U.S. automaker Chrysler LLC showed signs of progress with its unionized workers in its battle to stay alive on Sunday with just days left to complete deals to slash labor and debt costs or face bankruptcy.
No. 1 U.S. automaker General Motors Corp
Chrysler -- 80 percent controlled by private-equity firm Cerberus Capital Management LP
Failure to meet those goals could shut off access to U.S. government aid for Chrysler, leaving it facing potential liquidation.
In a first significant step toward meeting those goals, the Canadian Auto Workers union on Sunday ratified a new collective agreement with the automaker that will save Chrysler about C$240 million ($198 million) annually.
The union said its members voted 87 percent in favor of the new agreement. Chrysler has 8,000 unionized workers in Canada.
Our members understand better than anyone the current turmoil of the domestic auto industry, said CAW President Ken Lewenza. The high acceptance of this agreement is a recognition that although workers did not cause this crisis, we all have an interest in maintaining good jobs and ensuring the auto industry remains central to the overall Canadian economy.
The United Auto Workers union announced later it had also reached a tentative agreement with Chrysler, Fiat and the U.S. government on further concessions to a contract and a healthcare trust agreed with the automaker in 2007.
The UAW said that deal must be ratified by Wednesday and meets conditions mandated by the U.S. Treasury as part of an emergency loan program for Chrysler.
The patience, resolve and determination of UAW members in these difficult times is extraordinary, and has made it possible for us to reach the agreement we will present to our membership, UAW President Ron Gettelfinger said in a statement.
The UAW represents about 26,800 Chrysler workers in the United States. The company also has a contract buyout offer on the table for those workers that expires on Monday.
FIAT, CREDITORS NEXT
Chrysler said the UAW agreement should provide the framework for competitiveness and help the automaker to continue to pursue a partnership with Fiat.
Fiat representatives could not be reached for comment.
In an interview with the Fox News Sunday program Larry Summers, senior economic adviser to President Obama and co-leader of the autos task force, said there had been some progress made in talks to save Chrysler.
There are some issues that have been worked out and some issues that remain to be worked out, Summers said, without providing specifics.
The U.S. Treasury was expected to make a new debt restructuring offer to Chrysler's lenders, who are owed $6.9 billion, as soon as Monday, people briefed on the matter told Reuters.
A committee of Chrysler's first-lien lenders including JPMorgan Chase & Co
In response, Treasury offered the Chrysler lenders $1.5 billion in first-lien debt and a 5 percent equity stake in a restructured company. The terms of the Obama administration's latest offer were not immediately known, according to the people who spoke about the confidential discussions on condition that they not be named. A Treasury spokesman could not be immediately reached for comment.
Democrats representing Michigan -- the home state of Detroit's storied Big Three -- in the U.S. Congress, however, left little doubt over the weekend that they believed Chrysler's creditors must now make concessions following the announcement of the CAW deal on Friday.
The unions have come to the table over and over and over again and have taken huge cuts, said U.S. Senator Debbie Stabenow on the sidelines of a Michigan Democratic Party fund-raising event held in Detroit.
It is now incumbent on the creditors, in particular those that have taken public funds, to make some concessions and be a part of the solution, Stabenow said.
Facing its own June 1 deadline to come up with a plan for deeper and swifter cuts, GM announced on Sunday it would hold a news conference on Monday on its revised viability plan.
Sources briefed on the plan said GM would announce an accelerated restructuring plan that would involve additional plant closures and pave the way for a debt exchange for the struggling automaker.
U.S. auto sales have been driven to their lowest level in decades by the recession and the credit crunch, which has cut off access to auto loans for many consumers.
(Additional reporting by John McCrank, John Crawley, Kevin Krolicki and Poornima Gupta; Editing by Lincoln Feast)