UAW, Chrysler extend contract for a second time

September 21, 2011 - 7:30 PM

DETROIT (AP) — Chrysler and the United Auto Workers are extending their contract for a month as negotiators try to hammer out the first labor agreement since the company exited bankruptcy protection.

The 2007 contract between Chrysler and the UAW was originally set to expire on Sept. 14. But the parties extended it until 11:59 p.m. EDT Wednesday. On Wednesday evening, they announced it would be extended until Oct. 19.

Neither side gave any reason for the lengthy extension. It could mean that the UAW plans to negotiate a new contract with Ford before returning to Chrysler. It could also mean that negotiators have reached some kind of stalemate that they need time to work through.

The UAW reached an agreement with General Motors late Friday. GM workers are expected to begin voting on that deal soon. It includes a $5,000 bonus if the contract is ratified and a new profit-sharing plan in place of annual raises.

But Chrysler, which is much smaller, may not have the resources to match the bonuses and profit-sharing that GM offered its workers last week, people briefed on the talks say. The people did not want to be identified because negotiations between Chrysler Group LLC and the UAW are private. The automaker has said that its main objective is to hold labor costs steady at $49 per hour, among the lowest in the U.S. auto industry.

Chrysler workers know that they may not get as good of a deal as GM workers, said Kristin Dziczek, head of the labor and industry group at the Ann Arbor, Mich.-based Center for Automotive Research.

Chrysler reported a $254 million net loss during the first half of the year, while GM earned $5.4 billion. Chrysler also knows it still needs money to retool plants and revamp more of its models, Dziczek said. Chrysler is upgrading its lineup with technology from Italy's Fiat SpA, which owns a majority of Chrysler.

"I think the UAW gets that, and they understand what they're going to have to do to get an agreement at Chrysler," Dzicek said.

The talks have hit some bumps. In a letter sent just before the original contract was to expire, Chrysler CEO Sergio Marchionne accused UAW President of failing to show up to complete negotiations as scheduled. But Marchionne said Tuesday that he was optimistic they'd reach an agreement soon. He flew to the U.S. from Europe Tuesday night in case an agreement was reached.

King wouldn't discuss the letter, but said Tuesday that he has a good relationship with Marchionne.

Complicating the Chrysler talks is the UAW's indirect ownership of company stock. More than 40 percent of Chrysler is owned by a UAW trust fund that pays retiree health care bills. That puts the union in a difficult position: It must win more money or job guarantees from Chrysler without hurting the company's ability to turn a profit and boost the stock price when Chrysler eventually goes public again.

Meanwhile, negotiations between Ford Motor Co. and the UAW slowed while the union concentrated on the other two companies.

GM's deal promises news jobs and car production in the U.S, a top union concern. It also offers buyouts for more expensive, longtime union workers.

Under the deal, GM's union workers get a $5,000 signing bonus and profit-sharing checks that will likely exceed the $4,300 workers received this year. Longtime workers won't get a pay raise, helping GM contain costs. But entry-level workers will get raises of up to 24 percent during the contract's four years.