Chrysler Shutdowns Not Meant to Blunt Impact of UAW Strike, Experts Say

Special Report

2007 UAW
Labor Talks

The timing of Chrysler LLC’s 6-plant inventory-related shutdown scheme is “less Machiavellian” than appearances suggest, labor experts say.

The United Auto Workers union has set a strike deadline of 11 a.m. Oct. 10 in its bid to extract a tentative contract from Chrysler. But in the days and hours leading up to this determination, Chrysler prepared to idle more than half its U.S. assembly network in an action attributed to inventory adjustment.

Chrysler confirmed last week that five of its 10 U.S. assembly plants would be down, starting today, for a total of eight weeks. A sixth plant in Sterling Heights, MI – home to Dodge Avenger and Chrysler Sebring midsize car production – also will be idled, Ward’s is told Monday, though the auto maker declines comment.

Chrysler Sebring production slated for break.

Under such circumstances, a strike would seem moot. Not so, says Berkeley labor studies professor Harley Shaiken.

“A strike under any circumstances winds up being disruptive and potentially costly,” Shaiken says, citing potential damage to Chrysler’s key stakeholders, from suppliers to dealers to workers.

“Both sides are aware that there are public positions,” he adds. “And both side are less Machiavellian in practice.”

The shutdowns “could be a ploy,” allows Richard Block, professor of labor and industrial relations at Michigan State University.

“But I don’t know if it’s going to make a difference in the UAW strategy,” he says, noting the die was cast Sept. 26 when the union reached a tentative agreement with General Motors Corp.

The critical element of that deal – currently subject to rank-and-file ratification by GM workers – was the auto maker’s promise of a one-time $35 billion investment in a fund to finance retiree health-care benefits.

The fund is expected to provide long-term relief from obligations that slowly are crippling GM’s competitiveness.

Meanwhile, Block says the UAW is benefiting from unprecedented background gleaned from its behind-the-scenes involvement in Chrysler’s acquisition by Cerberus Capital Management LP.

The private-equity firm acquired a controlling interest in Chrysler in a $7.4 billion deal with the former DaimlerChrylser AG. The resulting disclosures about the respective resources of Chrysler and Cerberus provide the UAW with “a sense of what (Chrysler) can do and should be able to do.”

In the GM deal, “the basic outlines are there,” Block says. “You pretty much know what you need. The UAW is saying to Chrysler, ‘Let’s get it done.’”

But Cerberus remains the wild card because it enters its first set of UAW talks in Detroit, albeit indirectly. Cerberus has said Chrysler’s management team, led in this case by President and Vice-Chairman Tom LaSorda, is in charge of the talks.

Says Shaiken: “Cerberus would be ill-advised to begin improvising at this stage. That’s why Tom LaSorda is there.”

LaSorda, who made his reputation as a manufacturing guru at General Motors Corp., comes from a union family. His father was a high-profile UAW leader in Canada and his siblings remain active today in the Canadian Auto Workers union.

Shaiken and Block say Chrysler’s plant shutdowns are likely what they appear to be: inventory-related actions.

Chrysler is sensitive to bloated stockpiles, having been stung last year by gluts of SUVs that overflowed into Midwest shipping yards and parking lots. The cause? Sales expectations failed to match an ambitious production schedule.

Last month, vehicle stocks were 15% below September 2006 levels.

A short strike, Block says, would have negligible effect on Chrysler, given its soft sales performance.

According to Ward’s data, deliveries were down 1.6% last month compared with September 2006.

“On the other hand, (a poor sales performance) also suggests the company is in trouble and doesn’t want a long strike,” Block adds.

Says Shaiken: “I expect to see a settlement.”

Union spokesman did not return calls from Ward’s.

Meanwhile, Chrysler refutes a report that suggests its planned $700 million investment in a new axle plant is under review. Construction is well under way at the site in Marysville, MI.

It will replace the auto maker’s Detroit axle plant, which was built in 1917.

The Marysville operation, part of a $3 billion investment in powertrain manufacturing, “continues to be the plan of record,” the Chrysler spokeswoman says.

“We’re doing infrastructure work and have started constructing water and sewer lines to the site,” says Dan Coss, Marysville director of community development. “(Chrysler) told us about 700 jobs would be created, and with the added jobs and extra tax base it’s going to be a boon to our community.

Adds city manager Jack Schumacher: “I think it’s (rumors of ceasing project) more to do with negotiations.”

The new plant is expected to produce 1.2 million axles annually after it goes online in 2010.

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