Chrysler and the United Auto Workers union began contract talks yesterday, formally opening the U.S. auto industry's effort to reduce labor costs that now give an advantage to Asian rivals.
UAW President Ron Gettelfinger and Chrysler Chief Executive Officer Thomas W. LaSorda shook hands to mark the start of bargaining in a ceremony at company headquarters in Auburn Hills, Mich. The talks are aimed at replacing a four-year contract expiring Sept. 14.
The negotiations offer a chance for Chrysler, GM and Ford to end or reduce losses that, combined, amounted to $15 billion last year.
"The union is under intense pressure," said John Casesa, managing partner of Casesa Strategic Advisors LLC in New York. "Its active membership is shrinking because its employers, the Big Three, are losing market share."
GM, Ford and Chrysler have seen their share of the U.S. market fall to just above 50 percent. UAW membership peaked at 1.5 million in 1979 and is now about a third of that size.
Chrysler is being sold to Cerberus Capital Management LP by DaimlerChrysler AG.
Chrysler, GM and Ford are losing U.S. sales to lower-cost Asian competitors led by Toyota Motor Corp. U.S. automakers say they pay $25 to $30 more per hour in wages and benefits for American factory workers than rivals.
Much of the cost gap is due to retiree health care obligations, amounting to a combined $114 billion at the end of December, that Chrysler, GM and Ford negotiated with the union.
The three automakers may try to reduce the obligations by creating an independent fund administered by the union, people familiar with preliminary negotiations have said.