Chrysler strike ends quickly
Union announces tentative deal with No. 4 automaker less than 7 hours after pulling its members out of Chrysler factories.
NEW YORK (CNNMoney.com) -- A strike at Chrysler by the United Auto Workers union ended less than seven hours after it began Wednesday, as the union announced late in the afternoon that it had reached a tentative agreement with the nation's No. 4 automaker.
More than 32,000 UAW members at the automaker had gone out on strike at 11 a.m. ET after an all-night negotiating session failed to get a deal by the union-set deadline.
Brand Rx for Chrysler
Just after 5 p.m., the union issued a statement saying the strike would be recessed because of the tentative deal. The union said UAW Chrysler workers will be notified by the corporation to report to work on their next available shift.
Some workers were due to return to work for their 11 PM shifts at facilities with round the clock schedules. The strike began and ended in between their shifts.
"This 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," said a statement from UAW President Ron Gettelfinger.
Chrysler President Tom LaSorda issued a statement that said the proposed contract, which needs to be ratified by UAW members, includes a key company goal of shifting an estimated $18 billion in future retiree health costs from the company to a union-controlled trust fund.
"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," LaSorda said.
At union locals around the country there was relief and celebration. Charles Spencer, president of Local 122 in Twinsburg, Ohio, whose members work at a stamping plant there, said people were in disbelief as word of the quick settlement spread.
"Everybody's excited to be going back to their normal work, back to their normal lives," he said. "We won't know what the negotiating team pulled out. But evidently, what we were asking for was met somehow or another for them to call off the strike so quickly. Solidarity always makes things happen."
The strike affected 18 manufacturing plants and 30 other facilities, spread across 14 states. Wednesday's action was the first strike at Chrysler since 1985. The strike is even shorter than the two-day strike against Chrysler rival General Motors (Charts, Fortune 500) that started on Sept. 24, a brief walkout that concluded with a groundbreaking tentative labor agreement there.
Many of the important details of the Chrysler deal were not immediately available. The GM deal that set the pattern to which LaSorda's statement refers included a $3,000 signing bonus, along with three subsequent lump-sum payments equal to between 3 and 4 percent of the workers' annual pay. But it does not raise the base pay rate for the workers.
The union leadership said it won union job guarantees in the GM deal in the form of promises to build future GM vehicles at U.S. plants. Chrysler is believed to have been far more reluctant to give the union those guarantees than GM had been.
The deal is the first for Chrysler, which makes the Chrysler, Dodge and Jeep brands, since it was bought by U.S. private equity group Cerberus Capital Management from German automaker Daimler. In that deal, which closed in August, Daimler (Charts) essentially paid Cerberus to take the automaker, which fell to No. 4 in U.S. sales behind Toyota Motor (Charts) in 2006, in an effort to get out from under a $1.5 billion loss from last year, along with continued obligations to union members and retirees.
The union now is likely to turn its attention to Ford Motor (Charts, Fortune 500), the last of the troubled U.S. automakers. It has about 58,000 UAW members working at its plants, including some parts plant that are a separate unit of the company. Ford lost a record $12.7 billion in 2006, and while the overall company posted a profit in the second quarter, the company says that it will not see a profit at its core North American auto operations until 2009 at the earliest.
The UAW has been willing to assume future retiree health care costs as a way of protecting those benefits in the future in case one of the companies were to file for bankruptcy, and also because it was important for the union to see all three automakers return to profitability for the sake of their remaining union employees.
The number of UAW members on the job at Chrysler dropped 20 percent from the end of 2002 through the end of 2006. More cuts are in the works as the company has announced already reduced employment by about 7,100 of a announced 13,000 job reduction at U.S. and Canadian factories. This week came word it would trim an additional 1,500 white collar positions beyond the earlier announced cuts, mostly at its headquarters.
The strike had little significant economic impact on Chrysler, even if the deal is crucial for its ability to be competitive into the future. The automaker had a more than sufficient supply of cars and light trucks that allowed it to weather the short strike. In fact, half of its 10 assembly lines and one of its engine plants were already shutdown this week as it tried to bring its supply of vehicles in line with weak sales.
Workers at those plants did not strike and were able to keep nearly full pay despite not being at work.
The union's members at Chrysler get $28.75 an hour in straight wages, according to Chrysler. That comes to just under $59,000 pay when calculated for a 52-week, 40-hour a week year. Overtime pay and other adjustments generally takes the pay even higher.
But the total labor cost is far above that hourly wage when the cost of health care for both active and retired employees, as well as pension and other benefits, are factored in.
Chrysler estimates it pays $75.86 an hour in total hourly labor costs. That's not only significantly more than the $46 an hour average at the U.S. plants of Asian automakers, but it's also higher than GM and Ford have been paying.
GM's labor costs came to $73.26 an hour even before the latest cost-saving labor deal, while Ford was paying $70.51. The UAW granted GM and Ford cost savings on their retiree health care programs over the last two years, but it did not grant the same cost relief at Chrysler because until recently its parent company was still making money.
Chrysler was itself posting a profit until mid-2006, while GM and Ford started reporting losses on their North American operations in early 2005.
The union argues that labor costs are about $2,400 per vehicle, or only 8.4 percent of the average price of a car. It says that its members have already granted concessions to the automakers, while the company's top executives have gotten large pay packages.