Uaw Needs to Give Chrysler Allowance - Gettelfinger

By: Zeke Gervis

UAW President Ron Gettelfinger said on June 18 that the union must find a way to give Chrysler health care allowances that are similar to those it gave to Ford Motor Co. as well as to General Motors Corp. in 2005.

In an interview on "The Paul W. Smith Show" on WJR-AM in Detroit, Gettelfinger said that they have been talking to Chrysler quite frequently and that they need to find a way to be able to fix the problem on the said matter now wherein Chrysler, maker of quality is in a quirky condition.

Two years ago, the UAW gave health care allowances to Ford and GM that will save the companies' billions of dollars. And because Chrysler was in its stronger financial condition at the time, the union refused to do the same for the group. The Chrysler Group, in 2005, made $1.8 billion. Unfortunately, due to the continuing steepness of gasoline prices, which rose to nearly $3 per gallon, buyer began avoiding its truck-based models. The company said that in 2006 it lost $618 million and $1.98 billion before interest and taxes during the first three months of this year.

In March, Gettelfinger said that the UAW had finished a review of Chrysler's finances in order to determine if the allowances are warranted. On Monday, he acknowledged that the group has a problem that needs to be resolved.

Roger Kerson, UAW's spokesman did not comment beyond the observations of Gettelfinger. Chrysler spokeswoman Michele Tinson also did not comment.

In advance of national contract talks with the Detroit Three that are set to formally start in July; both sides have been negotiating on the health care allowances. But as of now, there is still no health care agreement formulated.

Chrysler, Ford and GM have a total of more than $100 billion in long-term retiree health care costs, which analysts believe must be lessen.

Under the 2005 agreement with GM, hourly workers would contribute $1 for each hour in future pay increases to a new fund to be able to help pay for retirees' health coverage. The amount of $370 is the maximum amount that single retirees would pay every year in deductibles and fees. Majority of the retirees and all active hourly workers would have higher co-payments for prescription drugs.

Meanwhile, under the 2005 agreement with Ford, retired workers would pay monthly contributions, yearly deductibles and co-payments for some medical services up to a maximum of $370 per year for individuals and $752 for a family. Neither deductibles nor monthly contributions were asked from the hourly workers, but they must contribute a portion of future wage increases to a trust for future health care expenditures. Moreover, the agreement also raises workers' costs for prescription drugs as well as retirees' emergency room visits.

Forecasters believed that any allowance from the UAW on health costs was unlikely to be granted to Chrysler when the group was turning a profit. But the situation has now changed.

DaimlerChrysler AG in Germany, Chrysler's parent, made an announcement on May 14, 2007 pertaining to its selling of a controlling stake of its indisposed U.S. operations to private equity firm Cerberus Capital Management LP. And analysts have said that Cerberus will likely demand higher allowances from the union than Daimler would have.

The company's losses also pushed Chrysler to announce a restructuring plan that includes acquisitions as well as early retirement offers so it can accommodate 13,000 hourly and salaried jobs in the U.S. and in Canada by 2009.

Although Cerberus already has executives inside Chrysler's headquarters working with its leaders, the equity firm has said that it will leave the negotiations to Chrysler, which is being led by Chrysler Group President Tom LaSorda.

On the radio show, Gettelfinger said that he was pleased to say that the discussions he has had with Cerberus have been very professional. He added that the firm has a lot of confidence in Tom LaSorda's capabilities and that they have confidence in the process that has been founded.

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