Chrysler, UAW agree on new contract

The last of Detroit's carmakers has reached a deal with the United Auto Workers union.

Chrysler Group LLC and union negotiators agreed on a new four-year contract Wednesday that creates 2,100 new jobs. The company will also invest $4.5 billion in its plants under the deal, which covers 26,000 U.S. workers. Last year, the automaker announced plans to invest nearly $1.3 billion in its Kokomo transmission and casting factories.

The agreement is less generous than those given to General Motors Co. and Ford Motor Co. It includes a $3500 signing bonus and $1,000 in annual bonuses. Most Chrysler workers won't get yearly raises but could receive profit-sharing checks if the company makes money. The agreement also raises entry-level wages to $19.28 per hour by 2015. Chrysler's workers must ratify the agreement.

This is the first contract since Chrysler's government bailout and trip to bankruptcy court two years ago, and the first since management of the company was taken over by Italian automaker Fiat SpA.

"This agreement is the latest in a remarkable turnaround for Chrysler," UAW Vice President General Holiefield said in a statement.

Contract negotiations are closely watched because they set the pay and benefits for 112,000 factory workers at the Detroit Three as well as for thousands of employees at auto suppliers and at the non-unionized plants of foreign automakers such as Toyota Motor Co. and Volkswagen AG.

GM workers ratified their labor agreement last month. Ford workers are still voting.

Workers at GM are getting $5,000 bonuses. Ford workers stand to get $6,000 bonuses if they ratify their agreement. The less generous deal at Chrysler is partly because the company isn't as healthy as its rivals. GM and Ford both made billions of dollars last year, while Chrysler lost money.

Chrysler and the union hit a number of stumbling blocks during negotiations. As the original deadline to reach a new contract approached in mid-September, Chrysler CEO Sergio Marchionne sent an angry letter to UAW President Bob King, accusing him of failing to show up at a meeting to finalize the deal. The two sides eventually agreed to extend the contract to Oct. 19.

Late last week, three money issues separated the company and the union: The size of signing bonuses and profit-sharing checks and a cap on the number of entry-level workers that Chrysler could employ.

The union wanted to cap the number of workers at 25 percent in 2015, while Chrysler wanted no limit, said two people briefed on the talks who asked not to be identified because the negotiations are private.

Entry-level workers make $14 to $16 per hour, about half the wage of longtime union workers. The UAW wants the lower-paid workers to move up to the higher wage of around $29, while the company wants to control costs by paying more workers at the lower rate.

About 12 percent of Chrysler's 23,000 factory workers now are paid the lower wage, and the carmaker plans to hire thousands more over the next four years as it retools factories to make new models.

Ford agreed to a 20 percent cap, while GM's limit is 25 percent.

The UAW also represents 3,000 salaried workers such as engineers.

Marchionne has been tough on Fiat's Italian unions, challenging the Italian way of negotiating new contracts and seeking plant-by-plant deals in a bid for more flexible work rules instead of the traditional national contracts.

In the process, he has run up against resistance from the FIOM metalworkers union. FIOM is planning a one-day strike at all Fiat plants on Oct. 21.

Chrysler, which has been majority-owned by Italy's Fiat since July, is still struggling to make a profit. The company earned $116 million in the first quarter, its first quarterly net profit in five years. But it lost $370 million in the second quarter, mostly because of charges for refinancing debt.

Chrysler expects to earn $200 million to $500 million this year, excluding the debt charges. If so, it will be Chrysler's first profitable year on that basis since 2005. But the company is earning only a fraction of what its Detroit rivals are.

Ford reported a profit of $6.6 billion last year, while GM earned $4.7 billion.

Fiat was given a 20 percent stake in Chrysler by the U.S. government in exchange for management expertise and technology. The Italian automaker has since raised its stake to more than 50 percent.