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Archive for Thursday, October 11, 2007

UAW reaches tentative pact with Chrysler, ratifies GM deal

October 11, 2007

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— Armed with two agreements - and with two brief strikes to show its muscle - the United Auto Workers union now turns to Ford, which could be the toughest bargainer yet because of its weakened financial position.

The UAW said Wednesday it agreed on a tentative contract with Chrysler LLC. The agreement must be ratified by a majority of Chrysler's union members to take effect. On the same day, the UAW said General Motors Corp. workers ratified a four-year pact that hands control of $51 billion in retiree health care debt to the union.

Chrysler was considered the wild card in this year's contract talks because it became a private company in August, when Cerberus Capital Management LP bought an 80-percent stake in the automaker from the former DaimlerChrysler AG. Analysts predicted Cerberus would push for short-term gains to generate more cash from its investment.

But Ford Motor Co. generally is seen as the weakest of the Big Three automakers, and it may have to push for a deal that cuts deeper than GM's or Chrysler's. Ford lost $12.6 billion in 2006 and has mortgaged its factories to secure a $23.4 billion line of credit to cover losses and fund its restructuring plan, which calls for closing 16 facilities by 2012. The company has identified 10 of the closures but has yet to announce the remaining six.

The No. 2 U.S. automaker also has been losing market share to Asian rivals. Ford controlled 26 percent of the U.S. market in 1996, but that fell to 17 percent last year. Toyota Motor Corp. outpaced Ford in U.S. sales for the first nine months of this year in its effort to unseat Ford as the No. 2 automaker.

Aaron Bragman, an auto industry analyst with the consulting company Global Insight, said Ford wants the same retiree health care trust that GM and Chrysler agreed to. Ford has around $26 billion in unfunded retiree health care debt and more than 123,000 retirees and spouses.

But Bragman said Ford could have trouble coming up with enough cash to put into the trust.

"They have a cash issue at Ford. That's their biggest challenge," Bragman said. "They're mortgaged to the hilt and everything is accounted for in terms of the cash they have."

Ford also will seek further cuts in its U.S. hourly work force when it officially returns to the bargaining table, officials from both the company and the union have said. Ford spokeswoman Marcey Evans said Wednesday that the union hasn't yet told Ford when negotiations will resume after breaking for Chrysler.

Gary Chaison, a labor specialist at Clark University in Worcester, Mass., said the union will almost have to strike Ford now that workers have walked off the job at GM and Chrysler. But Chaison said that's unfortunate, since a strike could do serious damage to Ford.

"I don't think the UAW has fully appreciated how much the industry has changed," Chaison said. "The idea of imposing an agreement by one of them with the threat of a strike might not be really relevant anymore."

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