Labor deal reached for Chrysler, CAW

Chrysler LLC and the Canadian Auto Workers union reached a deal on labor concessions late Friday as the automaker continues last ditch efforts to meet an April 30 deadline to qualify for government loans.

The tentative agreement became the first of many deals Chrysler must reach with stakeholders to get aid, including a proposed noncash tie-up with Fiat SpA.

Ratification votes will be held in Canada over the weekend, with results expected Sunday night, said CAW President Ken Lewenza.

Lewenza said the union was warned that without an agreement Canadian operations would be lumped in with Chrysler's bad assets to be liquidated under Chapter 11 bankruptcy.

The CAW agreement comes with company assurances that Canadian assembly plants will be part of the "new company" that continues as a joint operation of Chrysler and proposed alliance partner Fiat SpA.

The plants will continue to build future versions of the minivans and large cars made in Ontario now, Lewenza said.

There is also a chance that a bankruptcy filing in the U.S. does not necessitate an equivalent filing in Canada, he said.

Also this weekend, the U.S. Treasury Department could make a counteroffer to Chrysler's secured lenders to reduce some of the $6.9 billion in company debt they are carrying.

The Treasury received the banks' latest offer Friday, in which the lenders reduced their request by $750 million, but there is still a considerable gap between the two sides.

The banks proposed dropping the debt level to $3.75 billion from $4.5 billion sought in the previous proposal submitted Monday -- or 54 cents on the dollar. The banks also dropped demands for $1 billion in preferred equity and a call for Fiat to put in $1 billion as well, said people familiar with the banks' position.

Unchanged is a bank demand for 40 percent equity in Chrysler.

The Treasury Department had upped its offer Wednesday from $1 billion to $1.5 billion in new debt plus a maximum of 5 percent of Chrysler's equity once Fiat's stake reaches 35 percent from its 20 percent starting point.

Rep. Gary Peters, D-Bloomfield Township, said he was pleased that talks were moving, but said the banks, led by JP Morgan Chase, Goldman Sachs, Morgan Stanley and Citigroup, "are still asking for much more than market value for their holdings, which amounts to a taxpayer subsidy."

"(The latest) offer was still far from reasonable," Peters said.

The White House planned to keep talking over the weekend.

"The president, his task force on autos and all of the stakeholders are working around the clock to try to get a deal that protects jobs at Chrysler," spokesman Robert Gibbs said. "The best way to get this deal done is for everybody to understand they're going to have to give something."

Analyst Joe Phillippi of AutoTrends Consulting Inc. in Short Hills, N.J., said, "unless the banks really come in dramatically in terms of what they are willing to take, I think it definitely results in bankruptcy."

Chrysler President Jim Press told company dealers to remain focused, insisting that no bankruptcy filing was imminent.

"They are trying to avoid bankruptcy at all costs," said one dealer who took part in the 10-minute call Friday morning and asked to remain anonymous. Press didn't answer questions. "He said this could go right down to the wire and that people are working very hard."

The Obama administration will decide Thursday whether Chrysler has met conditions to receive an additional $6 billion in loans. Approval is predicated on Chrysler finalizing its deal with Fiat, and cost concessions must come from all other stakeholders, including the lenders, CAW and United Auto Workers.

Fiat could still decide to buy pieces of Chrysler in bankruptcy if the talks don't succeed.

With less than a week to go, the CAW agreement becomes the first domino to fall into place.

CAW concessions amount to about $240 million in annual cost savings by eliminating some benefits, creating a health care trust fund and increasing productivity, while preserving base wages and pensions.

Chrysler Vice Chairman Tom LaSorda thanked the CAW for its "openness in this challenging environment to create a new strategy that will lead this company on a path to success."

And Chrysler chief bargainer Al Iacobelli, said the deal will "help to ensure the company's future competitiveness," and moves Chrysler a step closer to a partnership with Fiat.

Lewenza said the union will now go back and renegotiate with GM and eventually with Ford Motor Co.

As for stakeholders in the U.S. who have yet to broker deals, Lewenza said, "suck up your greed and make a deal."

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