UAW Strikes Chrysler, Long Strike Could Hurt

The UAW went on strike against Chrysler LLC at 11 a.m. today after contract negotiations failed to reach a deal by the strike deadline. The stoppage affects 49,000 UAW-represented hourly employees at 31 U.S. factories and technical centers. The strike also is expected to shut Chrysler’s Canadian plants within 24 hours as parts run dry.

Five U.S. assembly plants were not included in the strike because they have already been shut down temporarily by the company, according to a source briefed on the situation.

Neither the UAW nor Chrysler has issued a statement about the situation.

The strike would idle 9,000 Canadian Auto Workers at three Chrysler plants including Windsor, Ontario, where Chrysler is launching its critically important redesigned minivan.

A short strike is not expected to hurt Chrysler too badly. High inventories of Dodge Ram pickups and sedans such as the Chrysler Sebring caused Chrysler to temporarily idle five assembly plants and an engine plant.

But a strike lasting longer than a couple of weeks could damage the company, said Gerald Meyers, a University of Michigan business professor who was CEO of American Motors from 1977 to 1982.

He said consumer loyalty doesn’t extend much further than the iconic Jeep brand. Potential Chrysler buyers who go elsewhere may not come back, he said.

Nearly round-the-clock bargaining since Friday, October 5, failed to bring an agreement. The private equity owner of Chrysler, Cerberus Capital Management, wanted concessions at least as good as those won by General Motors. GM’s 73,000 UAW workers are on the verge of ratifying the contract this week.

But the UAW is having a hard time finding the necessary cost savings because Chrysler has far less interest than GM in offloading all its retiree health care liabilities to a UAW-controlled trust, sources say. That health care deal saves GM about $3.3 billion annually beginning in 2010.

Cerberus is said to be balking at the $8 billion to $11 billion cash infusion that would be necessary to fund such a voluntary employee beneficiary association.

The UAW also extracted specific product commitments from GM in exchange for its retiree health care trust and factory work rule changes, including a lower new-hire wage for non-production jobs.

Chrysler has less to offer on the plant investment front.

In fact, Chrysler is re-evaluating a commitment announced this year to build a $700 million axle plant to replace the aging axle plant in Detroit. Automotive News has learned that Chrysler has taken bids from three axle suppliers for the work pledged to the plant.

—David Barkholz

Filed by David Barkholz of Automotive News, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.