Marchionne stands firm against added labor costs

David Barkholz covers labor issues for Automotive News.

DETROIT --  UAW President Bob King can have a new contract at Chrysler Group any time he wants it -- as long as it’s on CEO Sergio Marchionne’s terms.

Nothing has changed in these talks since King no-showed Marchionne almost a month ago to turn his bargaining to General Motors and Ford Motor Co. Those contracts are now done.

But so is the one at Chrysler. It’s almost exactly as they left it. All King has to do is sign it with the same pen that Marchionne had ready for him on Sept. 14, when King decided to stay at GM to bargain rather than visit Marchionne at Chrysler’s suburban Detroit headquarters.

Specifically, no increase in labor costs to Chrysler over the next four years, said a source familiar with the talks. It also contains a smaller signing bonus than the $5,000 to GM workers and $6,000 to Ford workers.

Marchionne is determined to make Chrysler a long-term success. That means labor costs must be held in check until the carmaker can revamp its product lineup and put together a few profitable quarters.

In short, wait until the next contract talks in four years. Marchionne has stated publicly that the GM and Ford deals are too rich for Chrysler’s blood given that the company had to pay $2 billion in debt service on government bailout loans. Those loans were only recently paid off from proceeds from bond sales.

GM didn’t have to pay interest on its $50 billion bailout money. That’s because the U.S. government took equity for the loans to save the company that expense.

Chrysler had a near-death experience two years ago. Marchionne knows the carmaker is still healing, and so do Chrysler’s 23,000 hourly workers.

So in exchange for whatever the UAW wants new in these negotiations, it must give up something to keep Chrysler’s labor costs neutral. It could be a little bigger signing bonus than is now being proposed. But for an increase, the UAW will have to accept something like a long-term guarantee through 2019 that Chrysler can hire an unlimited number of entry-level workers earning half the $28 an hour paid traditional workers.

Time has not softened Marchionne on his conviction. For King, it’s either sign his contract or head to arbitration where the fairness of the Chrysler offer will be judged in comparison to how the transplant automakers pay their workers.

There’s nowhere else to turn.

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