GM contract too expensive for Chrysler, too cheap for Ford
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GM Contract is expensive for Chrysler but it is too Cheap for Ford
DETROIT -- The UAW's tentative contract at General Motors is too rich for Chrysler Group and too lean for the rank-and-file at Ford Motor Co., sources at the companies say.
That means the GM contract is unlikely to provide a pattern for contracts at Ford and Chrysler.
A source familiar with negotiations said the GM tentative contract is too expensive for Chrysler. And Chrysler CEO Sergio Marchionne said as much today at the opening of a dealership in Turin, Italy.
Marchionne -- quoted by an Italian wire service, Agenzia Giornalistica Italia -- said Chrysler and GM started these negotiations at different places financially.
"GM and us are in two completely different positions," Marchionne said. "We were born in 2009, into very different situations. I had an 8-billion euro debt, they had a 50-billion dollar capital. Two very different situations."
Marchionne is scheduled to return to the bargaining table on Tuesday and said he is confident a deal will be reached "quickly." He declined to elaborate further on the talks.
The source said Chrysler was subject to an interest rate of 19.7 percent on its government loan, which was repaid earlier this year. The debt service on the government loans cost Chrysler about $2 billion over the two years, the source said.
Chrysler is also far less profitable and is sitting on a smaller pile of cash than its cross-town rivals - a situation that makes it harder to match the GM deal.
Chrysler, for example, wants a smaller signing bonus than the $5,000 signing bonus GM agreed to pay its 48,000 workers under the tentative agreement.
Company negotiators also have vowed not to pay a penny more than the average $49 an hour in wages and benefits Chrysler provides now to its hourly workers, regardless of what the UAW negotiated at GM.
So if the UAW wants a $2-$3 an hour increase for entry-level workers won at GM, the union will have to subtract that cost from somewhere else, such as health care spending.
"You can't put the same menu on the table for the two companies," the source said.
GM's average 'all-in' compensation is $56 an hour, while it's $58 an hour at Ford.
UAW President Bob King has scheduled a press conference in Detroit on Tuesday to discuss the tentative GM accord.
The GM deal is favorable to the company because it does not raise fixed costs in the form of wage increases or a restoration of cost-of-living allowances, according to analysts.
Instead, the UAW agreed to the signing bonus and an enhanced profit-sharing plan that is expected to provide more consistent payouts to hourly workers than the current plan pegged to U.S. profitability only. The new plan is pegged to global profitability.
Morgan Stanley analyst Adam Jonas wrote in a report to investors Monday that GM's labor spending won't be significantly increased by the tentative contract.
"GM's labor priorities are to keep the North American break-even low and to protect the balance sheet," Jonas wrote. "We believe both have been achieved."
Ford auto worker Gary Walkowicz said GM's tentative contract does not recover nearly enough of the $7,000 to $30,000 in concessions made by Ford hourly workers since 2007.
Based on reported details of the GM pact, a contract with those terms at Ford would not be ratified by the rank-and-file who want a pay raise and restoration of a COLA, he said.
"I don't think it would fly here," said Walkowicz, who is a UAW committee man at the Dearborn Truckplant in Michigan, where Ford F-150 pickups are assembled.
Walkowicz said a $5,000 signing bonus would be spread over four years. At $1,250 a year, that's an increase of just 2 percent of a straight-time wage for hourly workers of $58,240. In contrast, a 3 percent COLA that compounds annually would yield $18,000 in additional money to workers over the four years, he said.
"That $5,000 is a drop in the bucket to what we've lost," Walkowicz said.
A Ford source familiar with negotiations said the average Ford hourly worker will earn about $75,000 in 2011 when overtime is factored in, along with a $5,000 profit-sharing bonus and a potential $5,000 signing bonus.
That means the GM contract is unlikely to provide a pattern for contracts at Ford and Chrysler.
A source familiar with negotiations said the GM tentative contract is too expensive for Chrysler. And Chrysler CEO Sergio Marchionne said as much today at the opening of a dealership in Turin, Italy.
Marchionne -- quoted by an Italian wire service, Agenzia Giornalistica Italia -- said Chrysler and GM started these negotiations at different places financially.
"GM and us are in two completely different positions," Marchionne said. "We were born in 2009, into very different situations. I had an 8-billion euro debt, they had a 50-billion dollar capital. Two very different situations."
Marchionne is scheduled to return to the bargaining table on Tuesday and said he is confident a deal will be reached "quickly." He declined to elaborate further on the talks.
The source said Chrysler was subject to an interest rate of 19.7 percent on its government loan, which was repaid earlier this year. The debt service on the government loans cost Chrysler about $2 billion over the two years, the source said.
Chrysler is also far less profitable and is sitting on a smaller pile of cash than its cross-town rivals - a situation that makes it harder to match the GM deal.
Chrysler, for example, wants a smaller signing bonus than the $5,000 signing bonus GM agreed to pay its 48,000 workers under the tentative agreement.
Company negotiators also have vowed not to pay a penny more than the average $49 an hour in wages and benefits Chrysler provides now to its hourly workers, regardless of what the UAW negotiated at GM.
So if the UAW wants a $2-$3 an hour increase for entry-level workers won at GM, the union will have to subtract that cost from somewhere else, such as health care spending.
"You can't put the same menu on the table for the two companies," the source said.
GM's average 'all-in' compensation is $56 an hour, while it's $58 an hour at Ford.
UAW President Bob King has scheduled a press conference in Detroit on Tuesday to discuss the tentative GM accord.
The GM deal is favorable to the company because it does not raise fixed costs in the form of wage increases or a restoration of cost-of-living allowances, according to analysts.
Instead, the UAW agreed to the signing bonus and an enhanced profit-sharing plan that is expected to provide more consistent payouts to hourly workers than the current plan pegged to U.S. profitability only. The new plan is pegged to global profitability.
Morgan Stanley analyst Adam Jonas wrote in a report to investors Monday that GM's labor spending won't be significantly increased by the tentative contract.
"GM's labor priorities are to keep the North American break-even low and to protect the balance sheet," Jonas wrote. "We believe both have been achieved."
Ford auto worker Gary Walkowicz said GM's tentative contract does not recover nearly enough of the $7,000 to $30,000 in concessions made by Ford hourly workers since 2007.
Based on reported details of the GM pact, a contract with those terms at Ford would not be ratified by the rank-and-file who want a pay raise and restoration of a COLA, he said.
"I don't think it would fly here," said Walkowicz, who is a UAW committee man at the Dearborn Truckplant in Michigan, where Ford F-150 pickups are assembled.
Walkowicz said a $5,000 signing bonus would be spread over four years. At $1,250 a year, that's an increase of just 2 percent of a straight-time wage for hourly workers of $58,240. In contrast, a 3 percent COLA that compounds annually would yield $18,000 in additional money to workers over the four years, he said.
"That $5,000 is a drop in the bucket to what we've lost," Walkowicz said.
A Ford source familiar with negotiations said the average Ford hourly worker will earn about $75,000 in 2011 when overtime is factored in, along with a $5,000 profit-sharing bonus and a potential $5,000 signing bonus.
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