UAW local chiefs late Monday unanimously approved labor concessions that would cut Chrysler LLCs cash payments to a retiree health-care trust in exchange for 55 percent of the equity in the planned Chrysler-Fiat partnership, a source familiar with the accord said.
Additionally, the UAW agreed to allow Chrysler to hire as many lower-wage new workers as it can until 2015, the source said. Those workers start at $14 an hour, vs. $28 an hour for veteran workers, and also receive fewer benefits. The number had been capped at 20 percent of the work force.
Approval by the local leaders clears the way for the tentative agreement to go to Chrysler's 26,000 UAW-represented hourly workers for ratification. That voting will be finished by Wednesday, one day before Chrysler must complete a government-ordered alliance with Fiat S.p.A. to prove its viability and be eligible for $6 billion in additional rescue loans.
Without the aid and the Fiat deal, Chrysler may file for bankruptcy protection. Failure to negotiate concessions with debt holders may also trigger a bankruptcy filing.
Spokespersons for Chrysler had no immediate comment, while counterparts at the UAW couldnt be reached.
The source said the retiree health fund, or Voluntary Employee Beneficiary Association, would get a note for $4.59 billion in cash plus interest that would be paid in increments through 2023. The remainder of a previous $10.6 billion Chrysler obligation would be made in stock in the new Chrysler.
The VEBA stock could eventually be sold, with the federal government sharing in any appreciation of value. The note plus interest represents roughly half the value of the VEBA debt that Chrysler owes, the source said.
The stake would amount to about 55 percent of Chrysler stock, the source said.
Fiat, as part of the proposed partnership, would get an initial stake of 20 percent, rising to 35 percent if the Italian automaker reaches certain benchmarks set by the U.S. Treasury as part of the bailout plan.
Fiat has agreed to build at least one vehicle in one of Chrysler's U.S. plants, the source said. Neither the plant nor product was identified.
Chrysler workers in Canada on Sunday ratified a concessionary deal by an 87 percent vote as negotiators from the UAW and Chrysler reached their tentative accord. The automaker is still trying to persuade lenders to reduce their debt from $6.9 billion to $1.5 billion plus 5 percent in the restructured Chrysler.
Other concessions include a reduction of job classifications. Chrysler plants will operate with just two classifications of production workers and two classifications of skilled trades.
Under the existing contract, plants can have many more classifications.
In February, UAW workers at Chrysler made another round of concessions as workers forfeited cost-of-living raises, lump-sum bonuses and some break time.