Chrysler workers wary of new labor deal

updated 6:37 p.m. ET Oct. 11, 2007

DETROIT - As they assembled cars Thursday, workers at Chrysler's Sterling Heights assembly plant were talking about their new labor contract, wondering if Wednesday's six-hour strike was enough to get a good deal from the company. Even as they waited to hear the details, industry analysts were predicting crosstown rival Ford will try to get more concessions than Chrysler.

Some workers were skeptical about job security promises, one worker said.

"A lot of people are sort of surprised that we only stayed out that long," said Brett Ward, a forklift operator at the Sterling Heights plant and a member of a group that's often critical of the union. "They're thinking that it might have really not gotten us that much."

UAW leaders have yet to brief the rank-and-file on the tentative deal, which abbreviated the strike when it was reached late Wednesday afternoon.

The Chrysler pact mirrors the contract with General Motors Corp. that UAW members ratified Wednesday. GM shares rose $1.86, or 4.9 percent, Thursday to close at $39.99, a 52-week high. Deutsche Bank analyst Rod Lache said in a note to investors that the UAW contract agreement can significantly improve the competitiveness of U.S. automakers.

Ford Motor Co. will go last in the negotiations. Spokeswoman Marcey Evans said Ford and the union weren't in talks Thursday, but their negotiations are expected to accelerate soon.

Under Chrysler's tentative agreement, the company would pay $10 billion to $11 billion into a union-run trust that will pick up Chrysler's $19 billion in future retiree health care expenses, according to two people who have been briefed on the agreement.

Other major provisions include job security pledges from the company and a two-tier wage scale, with new hires making around $14 per hour, or half the current starting wage of an assembly line worker.

The lower wage would cover about 11,000 "noncore" workers who do not build cars or parts. People now in those jobs would be offered buyout and early retirement packages to make room for the new workers, said the people, who spoke on condition of anonymity because the contract details have not been presented to union members.

Also included is a $3,000 signing bonus for all members, plus lump-sum payments of 3 percent of pay in the second year, 4 percent in the third year and 3 percent in the final year of the deal, the people said.

Another person familiar with the pact said the job security provisions weren't as extensive as those granted by GM, which promised to build next-generation products at 16 assembly plants and parts at other facilities. The Chrysler guarantees extend no further than the life of current products or the length of the four-year contract, said the person, who also did not want to be identified because the details haven't been formally released.

Although details have been scant, the deal appears to show that Chrysler's new owners, Cerberus Capital Management LP, didn't buy the company just to sell it off, said Richard McDonaugh Jr., president of Local 1183 at Chrysler's Newark, Del., assembly plant. McDonaugh, whose plant is slated for closure, said he is hoping that the UAW may have preserved its future in the contract.

"It very well could be true that they're in it for the long haul and they're not going to strip and flip us," he said.

It would be difficult for Chrysler to promise job security by guaranteeing that new vehicles will be built at U.S. plants like GM did because Chrysler's new executives aren't yet sure what vehicles will be built and the company still needs to shed factory capacity, said Greg Gardner, an analyst for Harbour Consulting, a Troy company that tracks manufacturing productivity.

"GM has gone a lot farther in its restructuring in terms of reducing capacity than Chrysler has," Gardner said.

Data collected for 2006 show that Chrysler used 88 percent of its factory capacity, but a company needs to be in the low- to mid-90-percent range to maximize profitability, he said.

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