Chryslerâs Turn in the Spotlight This Week
By Michelle Krebs October 9, 2007Itâs often said in the auto industry that everybody gets their turn in the barrel. In recent weeks, it has been General Motors; next week, itâll be Ford. But this week it is Chrysler in the spotlight.
On Wednesday, Chrysler faces an 11 a.m. strike deadline set by the United Auto Workers union.
At the same time, word is leaking out â or deliberately being leaked out to strengthen the automakers hand â that Cerberus Capital Management, Chryslerâs new owner, is planning even deeper job cuts than announced earlier this year.
And Chryslerâs top executives, including CEO Bob Nardelli, formerly of Home Depot, and vice chairman for sales and marketing Jim Press, formerly of Toyota, face dealers and meet with the media at Chrysler dealersâ national convention in Las Vegas this week.
Deeper Cuts Than Planned
Not surprisingly, word in the Detroit media is that Chrysler planning deeper job cuts than was part of the original turnaround plan revealed in February. The information leaked out â or was deliberately leaked to Detroit media â this week, in the midst of labor talks, to show it isnât just union workers bearing the brunt of Chryslerâs cost cutting.
The original recovery plan called for cutting 13,000 jobs, including 2,000 salaried ones by 2009. Now Chrysler plans to cut 5 percent more â or about 500 white-collar jobs as well as eliminate a third of its contract workers, or about 1,100 jobs, according to the Detroit Free Press.
Despite Cerberus-appointed management insisting it would stick to Chryslerâs recovery plan, observers didnât believe it. They expected Cerberus to go deeper and faster in order to turn Chrysler around so it could recoup its investment quicker. The economy, Chryslerâs slow sales and its buildup of inventory of unsold vehicles clinched the deal.
A Strike Is Possible
A strike is certainly possible, even probable.
Conspiracy theories like the one that has the General Motors and the UAW in cahoots on the strike that lasted all of 41 hours in order to allow the union look like the tough guy with its rank-and-file look probable.
Chrysler could benefit from a strike. Chrysler, with its high inventories, could afford to lose some production. Last week, the automaker announced plans to idle a number of U.S. assembly plants this week and some next to adjust inventories. It eliminated overtime at other plants.
If workers go out on strike, those at plants idled for inventory adjustment would be paid the $200 per week from the union, not receive their full pay from Chrysler.
The Issues Are Real
Still, the issues facing UAW workers with Chrysler are real and different from those at GM and Ford, even though the union wants a contract patterned after the one it got from GM. That agreement includes a provision to allow GM to pay lower wages and no pension (a 401k instead) to some workers and shift its health care costs to a new union-run trust fund in return for making product commitments to specific plants.
To begin with, the UAW has not ever negotiated with a privately-held Chrysler, now owned 80 percent by private equity firm Cerberus and 20 percent by Daimler AG. It should be noted, by the way, that UAW President Ron Gettelfinger supported Cerberusâ purchases. Still, Chrysler employees â blue- and white-collar alike â are apprehensive. They wonder what Cerberus is up to â how long is its commitment to Chrysler? What will they do with Chrysler?
In addition, Chryslerâs UAW unit did not agree to health-care concessions last year as their counterparts at Ford and GM so Chrysler now wants those concessions in addition to a union-run health-care trust. Cerberus, however, isnât thrilled about using cash to put into a health-care trust as GM has agreed to and Ford likely will since it took on debut to buy Chrysler.
Cerberus also doesnât want to make product commitments to plant. It wasnât to spin off some operations to generate cash to make a return on its investment. And Press has hinted Chryslerâs product portfolio will undergo some pruning. In addition, Chrysler wants to source vehicles overseas. Already, it has an agreement for Chinaâs Chery to produce small cars for Chrysler to sell in North America and Europe.
Meantime, Chrysler and UAW negotiators were due back at the bargaining table Tuesday after a marathon session that ended at 4 a.m.
LEAVE A COMMENT