Chrysler and Unions Agree to Collective Agreement Before Federal Deadline

April 27, 2009

(ChattahBox) — Under the gun Chrysler Corp. may be able to finalize a deal with Italian carmaker Fiat after  two major unions indicated that they were willing to ratify a tentative deal. Chrysler said the agreement, reached during marathon negotiations this weekend, satisfied the requirements laid out by the Obama administration for a deal by an April 30 deadline.The Canadian Auto Workers union ratified a new collective agreement with Chrysler to allow layoffs and pay cuts by about C$19 ($15.61) an hour. It also cuts workers’ benefits, reduces time off and creates a health care trust for retirees and the elimination of a third shift at a plant in Ontario, Canada.  In all it’s a saving  $240 million annually, the union said. The deal, is expected to lead to similar cuts for Canadian workers at General Motors and Ford Motor.

Separately, The United Auto Workers union announced that it had also reached a tentative agreement with Chrysler, Fiat and the U.S. government on further concessions on a contract and a healthcare trust agreed with the automaker in 2007.

Lenders to Chrysler are reportedly owed $7.0 billion, but Fiat and the U.S. government are pushing the lenders to forgive $5.5 billion of the debt in exchange for a 5.0% stake in the company, the analyst said.

Even with the agreement, Chrysler is expected to seek Chapter 11 protection, in a case mapped out by the government in advance, including safeguards meant to protect worker benefits.

A new company would be set up with the best assets of Chrysler, according to sources. Fiat of Italy would own 20 percent to 35 percent of the new Chrysler, they said, with the government also holding a stake.


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