26 Apr 2009

Chrysler in tentative labour deal, GM draws govt aid

11:06 am on 26 April 2009

Chrysler won a round of concessions from its Canadian union on Friday while General Motors Corp soaked up $US2 billion more in US government aid and Ford Motor Co posted a narrower-than-expected loss.

Chrysler and GM are both operating under US government oversight and increasing pressure to win cost-saving agreements to avoid bankruptcy.

Under the tentative agreement with the Canadian Auto Workers union, Chrysler would leave hourly base pay intact but cut a range of benefits, including an annual Christmas bonus, and add flexibility to work rules that would make it easier for Chrysler to hire temporary workers.

Chrysler would also cut the third production shift at its Windsor, Ontario minivan plant.

The leadership of the Canadian union also agreed to work with Chrysler to create a trust fund to pay for retiree health care modeled on a similar fund that the United Auto Workers union approved for Chrysler's US workers in 2007.

Chrysler still owes over $US10 billion to the United Auto Workers for that trust fund and is seeking concessions from the US union that would allow it to pay stock, rather than cash, into the fund in in a restructured company.

Chrysler faces a 30 April deadline to reach agreements that would cut its debt, labor costs and cement an alliance with Italy's Fiat to satisfy the Obama administration.

General Motors battles on

The Obama administration has rejected a GM restructuring plan, ousted its chief executive and told the automaker to cut deeper and move faster if it wanted to continue to receive government support.

GM has been operating under $US13.4 billion of emergency government loans. The $US2 billion draw adds working capital for the automaker. The US Treasury could lend another $US3 billion to GM.

On Thursday, GM announced plans to slash production in North America over the next three months.

Ford shares rally

The struggles of Chrysler and GM overshadowed Ford's results on Friday.

Ford, which has not sought emergency government loans, posted a $US1.4 billion loss, was less than analysts had expected, and said it was on track to at least break even in 2011.

Ford shares rose as much as 20% at one point on Friday, closing up 11.36% at $5.00.

Chief Financial Officer Lewis Booth called the results encouraging and said the automaker expected the first quarter to have the worst cash burn of the year.