Chrysler Reaches Landmark Deal with Striking U.S. Workers

Oct. 11, 2007
Contract includes an independent retiree health care trust

A strike at Chrysler LLC's U.S. plants was called off after less than seven hours when the automaker reached a deal with its main union on a landmark contract. While details of the contract were being withheld pending union ratification, Chrysler said the tentative deal would help it narrow the labor-cost gap with the non-unionized U.S. plants of Toyota, Honda and other foreign competitors.

"The national agreement is consistent with the economic pattern, and balances the needs of our employees and company by providing a framework to improve our long-term manufacturing competitiveness," Tom LaSorda, vice chairman and chief negotiator at Chrysler LLC, said.

Chrysler said the deal includes a memorandum of understanding to establish an independent retiree health care trust. No details were released on the degree to which Chrysler would fund the trust, which is expected to be administered by the United Auto Workers union.

Sources close to the negotiations said Chrysler's agreement mirrored the historic deal recently reached following a two-day strike at General Motors. That agreement, which was ratified on Oct. 11, includes a two-tiered wage system and a switch to far-less generous pensions for new hires in exchange for job security promises.

The union backed down on demands for Chrysler to give the same degree of job security guarantees obtained from GM in exchange for concessions on the two-tiered wage structure, sources said.

UAW officials had been taking a hard line against Chrysler's new owners, Cerberus Capital Management, out of concern that the private equity group is not focused on the long-term interests of the company and its workers. The UAW was pushing for Chrysler to transfer administration of retiree health care benefits over to the union in order to safeguard future benefits, sources close to the negotiations said. Officials at GM heralded the transfer as a way to save the company billions, but Chrysler has far fewer retirees than GM and stands to save less in the long-term.

Chrysler bargainers meanwhile had pressed the union to roll back all or part of the wage increase of one dollar per hour the company's workers have been collecting since September 2006, sources said. The scheduled 2006 wage increase at GM and Ford was diverted to cover rising health-care costs under special agreements the union negotiated with both companies in the face of massive losses. LaSorda has said the company is basically owed $345 million in health-care concessions by the union.

Sources said Chrysler's dollar-an-hour disadvantage will eventually be erased as it was granted concessions on cost-of-living adjustments not given to the other U.S. automakers. While he declined to comment of details of the agreement, Chrysler vice chairman Jim Press told reporters that these "win-win" agreements with the union are key to the U.S auto industry's comeback. "We've got the opportunity to make things better," he said in a conference call. "We will show the American automobile industry will compete effectively on the world stage."

Copyright Agence France-Presse, 2007

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