Chrysler Group, UAW begin negotiations

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“The settlement at Dana is not a precursor for any other set of negotiations,” he said, adding that Dana is in Chapter 11 bankruptcy protection and retirees are in danger of losing health care coverage.

But Mr. Gettelfinger would not answer a question about whether the union will rule out a similar trust fund for companies not in bankruptcy.

Mr. Franciosi said reducing costs and becoming more competitive is imperative for both sides.

He also said that while Chrysler would like to get labor costs closer to its Asian competitors, that doesn’t necessarily mean concessions for the union.

“We can get very creative. Creativity and innovation by definition are not necessarily concessionary,” he said.

Mr. Gettelfinger is leaving himself some breathing room in case the companies put enough money into a trust to make the health care deal worthwhile, said Gary Chaison, a labor specialist at Clark University in Worcester, Mass.

But any arrangement for the union to take over health care liabilities would also be a difficult sell to the membership, Mr. Chaison said, noting that Ford workers barely approved health care concessions in 2005.

“I think he’s very concerned that a health care arrangement that’s radically different is going to be rejected by the membership,” Mr. Chaison said.

A strike, which could cripple one of the companies and possibly force bankruptcy, is not an option, Mr. Chaison said.

As for Chrysler, Mr. Chaison said Mr. Franciosi is signaling that a traditional concession, such as a wage cut or a lower pay scale for new employees, might not be the answer.

“There are lots of ways to tweak health benefits and pension plans,” Mr. Chaison said. “It could be a change rather than a cut.”

The Detroit companies have said they have a $25 to $30 per hour labor cost disparity with their Japanese rivals.

Ford paid an average of $70.51 per hour in wages, pension and health care costs for hourly workers last year, according to its annual report. GM’s annual report says its labor costs average $73.26 per hour, while the Chrysler Group’s costs average $75.86.

All three will seek to reduce costs to about $48 per hour, about the average hourly cost incurred by Toyota, Honda and Nissan.

Studies have shown the U.S. automakers make about $2,000 less per vehicle than their competition, with much of that due to labor costs.

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