April 17, 2009 / 2:12 PM / in 9 years

Chrysler says survival in Canada depends on union

TORONTO (Reuters) - Chrysler Corp’s manufacturing operations in Canada will not survive in the long term without significant concessions from the Canadian Auto Workers union, the company said in a letter to employees on Friday.

<p>Canadian Auto Workers (CAW) union president Ken Lewenza speaks to the media in Toronto March 30, 2009. REUTERS/Mark Blinch</p>

The letter, from Chrysler Chief Executive Bob Nardelli and President Tom LaSorda, said Chrysler Canada must get its total labor costs down from C$76 ($62.80) an hour to Toyota Motor Corp’s Canadian labor rate of about C$57 an hour. It said the CAW’s refusal to cut labor costs to this level is jeopardizing the company’s future.

“Time is very short. We have only two weeks before a final decision must be made. Let me be clear: Our negotiations are about saving Chrysler Canada. We are coming down to the wire in the fight for our company’s survival -- and we need your support,” the letter said.

The governments of Canada and the United States have given Chrysler until the end of April to form a partnership with Italian carmaker Fiat SpA and to come up with an acceptable restructuring plan for the company to qualify for long-term aid.

The Canadian government said on Thursday that without a deal with the CAW, Chrysler Canada would not be viable.

The letter to employees said the company has made several proposals to the CAW to bring down costs without affecting base wages and pensions.

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

Some specific examples included reducing shift premiums, ending out-of-Ontario health care coverage, and eliminating life insurance for current and future employees.

Those ideas, and several more listed by the company, would bring costs down by C$8.24 an hour, Chrysler said.

“Unfortunately, the CAW has been opposed to these solutions -- however, we are open to alternative ideas. Next week, we plan to meet with the CAW to attempt to reach an agreement that is acceptable to Fiat and the Canadian government.”

So far, the CAW has put savings estimated to be around C$7.20 an hour on the table, based on the concession deal that the it signed with General Motors Corp last month.

GM said that deal would also permanently cut nearly C$1 billion from its books due to lower costs related to retirees.

The CAW said labor talks with Chrysler will restart on Monday.

The union has said talks between the two sides were put on hold at the beginning of this month as Chrysler worked on details with Fiat on their proposed alliance.

Fiat has also said the CAW must reduce labor costs -- by up to C$19 an hour -- if it is to partner with Chrysler.

($1=$1.21 Canadian)

Reporting by John McCrank; editing by Peter Galloway

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