Chrysler, Unions Make Progress as Deadline Looms

U.S. automaker Chrysler showed signs of progress with its unionized workers in its battle to stay alive on Sunday with just days left to complete deals to slash labor and debt costs or face bankruptcy.

CNBC.com

No. 1 U.S. automaker General Motors is also restructuring in an effort to secure the government funding it needs to stay in business.

CNBC has learned GM will close at least an additional six plants in North America. These closings would leave GM with 27 final assembly, stamping, and powertrain plants in North America. It also marks another substantial cut in the auto makers production capacity.

In 2008, GM had 47 North American plants. When the company put together its first restructuring plan in December, it announced it would drop to 38 plants by 2012. That number was further reduced to 33 as part of a revised business plan GM submitted to the Treasury Department in February. Now, the troubled auto maker is planning to cut back to a total of 27 plants.

It is unclear how quickly GM will close these plants or which ones are on the target list. A source familiar with the GM plan says the plants will be closed on a much quicker schedule than originally laid out. That schedule was for a phased reduction over the next three years.

GM CEO Fritz Henderson will detail the auto makers latest restructuring Monday morning. It will include closing the Pontiac line after 83 years.

Chrysler -- 80 percent controlled by private-equity firm Cerberus Capital Management -- has been given until April 30 by the Obama administration to agree on cost-cutting deals with its creditors and the unions, plus cement an alliance with Italian automaker Fiat.

Failure to meet these goals could shut off access to U.S. government aid for Chrysler, leaving it facing potential liquidation.

In a first significant step toward meeting those goals, the Canadian Auto Workers union on Sunday ratified a new collective agreement with the automaker that will save Chrysler about C$240 million ($198 million) annually.

The union said its members voted 87 percent in favor of the new agreement. Chrysler has 8,000 unionized workers in Canada.

"Our members understand better than anyone the current turmoil of the domestic auto industry," said CAW President Ken Lewenza. "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 United Auto Workers union announced later it had also reached a tentative agreement with Chrysler, Fiat and the U.S. government on further concessions to a contract and a healthcare trust agreed with the automaker in 2007.

The UAW said that deal must be ratified by Wednesday and meets conditions mandated by the U.S. Treasury as part of an emergency loan program for Chrysler.

"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 we will present to our membership," UAW President Ron Gettelfinger said in a statement.

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 on Monday.

Fiat, Creditors Next

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

"We commend the UAW's leadership for their endless determination and perseverance in reaching this tentative agreement," Chrysler said in a statement.

Fiat representatives could not immediately be reached for comment. In an interview with the "Fox News Sunday" program Larry Summers, senior economic advisor to U.S. President Barack Obama and co-leader of the government's task force working to restructure the auto industry, said there had been some progress made in talks to save Chrysler.

"There are some issues that have been worked out and some issues that remain to be worked out," Summers said, without providing specifics.

Democrats representing Michigan -- the home state of Detroit's storied Big Three -- in the U.S. Congress, however, left little doubt over the weekend that they believed Chrysler's creditors must now make concessions following the announcement of the CAW deal on Friday.

"The unions have come to the table over and over and over again and have taken huge cuts," said U.S. Senator Debbie Stabenow on the sidelines of a Michigan Democratic Party fund-raising event held in Detroit.

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"It is now incumbent on the creditors, in particular those that have taken public funds, to make some concessions and be a part of the solution," Stabenow said.

Facing its own June 1 deadline to come up with a plan for deeper and swifter cuts, GM announced on Sunday it would hold a news conference on Monday on its revised viability plan.

Sources briefed on the plan said GM would announce an accelerated restructuring plan that would involve additional plant closures and pave the way for a debt exchange for the struggling automaker.

U.S. auto sales have been driven to their lowest level in decades by the recession and the credit crunch, which has cut off access to auto loans for many consumers.

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