The Chrysler Group maker of through its negotiators has officially started negotiations with the United Auto Workers today as reported by the Chronicle Journal. This negation is very important since it will determine the survival of Detroit's three automakers.
Actually talks between the Detroit's three automakers (namely Ford, Chrysler, and General Motors) and the United Auto Workers have been underway for months but because of some unresolved issues they have not been able to come up with an agreement that would be acceptable to all parties.
The officials of all three automakers have said that they need to have the same labor cost parity with their Japanese rivals mainly Toyota and Honda in order to regain financial health. According to studies the Detroit automakers spend $2,000 more per vehicles as compared to their Japanese automaker rivals with much of the cost attributed to labor expense.
Whether the companies will get the deal that they want is yet to be seen and would largely depends on the outcome of the negotiations. However UAW President Ron Gettelfinger has already said in advanced that the union will not go into the talks in a concessionary mode.
But of course it can be remembered that United Auto Workers have previously agreed on deals that in the past are considered unthinkable or non-negotiable like for instance the health concessions that were given to Ford and General Motors last 2005 and let us not forget that the UAW has also consented to buyout and early retirement packages that have resulted to the cutting of thousands of jobs.
And just last month UAW has agreed to lower wages at struggling parts maker Delphi in exchange for an assurance that jobs at some plants would remain.
Ford, GM, and Chrysler will be working to cut about $25 to $30 an hour labor cost which they claim is the disparity that they have with their Japanese rivals.
According to Ford's annual report it has paid at an average $70.51 an hour in wages, pension, and health care costs for hourly workers last year. On the other hand General Motors' annual reports show that its labor costs average reaches $73.26 an hour while that of Chrysler Group's reaches an average labor cost of $73.86.
The three Detroit-based automakers will be working together to urge UAW to reduce costs to about $48 an hour which is about the average hourly cost incurred by their Japanese rivals Toyota, Nissan, and Honda.
Last year, Detroit's former big three automakers have lost a combined $15 billion and despite the fact that General Motors is starting to recover, it is still continuously losing cash in North America.
The negotiations between Chrysler and UAW will proceed at the automaker's headquarters in Auburn Hills. And for Monday the same negotiation will push through but this time with Ford and General Motors. The national contract between UAW and the Detroit former big three will expire on September 14, 2007.
