UAW starts clock on difficult Chrysler talks
Union's historic GM deal may not prove to be an easy-to-fit model; intensive negotiations with Chrysler loom, though threat of strike in the next few days is low.
NEW YORK (CNNMoney.com) -- When the United Auto Workers gave Chrysler LLC a 72-hour deadline on Sunday, it set the clock ticking on what promise to be difficult negotiations but it did not spark an imminent strike threat, experts said.
That's a different scenario from last month, when the union gave General Motors a 12-hour deadline before eventually launching a two-day strike that shuttered 80 GM facilities. In fact, as much as the union hopes to use the historic deal it struck with GM as a model for Chrysler and then Ford Motor Co., its negotiations with Chrysler are in a very different posture.
According to a source familiar with the talks, UAW and Chrysler representatives met throughout the weekend but did not hold marathon all-night sessions. It's likely that significant negotiating work remains - perhaps more than can be accomplished in 72 hours.
For the UAW, one major difference with the Chrysler talks is that the union began its negotiations with GM (Charts, Fortune 500) when the automaker's 80 plants and facilities were up and running. But half of Chrysler's 10 assembly lines, along with one powertrain plant, are shut this week as the struggling carmaker tries to adjust its inventory of vehicles in lines with weak sales.
That takes away some of the sting of a potential strike, since about 13,500 UAW members at Chrysler - or nearly a third of the union's membership still working at the company - are being paid nearly full wages by the company to not work.
Three of those six idled plants are due to resume operations next Monday, with the other three due back on the job a week later. A strike this week would do Chrysler at least a small favor, ending the company's need to continue to pay thousands of workers it doesn't need to be on the job at the current time.
The two sides could strike a deal by Wednesday morning. But experts say a more likely short-term outcome is that the union and the company will agree to continue talks under an hour-by-hour contract extension. GM and the UAW worked under that kind of informal extension for more than a week between the expiration of the earlier contract and the start of the strike.
"This deadline says to me they're reasonably close to an agreement, but it's still going to be tough to get an agreement that will work for everyone," said David Cole, chairman of the Center for Automotive Research, who believes there will be more extensions before there is a deal at Chrysler.
"There has to be a little drama involved in that process," he said.
The 72-hour notice was the end of a more formal contract extension the union reached with both Chrysler and Ford Motor (Charts, Fortune 500) on Sept. 13, the day it set its sights on reaching its first deal with GM. The extensions granted at that time required the 72-hour notice that union has now given to Chrysler.
Officials at several UAW locals around the country, speaking on background Monday, said they haven't yet been told to prepare for a strike Wednesday morning, although all said they could scramble to get ready to walk out should such a call come from union leadership.
Still, there's significance to to the union's giving Chrysler the deadline - it's a sign that the union wants its next deal to be with Chrysler, not Ford.
The union generally wants to reach deals with the strongest company first, and then use that agreement to set a pattern for the deal with the next strongest company and finally use those two agreements as the basis of talks with the weakest of the traditional Big Three.
By starting the clock ticking at Chrysler, the union leadership is putting embattled Ford off for last. It's a signal that the company that recently lost its status as the nation's No. 2 automaker in terms of U.S. sales to Japanese rival Toyota Motor (Charts) has the most serious problems that will need to be addressed in these groundbreaking talks.
Union leaders would like the tentative deal at GM to set a pattern for future deals with Chrysler and Ford, but that might be hard to accomplish.
GM is much farther along in its turnaround efforts than Ford or Chrysler, which are losing billions of dollars on their North American auto making operations while GM posted a narrow profit on that key unit in the second quarter.
GM also has a surplus in its pension fund that allowed it to offer retirees improved pension benefits to help win over union negotiators and rank-and-file members who are now going through the ratification process there. Ford and Chrysler have no such surplus to tap to help reach a deal.
"We've never seen more differences between the three companies than we do today," said Cole.
And the UAW also faces a much different management team at Chrysler and Ford than it did at GM, which is still run by executives who came up through the ranks at the auto making behemoth.
Chrysler was recently purchased by Cerberus Capital Management. While the talks are being led by Tom LaSorda, a long-time Chrysler executive whose parents were UAW members and who has a long history of dealing with the union, it also brought in two outsiders into top management jobs. Robert Nardelli, who was ousted as CEO of Home Depot partly because of a controversy over his large pay package in the face of poor stock performance, is now CEO of Chrysler.
In addition, Jim Press, who left his job running the nonunion U.S. operations of Toyota Motor to join Chrysler after the Cerberus purchase, shares the vice chairman and president title with LaSorda.
A year ago Ford turned to Alan Mulally, then the Boeing (Charts, Fortune 500) commercial aircraft chief, to be its new CEO. His track record has also shown that he's not afraid of being shut down by a long strike. Boeing was hit by a a 28-day strike by the International Association of Machinists in 2005.
Cole said he doesn't believe the UAW is looking for a long crippling strike at either Chrysler or Ford.
"The union knows it needs to have three sustainably profitable companies," he said. "A short strike doesn't hurt, but any of these companies could topple over the cliff with just a nudge from the union."
But Cole also said it's wrong to assume that a strike at Chrysler, or Ford, would mirror the short walk-out at GM, partly because of the new management teams in place at those companies.