plan and comes four days before a U.S. deadline for Chrysler to tie up with the Italian automaker. Chrysler, surviving on $4 billion in U.S. aid, is still negotiating new terms with its creditors.

Chrysler said the agreement should provide the framework for competitiveness and help the automaker to “continue to pursue a partnership with Fiat.”

Failure to revise deals with lenders and seal the Fiat alliance could shut off access to additional U.S. government aid, leaving Chrysler to face potential liquidation.

“We recognize this has been a long ordeal for active and retired auto workers, and a time of great uncertainty,” UAW president Ron Gettelfinger said in a statement. “The patience, resolve and determination of UAW members in these difficult times is extraordinary, and has made it possible for us to reach the agreement.”

The union said Chrysler, Fiat and the U.S. Treasury Department agreed to the deal.

The agreement involves further concessions to the UAW-Chrysler contract agreed to in 2007. Workers must approve the terms by Wednesday, April 29. No details were offered.

Like an accord with the Canadian Auto Workers announced Friday, April 24, and ratified Monday, April 27, the UAW concessions don’t include a wage cut, said a source familiar with the talks. The union has agreed to additional concessions to the $10.6 billion retiree health care trust, or voluntary employee beneficiary association, that Chrysler had proposed funding half with equity and half with cash, the source said.

The UAW concessions are at least as deep as those settled by the CAW, the source said. Those CAW savings were pegged at about CA$240 million ($198 million) annually. The CAW’s givebacks include additional break time, a vehicle purchasing discount and tuition reimbursement.

The CAW said its members voted 87 percent in favor of their new collective agreement with Chrysler, which has about 8,000 unionized workers in Canada.

The union made the concessions in order to try to help the company qualify for government aid in Canada.

“Our members understand better than anyone the current turmoil of the domestic auto industry,” CAW president Ken Lewenza said.

“The high acceptance of this agreement is a recognition that although workers did not cause this crisis, we all have an interest in maintaining good jobs and ensuring the auto industry remains central to the overall Canadian economy.”

The UAW represents about 26,800 Chrysler workers in the United States. The company also has a contract buyout offer on the table for those workers that expires Monday, April 27.


Filed by David Barkholz of Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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