Chrysler’s “Wildcard” In Labor Talks: Marchionne

Chrysler is coming off a strong year sales-wise, but negotiations with the Canadian Auto Workers will force the company to make a tactical decision; should Chrysler take a tough line in an effort to reduce costs, or look for a quick settlement in order to hold off a strike, maintaining their sales hot streak.

All of Chrysler’s minivans and rear-drive cars (such as the Chrysler 300, Dodge Charger and Dodge Challenger) are built in Canadian plants/ With 27 percent of its vehicles made in Canada, a strike would have serious ramifications. In its native market, the Dodge Grand Caravan is a top-selling nameplate,while in the U.S., Chrysler’s double-digit sales gain could be in jeopardy.  Chrysler is thought to be the automaker being target for a strike by the CAW, but other observers feel that the company will take a hard line in negotiations.

Chrysler’s potential “wildcard” (as industry observer put it) is CEO Sergio Marchionne. A report in The Globe and Mail claims that

Mr. Marchionne has been vocal about how wage rates at Chrysler’s Canadian operations are uncompetitive and how Canadian workers need to accept so-called two-tiered wages that provide new workers with pay that’s about half of what established workers earn. The $7-an-hour gap between Chrysler’s Canadian and American plants arises mainly from the wage structure in its U.S. factories. Newly-hired Chrysler workers in that country will earn between $15.78 (U.S.) and $19.28 an hour between 2011 and 2015, compared with $29.11 for established workers…The Canadian plants of the Detroit Three also pay lower wages to new employees, but after six years, those workers are brought up to regular union rates.

Chrysler’s Canadian operations are expected to deliver nearly a third of the company’s $3 billion profit in 2012 alone. Aside from vehicle assembly, a strike at the Toronto-area casting plant would put a major crimp in the company’s production pipeline. But with Chrysler looking to cut labor costs while getting workers to accept a profit sharing deal, it’s tough to predict how the showdown between Marchionne and CAW President Ken Lewenza will go down. If Chrysler is the first automaker to negotiate, the deal will likely set a precedent for future negotiations with the other two domestic automakers.