Image: Ford assembly facility
Paul Sancya  /  AP
It took two short strikes, but the United Auto Workers union has new contracts with General Motors and Chrysler, and now it will move on to struggling Ford.
updated 10/11/2007 6:37:55 PM ET 2007-10-11T22:37:55

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.

By contrast, Ford is using about 79 percent of its plant capacity, and that's one reason Ford could be seeking more concessions than Chrysler and GM did, said Erich Merkle, vice president of auto industry forecasting for consulting company IRN Inc. in Grand Rapids. Merkle said Ford needs to match its production with its falling U.S. market share.

Ford is generally considered the weakest of the Detroit Three in this round of contract talks. It 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.

Merkle said he's concerned the UAW will try to make Ford follow the pattern set by Chrysler and GM even though its needs are different. For example, he said, Ford isn't in the position to guarantee future jobs at U.S. plants.

"I just don't think they're going to get the things that they need," Merkle said. "But at the end of the day, the less the UAW gives up, the more it's going to hurt Ford from a financial position long-term."

Ford has at least one advantage in the talks: UAW President Ron Gettelfinger began his career at Ford as a chassis line repairman, rose through the union ranks as a Ford bargainer and continues to have a close relationship to the company. Ahead of this year's talks, Ford President and CEO Alan Mulally said he "couldn't be more pleased" about his relationship to Gettelfinger and other union leaders.

Gettelfinger's relationship with Ford and the fact that talks have been going on for months will diffuse some tension, said Harley Shaiken, a professor at the University of California at Berkeley who specializes in labor issues.

"It will be tough bargaining, which is less subject to a miscalculation than it would have been without the relationship," Shaiken said. "A relationship doesn't make deep differences go away, but they can be approached in a more effective manner."

Workers at the automakers must vote on the contracts before they take effect, so UAW officials will have to convince Ford and Chrysler workers that they did the best they could. Shaiken is already predicting that the UAW will have a tough time selling its tentative agreement to Chrysler workers. He has heard of worker discontent in the plants, with some already upset about the deal.

"It's going to be a tough vote, where confidence in the leadership is balanced against anger at the situation. That's a volatile mix," Shaiken said.

Chrysler didn't get the same health care concessions in 2005 as Ford and GM, mainly because it was in better financial shape at the time. Shaiken said the Chrysler membership would have voted down any concessions at that time, but the situation has changed since then, with Chrysler losing money and being sold off by the former DaimlerChrysler AG.

Still, Chrysler workers may be more skeptical of the contract than workers at GM.

"I think you've got a pattern still in place, tailored to Chrysler, but you're going to have a lot of concerns," Shaiken said.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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