Chrysler Workers Walk Out After Talks Pass Deadline


Thousands of Chrysler autoworkers started to walk off the job after the automaker and the United Auto Workers union failed to settle on a tentative contract agreement before a union-imposed deadline.


It would be the first UAW strike against Chrysler since 1997, when one plant was shut down for a month, and the first strike against Chrysler during contract talks since 1985. There was no immediate official word from the union or Chrysler after the late morning deadline passed on whether it was a nationwide strike.

The UAW, which must reach new four-year agreements with all three Detroit automakers, struck General Motors for two days before agreeing on a tentative pact with the automaker on Set. 26. The union hasn't yet settled with Ford Motor.

Chrysler has 24 U.S. manufacturing facilities, including 10 assembly plants, but not all would be affected by a strike. The automaker had already planned to idle five assembly plants and some factories that make parts for short stretches  during the next two weeks in an effort to adjust its inventory to a slowing U.S. automotive market.

Little Impact at First

A short strike would likely have little effect on the automaker, which had a 71-day supply of cars and trucks on dealer lots at the end of August, according to Ward's AutoInfoBank. A walkout longer than a month would start to cut into sales, said Paul Taylor, chief economist with the National Automobile Dealers Association.

The UAW had warned it would go out on strike at 11 am New York time if the two sides failed to agree on a new deal on wages and benefits for 49,000 U.S. factory workers and more than 77,000 families of Chrysler retirees.

Although few details of the contract talks have emerged since high-level negotiations resumed this weekend, the union has pushed for job security at the same time that Chrysler and its new private equity owner are trying to slash operating costs in areas such as health care.

A person briefed on the talks said slow progress was being made as of Wednesday morning with some key issues still unresolved.

Chrysler's larger rival General Motors reached its own cost-cutting deal on wages and benefits that ended a two-day strike on Sept. 26.

That contract, which the UAW has said would be a framework for the Chrysler negotiations, is expected to be ratified by rank-and-file GM workers as soon as Wednesday.

Key Question

The question of whether Chrysler can emerge from the UAW talks with a similar deal is seen as crucial to the success of the unprecedented bid by its new private equity owner, Cerberus
Capital Management, to turn around the automaker at a time of slack sales and intense competition.

Chrysler Strike Impact

Any deal -- or a UAW decision to send workers off the job -- would also have immediate implications for Ford Motor , which faces its own round of contract talks with the UAW once the union has finished with Chrysler.

On a combined basis, the three Detroit-based automakers lost some $15 billion last year and have argued they need deep concessions from the UAW in order to return to profitability
and to keep significant production in the United States.

Analysts said Chrysler, which lost $680 million in 2006, is not in a position to grant the union the job guarantees at a time when Cerberus is pushing for a faster restructuring and
scouring the automaker's future planned vehicle line-up.

"I would not be surprised to see a strike at Chrysler," IRN analyst Erich Merkle said, adding Chrysler could weather a strike for as long as three weeks by running down inventory.

White-Collar Cuts

In a move intended to show that salaried workers are also making sacrifices, Chrysler told the union this week that it planned to cut about 1,500 more white-collar jobs than initially planned, a person briefed on the plan said.

That would nearly double the nonunion job-cuts that Chrysler announced in February as part of a restructuring plan aimed at returning the company to profitability by 2009.

The UAW and Chrysler declined to comment on the talks.

Wednesday's strike deadline was announced in a letter from the UAW's top negotiators to union locals.

In the letter, UAW President Ron Gettelfinger and Vice President General Holiefield said "many difficult issues" had been discussed involving wages and benefits for UAW-represented
workers at Chrysler.

"The company has thus far failed to make an offer that adequately addresses the needs of our membership," they said.

Plant Shutdowns

The impact of any strike against Chrysler would be muted by a series of plant shutdowns the automaker has already undertaken to get rid of unsold inventory.

Five of Chrysler's U.S. assembly plants with UAW-represented workers were idled this week. Another plant in Sterling Heights, Michigan, was scheduled to be shut down next week, people familiar with those plans said.

Chrysler has the highest total wages and benefits -- more than $75 per hour for the average worker, compared with $70 for Ford and $48 for Toyota Motor's U.S. unit, according to company data.

Chrysler's U.S. sales have slipped 3 percent through September, in line with a decline in the broad market. The company ranks behind GM, Toyota and Ford in sales.

Chrysler was acquired by Cerberus in a $7.4 billion deal that closed in August. Former owner Daimler AG retains a nearly 20 percent stake in the automaker.