Now that it has negotiated a cost-cutting labor contract with the UAW, Chrysler LLC can hunt for an automotive partner.
Chrysler needs a new generation of cars, up-to-date technology and better access to overseas markets. To achieve that on its own, Chrysler would need lots of time and lots of money.
"Chrysler needs new product mix, geographic diversification and access to growth markets," said John Casesa, managing partner of Casesa Shapiro Group LLC, of New York. "That's going to be hard to do without partners and fresh investment in the business."
The tentative contract covering Chrysler's 45,000 hourly employees — a deal reached last week after a six-hour strike — was a necessary first step, says Dave Cole, chairman of the Center for Automotive Research in Ann Arbor, Mich.
He says Chrysler couldn't line up the partner before the UAW agreement because a deep-pocket partner might have made the UAW think Chrysler was strong enough not to need the concessions.
Now potential partners can feel more confident that Chrysler has a long-term future.
Like General Motors and Ford, Chrysler pays its hourly workers about $75 an hour in wages and benefits — far more than Toyota's estimated $50 to $55 an hour in North America.
The new contract appears to eliminate most of that gap.
The agreement generally mirrors the UAW's contract with GM, with a UAW-administered health care trust to cover retirees, lower-tier wage for nonproduction workers and modest bonuses instead of raises.
But unlike GM, Chrysler did not give firm commitments to build future vehicles in specific assembly plants.
The UAW is expected to hold plant-by-plant ratification votes this month.
Assuming that workers approve the contract, Chrysler would be free to seek partners with deep pockets.
Chrysler couldn't do that without a new labor agreement, Cole says, because the UAW could have used a partnership as an excuse to avoid big concessions. That's what happened in 2005, when the UAW refused to give DaimlerChrysler the same retiree health care concessions that save GM $1 billion annually and Ford Motor about $650 million.
At the time, the union reasoned that Chrysler's corporate parent in Germany was too profitable to need help. "With this deal, Chrysler is a more attractive investment," Cole says.