CAW gives ground in attempt to save Chrysler

The Canadian Auto Workers union has surrendered years of hard-won gains to keep the operations of Chrysler Canada Inc. from being liquidated in a likely bankruptcy protection filing by the troubled auto maker.

The groundbreaking concessions came after four days of tense, multiparty negotiations that involved the federal and Ontario governments and Italian auto maker Fiat SpA, would-be saviour of Chrysler LLC.

The concessions, including cuts to health-care coverage, vacations, bonuses, incentives to buy Chrysler vehicles and other benefits, met the company's target of reducing labour costs by $19 an hour, CAW president Ken Lewenza said last night at a news conference at a Toronto hotel.

The alternative the company presented to the union was that its three Canadian manufacturing plants would be hived off into the portion of Chrysler LLC assets that will be liquidated if there is a bankruptcy filing, Mr. Lewenza said. Chrysler LLC is expected to seek protection under Chapter 11 of the U.S. bankruptcy code next week.

"I think it's a victory, considering what we've been through and considering the alternative and the consequences that were ahead of us if we didn't get a deal," Mr. Lewenza told reporters.

The company told the union that the agreement could help stave off bankruptcy protection of Chrysler Canada when a new restructuring plan is submitted to the federal and Ontario governments next week.

The union gave up benefits, but preserved base wages and pensions.

It also agreed to participate in a trust fund to manage Chrysler Canada's health-care costs, the first such fund of its kind in Canada.

Negotiations over creating that fund delayed the agreement by a full day, union officials said last night.

The union endured "the most tortuous and unfair process anyone can imagine," Mr. Lewenza said, while blasting governments and the company for "ganging up" on auto workers.

"Most importantly, we are living to fight another day," he added.

The deal on its own won't keep Chrysler Canada out of bankruptcy protection. The two governments are insisting that Chrysler Canada's parent company reach a deal with Fiat that will preserve large parts of the U.S. operations of the third-largest Detroit auto maker.

In addition, a tax dispute between Chrysler Canada and the Canada Revenue Agency dating back to when the company was part of DaimlerChrysler AG is also a sticking point in any Canadian deal to provide Chrysler Canada with more money.

Chrysler LLC co-vice-chairman Tom LaSorda said last month the firm would shut its operations here if it didn't get a union deal that reduced costs and a letter from Ottawa saying Chrysler wouldn't have to put up any more cash collateral in the tax dispute.

There has been "work on that front" a federal official said of the tax dispute, but Canada Revenue would not provide such a blanket assurance.

But the CAW deal does meet a key demand of the two governments, which are keeping the company alive with a loan of $1-billion. The Canadian governments now require that Chrysler LLC complete an alliance with Italian auto maker Fiat SpA before offering additional loans aimed at financing the company's move to profitability.

The union surrendered major concessions on benefits, including many - such as cutting Christmas bonuses - that were given up in a GM deal six weeks ago. In addition, the employee car purchase plan and the tuition rebate process were cut, effective January, 2010, as was semi-private hospital coverage. Paid breaks were reduced to 40 minutes a day. The third shift at the Windsor assembly plant will be eliminated in August.

Mr. Lewenza called on U.S. auto negotiators to get a deal done and "suck up your greed and make a deal to avoid going into Chapter 11 [bankruptcy]."

With heavy pressure from the Obama administration, Chrysler and the United Auto Workers in the United States are reportedly close to a deal that would pave the way for an orderly bankruptcy filing there.

Mr. Lewenza said the new deal will be guaranteed if Chrysler LLC files for bankruptcy or merges with Fiat.

"So the Canadian plants will survive, even if Chapter 11 is inevitable," he said. "We will work with Fiat if, in fact, the merger becomes a reality, which we hope it does."

Federal and Ontario officials said they are increasingly hopeful that Chrysler could avoid a bankruptcy filing in Canada, even if the parent company seeks court-protection to deal with U.S. creditors.

With a report from Josh Wingrove in Toronto