Strike Two: UAW Walks Out on Chrysler

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Researched by Industrial Info Resources (Sugar Land, Texas)--A little over two weeks have passed since the United Auto Workers (UAW) (Detroit, Michigan) went on strike against General Motors Corporation (NYSE:GM) (Detroit, Michigan) during intense contract negotiations with the nation’s No. 1 automaker. The UAW began its second strike of the year today, October 10, 2007, as workers walked out of Chrysler LLC’s (Auburn Hills, Michigan) operational plants in another attempt to force progress in the ongoing contract negotiations.

Approximately 49,000 Chrysler workers walked off the job at 24 U.S. plants as well as other sites this morning after the strike deadline passed. The strike comes as GM’s union workers are still in the process of voting on the agreement reached with the union on September 26, 2007, after a two-day strike.

“The company has thus far failed to make an offer that adequately addresses the needs of our membership,” UAW President Ron Gettelfinger and the UAW’s chief Chrysler negotiator General Holiefield, said in Monday’s memo which set the deadline.

One of Chrysler’s main points during these negotiations was health-care cost concessions that were granted to both GM and Ford Motor Company (NYSE:F) (Dearborn, Michigan) in 2005. These health care givebacks would be worth an estimated $340 million a year to Chrysler. In addition, Chrysler wants to create a company-funded, union-run trust, similar to the one GM is creating as a result of its own negotiations this year, which would take the burden of $18 billion in unfunded retiree health-care costs out of Chrysler’s hands and into the union’s.

Much like both GM and Ford, Chrysler’s main concern is the cost of hourly wages. In order to better compete with foreign automakers, Chrysler must reduce its estimated $75.86 per hour in wages and benefits, the highest among the Detroit 3, by a minimum of $25 per hour.

However, one sticking point in these negotiations for the recently purchased automaker is that Chrysler may not be willing to make job security promises like GM did. GM guaranteed that new cars and trucks would be manufactured at U.S. facilities, something Chrysler has not shown a willingness to do. Chrysler is proposing that parts-transportation roles would be hired out as opposed to being handled by union members, currently one of the higher-wage union jobs.

Union workers are more apprehensive about this set of talks and the resulting strike than they were when dealing with GM. With the private equity firm Cerberus Capital Management LP (New York, NY) purchasing the struggling automaker just before negotiations began, union members are uncertain as to who they are dealing with since Cerberus is not a traditional automaker with whom they have a decades-long relationship. One tactic that may be invoked by Chrysler is backing away from recently announced new capital investments, such as the proposed $450 million engine plant expansion in Kenosha, Wisconsin,

Cerberus has made no bones about the fact that it will trim down the automaker to make it more streamlined and viable as a profitable venture. Chrysler has ramped up its marketing campaign recently, since the change of ownership, and the cutting of several models is still under consideration.

A short-term strike will have little effect on Chrysler, as it has a 71-day supply of on its lots. If the strike lasts more than a month Chrysler would begin cutting into sales. Chrysler is in the middle of the critical launch of its new minivans.

Chrysler had already idled five of its assembly plants, as well as some parts-manufacturing facilities, last weekend for two weeks to allow sales to catch up to production of certain models.

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