The contract reached in October by the United Auto Workers (UAW) and Chrysler closely resembled the UAW’s earlier agreement with General Motors, cutting wages for new workers and moving health care into a union-run health plan in exchange for job guarantees and bonuses. Chrysler will front $11 billion to establish a health care trust fund.
As a result of the agreement, more than 11,000 Chrysler positions and more than 16,000 at GM will be labeled “noncore”—and their pay scales will be cut by about half. Chrysler will offer a “special attrition program,” i.e., buyouts to encourage existing workers to vacate those positions and make way for new, cheaper workers. In exchange, existing workers will receive guaranteed bonuses for up to four years.
The moves are expected to close a $25 to $30 per hour gap in labor costs between the car makers and their Japanese competitors.