Talks broke down between the United Auto Workers and Chrysler LLC. Thousands have walked off the job.
***Updated to include the decision by UAW to strike. Changes were made to the original piece accordingly***
Here we go again. Thousands of workers walked off the job after an 11 a.m. (Eastern Time) negotiation deadline past. 49,000 United Auto Workers left 24 Chrysler sites across the United States. The most recent UAW contract expired on September 14th, but the union agreed to extend the deal and bargain with General Motors first.
Negotiators for both sides halted negotiations once the strike began. Five plants, already idled because of poor sales, are not being striked against.
Chrysler LLC may nothave the same bargaining power it had when it was merged with Daimler-Chrysler. Being backed by private equity firm Cerebrus Capital Management makes Chrysler a much smaller company than it was previously. The company makes less than one million cars domestically per year.
This fact has Chrysler in a bit of a tough spot at this moment in time, when the three major U.S. automakers - Chrysler, Ford, and GM - have less than 50% of the market share in the states. Chrysler alone lost $1.5 billion in the first three months of 2007 while still under Daimler ownership. The automaker also saw a 3% drop in sales for the third quarter of 2007.
At what is clearly a hard time for Chrysler to weather a strike, union negotiators sent a memo to local union leaders advising them that UAW would no longer extend its contract with Chrysler. Labor workers had essentially been working out of contract there since 11:59 p.m. Tuesday.
UAW President Ron Gettelfinger is towing the same line against Chrysler as he did against GM. "The company has thus far failed to make an offer that adequately addresses the needs of our membership,'' UAW President Ron Gettelfinger and the UAW's chief Chrysler negotiator, General Holiefield, said in Monday's joint memo.
Chrysler is seeking similar health care concessions the UAW gave to GM and Ford over the last two years. Chrysler is also trying to lower the number they would have to pay into a retiree health care trust fund run by the union, effectively taking those high costs off Chrysler's books. UAW negotiated a similar deal with GM last month. Chrysler has 78,000 retirees and spouses, compared to 340,000 at GM.
UAW also wants job security written into the deal, guaranteeing certain plants and factories will continue to build future Chrysler products. Chrysler is also looking to buy out high-wage union members responisble for parts transportation, handing that role over to a contractor, according to the AP.
As a private company, it is clearly advantageous for Chrysler to try to reduce labor costs without a long strike, but how long of a strike they can deal with is up for speculation.
Analysts say Chrysler, which has a 71-day supply of cars and trucks, may even benefit from a short-term strike, where the company would surely offload a percentage of their high inventory.
But National Automobile Dealers Association economist Paul Taylor told the AP that a month-long walkout would erode Chrysler sales when the Aspen and Jeep Wrangler are selling well.
UAW leaders could have extended their contract on an hour-by-hour basis, but their fairly quick decision to call the strike may indicate the two sides are fairly far apart. UAW continually extended their contract with GM for nine straight days while working out a new deal. When the strike was called against that automaker last month it only lasted two days.
Union workers will only receive $200 per week from their union's strike fund. Chrysler, which has no longer publically owned, has no outside shareholders to pressure them into a deal. Because they are private, their cash reserves are largely unknown. A short strike may actually be advantageous to Chrysler from a financial position, but political fallout from a protracted strike will not be in the automaker's best interests.