UAW Ratifies Chrysler Contract: Union to own 55pct of automaker

Chrysler's 26,800 United Auto Workers voted overwhelmingly late Tuesday to concessions demanded by the U.S. Treasury in exchange for what will amount to a 55pct equity position in a reorganized Chrysler-Fiat company.

UAW President Ron Gettelfinger said the membership "responded by accepting an agreement that is painful for our active and retired workers, but which helps preserve U.S. manufacturing jobs and gives Chrysler a chance to survive." In essence the union will accept Chrysler stock in exchange for half the $10.6 billion obligation the automaker owes the UAW retiree health care trust.

Chrysler Vice Chairman and President Tom LaSorda said, "Today's vote enables us to continue our work to meet the conditions laid out by the U. S. Treasury Department." Still, it is unclear if the UAW's acquiescence will forestall federally mandated bankruptcy proceedings that the Obama administration could well announce this week. The other shoe is the completion of a merger agreement between Chrysler LLC and Italian automaker Fiat S.p.A. - a company also in negotiations to acquire Opel.

The Treasury's deadline for Chrysler to prove future viability is midnight Thursday. In his Tuesday night press conference, President Obama said a final decision is still in the air.

Chrysler's debt restructuring has been proceeding at flank speed this week with Canadian auto workers approving similar concessions Monday. In addition, four New York banks holding some $4.8 billion in secured loans have agreed to accept $2 billion for their paper. Another $2 billion in secured loans is still held by 40 lending institutions including banks and hedge funds.

As part of the UAW-Chrysler contract, the union will become the majority shareholder with a 55pct equity position. Fiat would have 35pct share with the other 10pct in the hands of secured creditors and the U. S. Government.

Fiat is expected to share engine technology valued at $8 billion that will create some 4,000 new UAW jobs. Meanwhile, hourly workers will lose several bonus programs, annual cost-of-living allowances, one holiday and some break time. Chrysler will pay a new $4.587 billion note to the UAW retiree health care trust and make increasing annual payments to the trust through 2023.