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Chrysler wants concessions on health care

/ Source: Reuters

Chrysler Group, the U.S. unit of DaimlerChrysler AG, said Thursday it was seeking a deal with its major union this year to cut its $2.3 billion annual health care bill before the two sides begin a crucial round of contract talks.

While Chrysler has cut its work force by about 35 percent, or almost 44,000 jobs, since 2000, health care costs have risen by 56 percent in that time, Chrysler Chief Operating Officer Eric Ridenour said in a presentation for analysts.

Ridenour said Chrysler had provided updated information to the United Auto Workers union about its finances and was ready to begin talks with union leaders on a concessionary deal that would shift some health care costs back to factory workers.

“We want and need the UAW to come to the table about how we can reduce these costs,” Ridenour said in his presentation in Dearborn, Michigan, which was monitored by Webcast. “They don’t need a crystal ball to see we’ve had a tough year.”

Chrysler has forecast a 2006 loss of some $1.3 billion after failing to respond to the shift away from high-margin trucks, sport-utility vehicles and minivans that represent about 64 percent of its total U.S. sales.

Chrysler struggled to manage inventory in 2006 and ended the year with dealer inventory of about 539,000 vehicles, a 74-day supply, down from a near 91-day supply of 649,000 vehicles in the second quarter.

Ridenour told the analysts that Chrysler hoped to conclude a deal with the UAW on health care before it begins talks on a new master contract set to expire in September.

He also said while Chrysler was seeking “parity” with the concessions that the UAW granted last year to larger rivals General Motors Corp. and Ford Motor Co., the agreements would not have to be identical.

UAW rejected a health care deal for Chrysler in September, saying the automaker was in a stronger position than the other Detroit-based companies and that such concessions would not be approved by its membership.

A UAW representative could not be immediately reached to comment.

Chrsyler is readying a restructuring plan, set to be announced in February, that Ridenour said was being compiled from the work of seven teams of executives, including some from DaimlerChrysler’s Mercedes unit, examining everything from structural costs and manufacturing flexibility to quality.

“We are looking across the board at everything,” he said.

As part of the cost-cutting, Ridenour said Chrysler was increasingly looking to source from outside North America, particularly Asia, and that it will seek to reduce the time it takes to build a vehicle and increase the use of shared parts.

Chrysler aims to cut average production time for its cars and trucks to less than 30 hours in 2007 from almost 34 hours in 2005, according to slides prepared for the presentation.

In materials posted on the DaimlerChrysler Web site, the company expects to have one-half of its components used on more than one vehicle platform in 2007, up from 34 percent in 2006. It set a goal of 60 percent by 2009 and 70 percent by 2011.

Chrysler’s overall sales dropped 7 percent in 2006 in a U.S. market for cars and light trucks that dipped 2 percent.

The No. 4 U.S. automaker is banking on the introduction of new minivans late this year and momentum from 10 new vehicle launches in 2006 to boost sales in 2007, executives have said.

Without providing detail, Ridenour said an “optimization plan” being prepared for release this quarter would include steps to boost revenue and the margin on its cars and trucks.

Saddled with slow-selling trucks and SUVs, Chrysler spent in 2006 an industry-leading $3,812 in incentives per average vehicle, according to industry tracking Web site

Toyota Motor Corp., which overtook DaimlerChrysler to join the Big Three in U.S. sales, spent less than a third of that in average incentives at $1,055, according to Edmunds.