Fiat CEO warns he will ditch talks with Chrysler if union doesn’t cut labor costs

Posted: Apr 15, 2009
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Fiat’s CEO Sergio Marchionne told the Globe and Mail today that he would ditch the idea of partnership unless Chrysler’s unions agreed to cut labor costs. He told the Toronto newspaper that a partnership between Fiat and Chrysler had a 50-50 chance of succeeding because of the lack of progress in talks with union leaders – and that includes Canadian unions who he said were especially resistant.

“Absolutely we are prepared to walk. There is no doubt in my mind,” Marchionne said.

Marchionne said that unions had to agree to match low labor costs of plants that are ran by Japanese and German automakers in the U.S. and Canada.

Chrysler and Fiat have until April 30 to reach a deal otherwise the Auburn Hills automaker will go into bankruptcy. If a deal is reached, the U.S. government will provide $6 billion in additional funding. 

Marchinonne said that he would do whatever it takes to save Chrysler, even if he has to become chief executive of the company himself.

“Fundamentally, that’s possible, but the title isn’t important,” he said. “What’s important is that they hear me. It’s possible that I will have to divide my time between running Fiat and running Chrysler.”

- By: Omar Rana

Source: CNNMoney


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  • GMfan87

    its about time someone layed down the law on those greedy unions…

  • Ivan Gutierrez

    Hmm, does anyone think that the unions will really make such large sacrifices? I don't know the numbers but I would assume in order to meet Japanese and German labor costs there would have to be a significant drop in salaries. Zermatt, I need your help on this one.

  • zermatt

    Ivan,

    Salaries are just one component to the cost of labor that has caused GM & Chrysler have problems with being competitive. The biggest issue arises from the benefits for the union workers. “Gold Plated” doesn't begin to describe the level opulence that the heath care and retirement plans represent. I am not aware of any other industry (besides Congress) that has benefits so rich. That is compounded by the huge number of retirees (and they retire young in the auto industry) that get full medical benefits from the manufacturers. In GM's case these legacy costs are a significant portion of the cost of a car.

    Another other component of the UAW equation relates to work rules. The UAW has stood in the way of technology and other issues that relate to efficiency or operational cost savings. You need to know that the UAW has not abolished Job Banks, they have only suspended them for the time being.

    I would expect that Fiat is looking for a blended cost per hour that brings it in line with the Japanese and German manufacturers. That will not be easy to do without radically altering the terms of the benefits to retirees or putting it on the backs of the current workforce in the form of very low hourly wages and reduced future benefits.

    I get the feeling that the UAW has high expectations that the President and Congress are going have their backs in this gun fight. Time will tell, but the time line for Chrysler is much shorter than it is for GM.

  • Ivan Gutierrez

    Your right “Gold Plated” isn't enough, perhaps “Diamond Encrusted” would be better. Anyways thanks for your insight. It is, as always, greatly appreciated.

  • GMfan87

    well said

  • kabluey

    I believe that Fiat will walk and there will be no alliance.

  • Ivan Gutierrez

    Hmm, does anyone think that the unions will really make such large sacrifices? I don't know the numbers but I would assume in order to meet Japanese and German labor costs there would have to be a significant drop in salaries. Zermatt, I need your help on this one.

  • zermatt

    Ivan,

    Salaries are just one component to the cost of labor that has caused GM & Chrysler have problems with being competitive. The biggest issue arises from the benefits for the union workers. “Gold Plated” doesn't begin to describe the level opulence that the heath care and retirement plans represent. I am not aware of any other industry (besides Congress) that has benefits so rich. That is compounded by the huge number of retirees (and they retire young in the auto industry) that get full medical benefits from the manufacturers. In GM's case these legacy costs are a significant portion of the cost of a car.

    Another other component of the UAW equation relates to work rules. The UAW has stood in the way of technology and other issues that relate to efficiency or operational cost savings. You need to know that the UAW has not abolished Job Banks, they have only suspended them for the time being.

    I would expect that Fiat is looking for a blended cost per hour that brings it in line with the Japanese and German manufacturers. That will not be easy to do without radically altering the terms of the benefits to retirees or putting it on the backs of the current workforce in the form of very low hourly wages and reduced future benefits.

    I get the feeling that the UAW has high expectations that the President and Congress are going have their backs in this gun fight. Time will tell, but the time line for Chrysler is much shorter than it is for GM.

  • Ivan Gutierrez

    Your right “Gold Plated” isn't enough, perhaps “Diamond Encrusted” would be better. Anyways thanks for your insight. It is, as always, greatly appreciated.

  • GMfan87

    well said

  • kabluey

    I believe that Fiat will walk and there will be no alliance.