Chrysler, UAW reach pact on concessions

DETROIT - Chrysler L.L.C. cleared a major hurdle to its survival yesterday when it reached a tentative deal for concessions with the United Auto Workers union.

The troubled automaker is just days from a Thursday U.S. government deadline to gain concessions from its unions and debt holders and form an alliance with Italy's Fiat S.p.A. or face almost certain liquidation.

The UAW announced the deal last night, calling the concessions painful, but saying the deal takes advantage of the Obama administration's giving Chrysler and its workers a second chance.

The administration in February rejected Chrysler's restructuring plan and said it could not stand on its own. The government gave the Auburn Hills, Mich., automaker until April 30 to make more cuts and ink a deal with Fiat.

The UAW deal is seen as a key piece in Chrysler's plan, and it is noteworthy that the UAW said Fiat was involved in the deal.

Chrysler has been living on $4 billion in U.S. government loans and is expected to get $500 million more. Without government help, it would have gone out of business around the first of this year.

After rejecting the initial plan, the government said the UAW and Canadian Auto Workers (CAW) unions must make further concessions, including requiring the UAW to take equity in the company for at least half of a $10.6 billion payment into a union-run trust that is to take over retiree health-care costs next year.

The CAW ratified a concessionary deal yesterday that union President Ken Lewenza said made labor costs competitive with nonunionized Toyota in Canada.

The UAW and CAW deals leave concessions from the holders of $6.9 billion in Chrysler secured debt and the alliance with Fiat as the remaining hurdles to Chrysler's qualifying for additional government aid.

Debt holders, the company, and the Treasury Department remain far apart in swapping much of the debt in the company for equity.

The UAW said its deal "meets the requirements of U.S. Treasury Department loans to the company" and includes changes to the health-care trust. UAW Vice President General Holliefield said ratification had to be completed by Wednesday.

"We recognize this has been a long ordeal for active and retired auto workers, and a time of great uncertainty," UAW President Ron Gettelfinger said in a statement.

"The patience, resolve, and determination of UAW members in these difficult times is extraordinary, and has made it possible for us to reach the agreement we will present to our membership."

General Motors Corp., racing to beat a June 1 U.S.-ordered deadline to avert bankruptcy, is scheduled to provide details today on its latest plan to cut costs and keep $15.4 billion in U.S. loans it needs to survive.

The largest U.S. automaker's plan includes details on the elimination of the Pontiac brand and reductions in plants and employees as well as initiatives to complete previous cuts as much as four years sooner, Bloomberg News reported, citing people briefed on the details.

The cuts may mean GM can be profitable in a U.S. market with overall sales of as few as 10 million cars and trucks, said the people, or 13 percent lower than previously projected.