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| A worker inspected a Jeep on the assembly line last year at a Chrysler plant in Toledo, Ohio. Below, Chrysler vehicles awaited
shipment Saturday near a railyard in Auburn, Wash. Madalyn Ruggiero/AP/file |
Can Chrysler rewrite the labor rules?
It may not bust the union, but its private owners have more leeway to drive a hard bargain.
from the October 11, 2007 edition
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The company has brought in new management talent, including Jim Press from Toyota's North American operations, to aid this effort. At the same time, the new team has signaled a likely reduction in the number of models produced. And like other carmakers, Chrysler is trying to become more global: It cut a deal with Chinese automaker Chery to build a small car for export to the US.
Analysts aren't expecting a drawn-out strike. After several weeks, a strike would begin to affect the availability of Chrysler vehicles, especially popular ones like the Jeep Wrangler. That kind of sales slowdown is in the interest of neither labor nor management.
The UAW launched the walkout at 11 a.m. Wednesday, but the strike did not include five of the company's 10 US assembly plants, which have recently been idled by Chrysler itself in an effort to work down inventories.
The issues are similar to ones the union faced in talks with GM: cutting healthcare costs to help the carmaker compete with Asian-owned rivals and seeking to ensure that as many jobs remain in the US as possible.
GM workers, in votes across the country this week, have nearly ratified their new contract.
A deal at Chrysler would affect some 49,000 US factory workers and more than 77,000 retirees or surviving spouses.
The burden of rising costs for retiree healthcare is expected to be reduced through the same approach tried at GM. Chrysler would hand the burden to the union, in effect, by paying into a trust fund that the union would administer to pay for those medical costs.
In addition, Chrysler wants to win healthcare concessions that GM and Ford got from the UAW a couple of years ago.
In all this, a key question is whether private ownership will make managers less willing to compromise. The buyout firms typically set executive pay so that CEOs win big if the company's restructuring succeeds and win little if it doesn't. Typically, companies are resold in a public stock offering within a few years.
The business model has had some successes, but many of the deals are still too young for a verdict to be rendered.
Many in organized labor doubt that the trend, on balance, helps the US economy and workers .
"Private equity is a euphemism for leveraged buyouts," says Damon Silvers, associate general counsel at the AFL-CIO labor federation in Washington. "With some exceptions, it's not the form of finance or governance that is likely to lead to the best long-term outcome for firms." The auto industry, in particular, poses challenges with its long product cycles and heavy capital investments.
UAW workers "don't know how much Cerberus really knows about the auto industry," Mr. Brophy says. "These things will be revealed as we go forward."
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