UAW Shifts Focus to Chrysler and Marchionne

With a tentative agreement with General Motors Co (NYSE:GM) in hand, the United Auto Workers union shifts its focus to Chrysler Group LLC where a one-week contract extension will expire late Wednesday.

Last Wednesday night, less than two hours before the four-year pact between the union and Chrysler was to expire, Chrysler Chief Executive Sergio Marchionne fired off a letter to UAW President Bob King chiding the union chief for missing an opportunity.

Marchionne said: "You and I failed" the U.S. government that funded the automaker's 2009 bankruptcy and bailout by not coming to agreement on a contract by the deadline.

Most of the work had been done by last week, and only a meeting of the two chiefs was needed to finalize the deal, Marchionne's letter said.

"We are down to the resolution of a few issues, primarily involving the economics for our employees for the next four years," Marchionne's September 14 letter said.

In the same letter, Marchionne agreed to the one-week contract extension.

While King on Tuesday said he had not decided whether to enter intensive talks next with Chrysler or Ford, those close to the talks say Chrysler is up next and Ford -- the only automaker not to take a U.S. government bailout in 2009 -- will be last.

GM workers at union halls and plants across the country will begin voting on the proposed pact this week and are expected to ratify it by September 29, according to Joe Ashton, UAW vice president for GM relations.

Chrysler, led in its final push by Marchionne, who was expected to return to Detroit late Tuesday night, is holding a hard line against additional fixed-cost increases. Marchionne told reporters in Italy this week that GM and Chrysler are "two completely different entities" and that Chrysler should not be expected to match GM's packages of one-time payouts.

Chrysler has 23,150 UAW-represented workers. GM has about 48,150 union workers, and Ford has about 41,000.

GM's proposed agreement calls for a $5,000 ratification bonus per worker, $1,000 annual "inflation" bonuses for three years and a profit-sharing plan paying $1,000 per worker for every $1 billion of North American GM profit after it makes at least $1.25 billion on its home continent. A $4 billion annual profit would yield a $4,000 per-union-worker profit-sharing check, before taxes.

"FRAMEWORK"

King said on Tuesday that he believed a basic "framework" had been set at GM for use with Chrysler and Ford. But Chrysler executives have made it clear that they will not accept terms as generous as GM.

A source on Tuesday night said Chrysler will seek a commitment from the UAW that the union and the company will not return to the "bad habits" of high fixed costs that helped to nearly sink the U.S. auto industry, after the contract now being negotiated would expire in 2015.

"The bad habits must be gone forever, period. It's a strategic decision," the source said, adding that Chrysler wants a commitment not to reinstitute cost-of-living-allowances and other "bad habits" for the 2015-2019 contract and beyond.

"CULTURE OF POVERTY"

Last week's chiding letter to King was not the first time that Marchionne has sparred with the UAW.

President Barack Obama's auto task force chief Steven Rattner recounted in his book "Overhaul" a run-in Marchionne had with then-UAW President Ron Gettelfinger in April 2009.

Marchionne is CEO of Italy's Fiat SpA <FIA.MI>, which has managed Chrysler since 2009.

The Italian automaker expects to increase its stake in the American company to 58.5 percent by the end of this year, up from 53.5 percent, on a fully diluted basis.

(Reporting by Bernie Woodall, editing by Maureen Bavdek)