Chrysler and union open new contract talks

updated 12:26 p.m. ET July 20, 2007

AUBURN HILLS, Mich. - With handshakes and smiles, negotiators from Chrysler Group and the United Auto Workers formally began contract talks on Friday that many consider to be crucial to the survival of Detroit’s three automakers.

UAW President Ron Gettelfinger shook hands with Chrysler Chief Executive Tom LaSorda, and the top negotiators for both sides, UAW Vice President General Holiefield and Chrysler Senior Vice President John Franciosi also exchanged cordial handshakes.

In reality, talks between the UAW, Chrysler, Ford Motor Co. and General Motors Corp. have been under way for months because there are so many issues to address.

Officials of all three have said they need labor cost parity with their Japanese rivals, mainly Toyota Motor Corp. and Honda Motor Co. Studies have shown the Detroit automakers make around $2,000 less per vehicle than their competition, with much of that due to labor costs.

Whether the companies get what they want depends largely on UAW President Ron Gettelfinger, who has said the union will not go into the talks in a “concessionary mode.”

But the UAW recently has agreed to things that several years ago would have been unthinkable. It gave health care concessions to Ford and GM in 2005, and it agreed to buyout and early retirement packages that have cut thousands of jobs.

Last month it agreed to lower wages at struggling parts maker Delphi Corp. while winning assurances that jobs at some plants would be preserved.

All three companies have said they would like to cut or eliminate what they say is a $25 to $30 per hour labor cost disparity they have with their Japanese rivals.

Ford, according to its annual report, paid an average of $70.51 per hour in wages, pension and health care costs for hourly workers last year. GM’s annual report says its labor costs average $73.26 per hour, while the Chrysler Group’s costs average $75.86.

All three will seek to reduce costs to around $48 per hour, about the average hourly cost incurred by Toyota, Honda and Nissan Motor Co., company officials have said.

All three lost a combined $15 billion last year, and while GM has started to make money again, it’s still losing cash in North America, its sales stronghold.

Similar events involving Ford Motor Co. and General Motors Corp. will take place on Monday.

The national contract between the UAW and the automakers expires Sept. 14.

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