Chrysler LLC's recent decision to cut up to 10,000 factory jobs and slash production in North America tested the credibility of the automaker's new private equity owner, the head of the Canadian Auto Workers said on Tuesday.
Canadian Auto Workers (CAW) President Buzz Hargrove also said the newly private Chrysler was risking failure under Cerberus Capital Management by giving up market share in a bid to make itself more profitable.
There's absolutely no justification for what they've done. We've said to them that we think this is a stupid strategy, Hargrove told the Reuters Autos Summit in Detroit.
Chrysler announced earlier this month it would cut a third shift at its Brampton, Ontario plant as it phases out production of the Dodge Magnum wagon.
The automaker, which has said it needs to thin out its product line-up in order to restore profitability, is also shutting down production of the Chrysler Pacifica crossover in Canada.
Taken together, the two moves cost over 1,000 jobs for the Canadian auto union, which heads into contract negotiations with Chrysler, Ford Motor Co. and General Motors Corp next summer.
Chrysler also cut shifts at U.S. plants represented by the United Auto Workers union, which just ratified a new four-year labor pact with the struggling automaker.
Hargrove said he had been reassured by an initial meeting with Cerberus founder Stephen Feinberg shortly after the private equity firm bought Chrysler from former parent Daimler AG.
It seemed like he wanted to hold it forever. He said it was an American icon, Hargrove said of Feinberg.
But Hargrove said the recent production cuts by Chrysler were deeper than justified at Chrysler given the downturn in the overall market for U.S. auto sales.
The announcements they made right after the UAW settlement really tested their credibility, Hargrove said. There's a softening in the U.S. market which everyone's aware of, but it's nowhere near enough to justify what they did.
He added: This is about selling fewer vehicles and charging more to make money. It's not something we're opposed to -- making money -- but there's a lot of people that are going to be paying, and I'm not sure it's something they can do.
Without reform of U.S. and Canadian trade policy one of the major automakers would go under in their North American operations, he said.
Hargrove said the CAW, which represents about 35,000 active workers at Chrysler, GM and Ford would resist the kinds of concessions that the UAW gave the struggling industry in its just-completed round of contract talks.
Hargrove said the CAW would not accept a lower tier of wages for new hires -- a concession granted by the UAW -- or agree to allow the automakers to set up a trust fund for retiree health care costs.
By allowing new workers to be hired in at wages as low as $14 per hour, Hargrove said the new UAW contract undercut the auto industry's long-held tradition of providing middle-class pay for its blue-collar workers.
Who's going to be able to buy a car or a truck? This is the whole idea Henry Ford talked about when he started the $5 day, Hargrove said. You should be able to buy what you build, but you won't be able to.
Hargrove said he expected the Detroit automakers would point to the strong Canadian dollar as a competitive disadvantage for their operations there.
Will they raise it? Absolutely. They always raise every argument that gives them an advantage so I would be quite shocked if they didn't, he said.
CAW assembly workers now average pay of $32 Canadian per hour, higher than their U.S. counterparts at $28 per hour after the Canadian dollar's recent rise.
The CAW will start negotiations with the three Detroit-based automakers in July 2008. The union's current contract expires on September 17, 2008.
(Reporting by Kevin Krolicki, Editing by Lincoln Feast)