The United Auto Workers announced Wednesday that it reached a tentative contract agreement with Chrysler after a seven-hour strike against...
The United Auto Workers announced Wednesday that it reached a tentative contract agreement with Chrysler after a seven-hour strike against the automaker.
Chrysler said the agreement includes a provision that places responsibility for retiree health care with a union-managed trust fund. Analysts have estimated that Chrysler owes as much as $19 billion for retiree health care.
Such health-care trusts have been a top priority for the three Detroit automakers in their talks with the UAW this year. General Motors and the union last month agreed on a contract that contained a similar provision to enable GM to turn over $50 billion in retiree health-care obligations to a union-run fund.
UAW members employed by GM ratified that contract Wednesday, with 65 percent voting in favor of the deal, the union announced.
Most Read Business Stories
- Redoing Pacific Place as offices is only the start to a downtown comeback
- This company was just sold for $3 billion, and hundreds of employees are getting a cut. Some will get $800,000
- After billion-dollar acquisition of MGM, Amazon inherits a foe: Starz
- Southwest Airlines proposed a ploy to deceive FAA on Boeing 737 MAX, legal filing alleges
- Boeing docks crew capsule to space station in test do-over
Chrysler was purchased this year by a group of private investors led by Cerberus Capital Management. Like GM and Ford, Cerberus is determined to restructure wages and benefits in the context of an increasingly competitive global auto market.
Assembly workers at Chrysler make about $28.75 an hour, a rate that balloons to $75.86 when UAW health care and other benefits are added, according to the company. By comparison, Japanese plants in this country pay about $46 an hour in wages and benefits, Chrysler said.
Thomas LaSorda, Chrysler’s vice chairman and president, said in a written statement that the contract would improve Chrysler’s long-term manufacturing competitiveness.
UAW President Ronald Gettelfinger said the agreement “was made possible because UAW workers made it clear to Chrysler that we needed an agreement that rewards the contributions they have made to the success of this company.”
The agreement capped a day of turmoil at the automaker’s corporate headquarters and at Chrysler plants around the country.
The UAW had set 11 a.m. EDT (8 a.m. PDT) Wednesday as a strike deadline, and when the hour passed without an agreement between the company and the union, workers began leaving their posts.
In contrast to the low-key, two-day walkout that preceded last month’s GM deal, hundreds of Chrysler plant workers surrounded company headquarters in Auburn Hills, Mich., blocking intersections and waving picket signs. State police closed nearby highway ramps.
The UAW on Wednesday withheld key details of the Chrysler agreement pending ratification votes by members. If the deal would give Chrysler workers less than their counterparts at GM, it could be tough to sell to members.
The agreement between GM and the union created the health-care fund and set up a two-tier wage scale to pay new and so-called noncore workers less than veteran assembly-line workers.
In return, GM guaranteed to keep jobs in the United States and focus new production here.
Pushing a deal that breaks the pattern set by the GM contract could test union solidarity by further eroding the tradition of pattern bargaining that kept workers at each of the three Detroit automakers on roughly the same pay and benefit scales.
Gary Chaison, an industrial-relations professor at Clark University in Worcester, Mass., said the current negotiations have no precedent in the auto industry.
“The old tradition of pattern bargaining has broken down,” he said. “The UAW not only has to deal with companies that are right on the edge, it has to deal with a private-equity firm. It has to deal with negotiating major concessions of the type it’s never dealt with before.”
Chaison said the UAW last granted major concessions to auto companies in the 1980s, when Japanese competitors began taking larger shares of the U.S. market.
Union and management worked under the assumption that concessions in wages and benefits would be offset by job-security guarantees.
“Gettelfinger has to fight for what used to be assumed,” Chaison said.
Cerberus has argued that its deep pockets and broad business expertise put it in a strong position to reorganize Chrysler.
“The private-equity industry strongly believes that their model of governing and managing a firm is superior to the public-company model,” said Colin Blaydon, director of the Center for Private Equity and Entrepreneurship at Dartmouth College. “Chrysler is clearly going to be an iconic test of that proposition.”