Chrysler Group, UAW begin formal contract negotiations

Associated Press

AUBURN HILLS, Mich. July 21, 2007 10:15 am

— It was all handshakes and smiles Friday as the United Auto Workers formally opened contract talks with Chrysler Group, and while both sides were cordial, it didn’t take long for their differences to surface.
UAW President Ron Gettelfinger, while repeatedly refusing to answer specific questions about bargaining strategy, told reporters that the union already has done a lot to make the Detroit Three more competitive.
He cited health care concessions for General Motors Corp. and Ford Motor Co. and approval of buyout and early retirement packages that let all three companies reduce their work forces.
“We are working with the companies to get where they need to be, and they’re going to be strong, viable companies in the final analysis,” Gettelfinger said. In the past he has said the union is not in a concessionary mode.
But the automakers, on the other hand, have each said they need to reduce labor costs to become competitive with their Japanese rivals, Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co.
Industry analysts have said reducing costs is critical to the domestic companies’ survival amid intense global competition. The three automakers lost a collective $15 billion last year and only GM has shown a profit this year despite continued losses in North America.
Chrysler Chief Executive Tom LaSorda said the negotiations are an opportunity for true change.
“Negotiations are difficult. This one will be no exception. The challenges we are facing are clear,” he said.
Chrysler Senior Vice President John Franciosi, the company’s chief negotiator, said reducing costs and becoming more competitive is imperative for both sides.
Franciosi also said that while Chrysler would like to get labor costs closer to its Asian competitors, that doesn’t necessarily mean concessions for the union.
“We can get very creative. Creativity and innovation by definition are not necessarily concessionary,” he said.
The comments came after the traditional ceremonial handshakes that formally kick off the talks, but in reality, negotiations have been under way for months. Similar events will take place Monday with Ford and GM. The UAW’s national contracts with the Detroit Three expire Sept. 14.
Chrysler and the union clearly are focused on health care, with both calling for some sort of national solution to the problem of rising costs for active workers and the huge obligation to care for retirees.
Franciosi said the Detroit Three would begin a more aggressive lobbying campaign in Washington to address the costs, and LaSorda called health care a national crisis.
Chrysler would favor reducing the Medicare-eligibility age and national catastrophic health coverage as well as an integrated system in which people would be covered no matter where they go, LaSorda said. Gettelfinger often has called for a national health care system.
Both say they are competing against foreign automakers whose governments already pick up the tab for health care.
The Detroit Three collectively have a $90.5 billion unfunded liability for retiree health care, and all are interested in reducing or eliminating it. One possible solution they’ve floated came from a contract settlement last year between the Goodyear Tire & Rubber Co. and the United Steelworkers in which the company agreed to pay the union $1 billion to set up a trust and take over $1.2 billion in hourly retiree health care liabilities.
All three companies also 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 about $48 an hour, about the average hourly cost incurred by Toyota, Honda and Nissan Motor Co., company officials have said.
Studies have shown that the Detroit Three make about $2,000 less per vehicle than their competition, with much of that due to labor costs.
But the UAW, in a fact book given to reporters Friday, said labor costs represent only 10 percent of the cost of a new vehicle.

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