- The Washington Times - Monday, April 27, 2009

DETROIT | Chrysler LLC cleared another major obstacle to its survival Sunday when it reached a tentative deal for concessions with the United Auto Workers union.

The troubled automaker is just days from a U.S. government deadline Thursday to gain concessions from its unions and debt holders and form an alliance with Italy’s Fiat Group SpA or face almost certain liquidation.

The UAW announced the deal in a news release Sunday night, calling the concessions painful but saying the deal takes advantage of the Obama administration’s second chance for Chrysler and its workers.

Meanwhile, General Motors Corp. was expected to announce details of its massive restructuring plan on Monday, including the demise of its storied Pontiac brand, more factory closures and bigger job cuts as it fights to avoid bankruptcy protection.

Two people briefed on GM’s plan said the company has decided to close more factories than the five it announced in February. But the locations of the doomed factories will not be identified Monday, said the sources, who asked not to be identified because the plan has not been made public.

One of the people said GM will list specific numbers of blue-collar job cuts and announce another round of U.S. salaried job cuts beyond the 3,400 completed last week.

The administration in February rejected Chrysler’s restructuring plan and said the company could not stand on its own. The government gave the Auburn Hills, Mich., automaker until April 30 to make further cuts and ink a deal with Fiat.

The UAW deal is seen as a key piece in pulling together Chrysler’s plan, and it’s noteworthy that the UAW said Fiat was involved in the deal.

“The provisional agreement provides the framework needed to ensure manufacturing competitiveness and helps to meet the guidelines set forth by the U.S. Treasury Department,” Al Iacobelli, Chrysler vice president of labor relations, said in a statement. “As a result, Chrysler LLC can continue to pursue a partnership with Fiat SpA.”

Chrysler has been living on $4 billion in U.S. government loans and is expected to get another $500 million. Without government help, it would have gone out of business around the first of the year.

After rejecting the original plan, the government had said the UAW and Canadian Auto Workers unions must make further concessions, including the UAW taking equity in the company for at least half of a $10.6 billion payment into a union-run trust that will assume retiree health care costs starting next year.

The CAW ratified a concessionary deal on Sunday that CAW President Ken Lewenza said makes labor costs competitive with nonunionized Toyota in Canada.

The UAW says its deal “meets the requirements of U.S. Treasury Department loans to the company” and includes changes to the health care trust. UAW Vice President General Holliefield said the agreement’s ratification process has to be completed by Wednesday.

“We recognize this has been a long ordeal for active and retired autoworkers and a time of great uncertainty,” UAW President Ron Gettelfinger said. “The patience, resolve and determination of UAW members in these difficult times is extraordinary, and has made it possible for us to reach the agreement we will present to our membership.”

The UAW and CAW deals leave concessions from the holders of $6.9 billion in Chrysler secured debt and the alliance with Fiat as the remaining hurdles to Chrysler’s eligibility for additional government aid.

Debt holders, the company and the Treasury Department remain far apart in swapping equity in the company for much of the debt.

Mr. Holliefield said UAW members and retirees are being asked to make extraordinary sacrifices to help Chrysler become viable.

“In order for the company to have a sustainable future, all stakeholders will have to show the same willingness to contribute to the common good that has been demonstrated repeatedly by our membership,” he said.

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