April 25, 2009 / 3:57 AM / 8 years ago

Canadian union strikes tentative Chrysler deal

<p>Canadian Auto Workers (CAW) President Ken Lewenza speaks to the media regarding negotiations with Chrysler in Toronto, April 24, 2009. REUTERS/Mark Blinch</p>

TORONTO (Reuters) - The Canadian Auto Workers union and Chrysler Canada reached a tentative concession deal on Friday that would cut about C$19 ($15.70) an hour from labor costs in a bid to keep the struggling automaker from bankruptcy.

CAW president Ken Lewenza said the deal, if ratified, would save the company about C$240 million annually from cuts in benefits, time off, “legacy costs” and improved productivity, but not through lower base wages or reduced pensions.

“In our judgment we have done our job,” he said. “We have met the cost target not just by tightening our belts but by boosting productivity.”

The union said the cuts were demanded by the company’s potential strategic partner Fiat SpA, which said it would not consider aligning itself with Chrysler otherwise.

A partnership with the Italian car maker was one of the conditions put to Chrysler by the governments in Canada and the United States in order for it to receive billions of dollars in government loans needed to keep it running.

The company has until Thursday to complete deals with all its stakeholders and win government approval of its viability plan, or it will not receive the funding.

“The tentative agreement... helps move the company one step closer to a partnership with Fiat,” said Al Iacobelli, Chrysler’s chief bargainer and vice president of employee relations, in a statement.

Chrysler had warned the union that if it were forced to file for bankruptcy protection with no CAW agreement in place it would liquidate its Canadian operations, Lewenza told reporters.

With a deal, he said the company agreed to stand behind its Canadian plants in the event of a Chapter 11 filing in the United States and a Companies’ Creditors Arrangement Act filing in Canada and it would not ask for further CAW concessions.

“We are living to fight another day,” said Lewenza.

Union workers will vote on the deal, which would eliminate their Christmas bonuses and scratch their employee car purchase program, among other items, over the weekend.

The leadership of the CAW also agreed to work with Chrysler to create a trust fund to pay for retiree health care modeled on a similar fund that the United Auto Workers union approved for Chrysler’s U.S. workers in 2007.

Lewenza said the workers had been forced to negotiate with “a gun to our head” but later described the deal as “a victory considering what we’ve been through and the alternative and consequences that were in front of us if we didn’t get a collective agreement.”

MORE TO BE DONE

Announcement of the deal came on a day in which Canadian government officials, who have demanding concessions from the workers, said bankruptcy protection was an option for the company.

“Well, the preferred option is that there is no bankruptcy protection because the company (has become) viable and has reached a deal, in this case with Fiat, in order to move forward,” Industry Minister Tony Clement told reporters.

But he said the bankruptcy clearly remained an option, along with a complete wind-up of the company.

Clement later said in a statement that while the tentative CAW agreement was an important step toward achieving a restructured and viable Chrysler, “further work remains to be done.”

Finance Minister Jim Flaherty told Reuters in Washington that the Canadian, U.S. and Ontario governments were discussing providing the debtor-in-possession financing that would be needed in the event of bankruptcy protection.

The company, which is about 80 percent controlled by Cerberus Capital Management, still needs to gain concessions from the UAW, as well as its bond holders and other stakeholders.

Lewenza urged all Chrysler’s stakeholders, in both Canada and the United States, to “suck up your greed” and reach deals that would keep the company from having to file for protection.

Chrysler has about 9,400 workers in Canada, about 8,000 of whom are represented by the CAW at plants in Windsor, Brampton, and Toronto, Ontario.

($1=$1.21 Canadian)

Additional reporting by Louise Egan in Washington and Randall Palmer in Ottawa; Editing by Alex Richardson

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