Chrysler and the United Auto Workers union have finally agreed on a new contract.
The company was the last Detroit carmaker to reach a deal with the union after more than two months of bargaining and several snags. The tentative agreement, reached Wednesday, creates up to 2,100 new jobs and promises $4.5 billion in investments at U.S. plants. It was the first labor agreement for Chrysler since its government bailout and bankruptcy two years ago.
The deal is less generous than those reached earlier with General Motors Co. and Ford Motor Co., but Chrysler Group LLC is also less profitable than its rivals.
Union officials said the contract, which includes a $3,500 signing bonus but gives most workers no annual raises, is the best they can do. They promised profit-sharing checks once the company is making money again.
"Naturally we would have wanted to do a lot more for the Chrysler workers," said UAW Vice President General Holiefield, who led the Chrysler negotiations. Holiefield said the union wanted to reward workers but not hurt the company's bottom line as it struggles to make a profit.
GM workers, who ratified their labor agreement last month, are getting $5,000 signing bonuses. Ford workers will get $6,000 bonuses if they approve their agreement.
Chrysler said it won't discuss the contract until workers vote on it. Voting is expected to take about two weeks.
UAW President Bob King said preserving jobs and getting commitments from the companies to hire more workers was the union's major goal in this round of talks. The GM, Ford and Chrysler agreements together would add 20,000 jobs by 2015.
Chrysler's contract promises to invest $1.3 billion in its Kokomo, Ind., transmission plants, which will retain 3,500 jobs, and to add new products to its Belvidere, Ill., and Sterling Heights, Mich., assembly plants.
"If it was not for the UAW bargaining, all these jobs would be going to Korea and China and Mexico," King said at a union training facility in Warren, Mich., where UAW leaders gathered to learn details of the new contract.
If Chrysler workers approve the agreement, they get the signing bonus in two installments: $1,750 when it's signed and $1,750 once Chrysler achieves "financial stability." The company and the UAW are still deciding what defines stability. Workers also would receive smaller bonuses if their plants meet quality and productivity goals.
The contract governs 23,000 Chrysler U.S. factory workers as well as 3,000 salaried workers such as engineers.
Under the agreement, wages of entry-level workers will rise from $15.78 an hour to $19.28 by 2015. About 12 percent of Chrysler's 23,000 factory workers are now paid entry-level wages, about half the wage of longtime union workers.
Contract negotiations are closely watched. Not only do they set pay and benefits for 112,000 factory workers at Detroit's three car companies, they influence benefits for thousands of employees at auto suppliers and non-union plants run by Toyota Motor Co., Volkswagen AG and other foreign companies.
Chrysler and the union hit a number of stumbling blocks during negotiations. As the original deadline to reach a new contract approached in mid-September, Chrysler CEO Sergio Marchionne sent an angry letter to King, accusing him of failing to show up at a meeting to finalize the deal. The two sides eventually agreed to extend the contract to Oct. 19.
Late last week, three money issues separated the company and the union: The size of signing bonuses and profit-sharing checks and a cap on the number of entry-level workers that Chrysler could employ. The union wanted to cap the number of workers, while Chrysler wanted no limit. The tentative agreement sets no limit until 2015, when a 25-percent cap will go into place. Ford agreed to a 20 percent cap, while GM's limit is 25 percent.
In the past, workers might have gone on strike if negotiations were delayed for so long. But under the terms of their government bailouts, GM and Chrysler workers were forbidden to strike over wages during this round of talks.
These were the first negotiations for Chrysler since Italian automaker Fiat SpA took over management of the company. Fiat was given a 20 percent stake in Chrysler by the U.S. government in exchange for management expertise and technology. The Italian automaker has since raised its stake to more than 50 percent
Marchionne, who is also Fiat's boss, has been tough on Fiat's Italian unions, challenging the Italian way of negotiating new contracts and seeking plant-by-plant deals in a bid for more flexible work rules instead of the traditional national contracts. In the process, Marchionne has run up against resistance from a metalworkers union, which plans a one-day strike at all Fiat plants on Oct. 21.
But he is also winning accolades for turning around Chrysler's finances and putting out a string of well-received products like the Chrysler 200 sedan and Jeep Grand Cherokee. Fiat shares rose 7.8 percent Wednesday.
Chrysler hasn't made an annual profit since 2005. The company earned $116 million in the first quarter, its first quarterly net profit in five years. But it lost $370 million in the second quarter, mostly because of charges for refinancing debt.
Chrysler expects to earn $200 million to $500 million this year, excluding the debt charges. But the company is earning only a fraction of what its Detroit rivals are. Ford reported a profit of $6.6 billion last year, while GM earned $4.7 billion.
Matt Jarvis, a union leader from Local 685 in Kokomo, Ind., said some workers may be disappointed by the size of the signing bonus. But he expects the agreement will pass because Chrysler's near-collapse two years ago is still fresh in workers' minds.
"With the economy the way it is and the status of the company the way it is, it was good we were able to maintain what we had," Jarvis said.