GM, Chrysler miss deadline for new contracts

September 15, 2011 - 12:30 AM

DETROIT (AP) — General Motors Co. and Chrysler Group LLC failed to meet a Wednesday deadline for reaching new contract agreements with the United Auto Workers union. GM negotiators were still in talks early Thursday, but talks at Chrysler appeared to have broken down.

Up until Wednesday, the negotiations that began over the summer appeared to be proceeding without acrimony. But late Wednesday, the CEO of Chrysler fired off a letter saying an agreement likely wouldn't be reached because UAW President Bob King didn't come to the table Wednesday night to finalize the deal.

"I know we are the smallest of the three automakers here in Detroit, but that does not make us less relevant," Chrysler CEO Sergio Marchionne said in the letter to King, which was obtained by The Associated Press.

Marchionne said he planned to travel out of the country and will return next week. He said he would agree to extend Chrysler workers' current contract for a week, but the decision to extend the contract must be made by the UAW.

A message seeking comment was left late Wednesday with the UAW. A person briefed on the negotiations said the union is reviewing the letter and considering whether to extend the contract. The UAW extended its contract with Ford Motor Co. last week, as talks have progressed more slowly with that automaker. The person requested anonymity because the talks are private.

The union may have little choice but to extend the contract. In the past, workers could strike if an agreement wasn't reached by the deadline. But GM and Chrysler workers can't strike over wages this time, a condition placed on them when the companies took government bailout money two years ago.

Things appeared to be progressing more smoothly at GM. Joe Ashton, the UAW's vice president in charge of the GM negotiations, told local union officials Tuesday night in a note that bargainers have made "much progress" in talks with the company. GM has taken the lead on the negotiations and its agreement may be used to set the pattern for the other two companies.

The contract talks will determine wages and benefits for 111,000 union workers at the auto makers, and they also set the bar for wages at auto parts companies, U.S. factories run by foreign automakers and other manufacturers, which employ hundreds of thousands more. The contract talks are the first since GM and Chrysler needed government aid to make it through bankruptcy protection in 2009.

Ashton wrote that "difficult restrictions" have been placed on the union and company as a result of the bailout. GM nearly ran out of cash and needed $49.5 billion from the government to survive, but it's been making billions in the last two years because its debt and costs were lowered in bankruptcy and its new products have been selling well.

To get the government funding for GM, the union had to agree not to strike over wages at GM and Chrysler. Also, unresolved issues can be taken to binding arbitration, and the union's new contracts must keep the companies' labor costs competitive with Asian automakers such as Toyota Motor Corp. and Honda Motor Co.

"As you know, several difficult conditions were agreed to in order to obtain financing during the bankruptcy," Ashton wrote in the note to local union officials. "We are confident that we can reach an agreement that will meet many of the goals we set at the beginning of negotiations."

The union has been seeking bigger profit-sharing checks instead of pay raises, higher pay for entry level workers who make $14 to $16 per hour, signing bonuses and guarantees of new jobs as auto sales recover. Ford and GM want to cut their labor costs to get them closer to Honda and Toyota, while Chrysler wants to hold its costs steady.

The contract agreements are only temporary until they are ratified by workers.