Fiat CEO plays hardball with Chrysler
TORONTO — The chief executive of Italian automaker Fiat SpA is turning the screws on Chrysler LLC factory workers in Canada and the United States, saying Fiat will walk away from a planned commercial alliance with Chrysler if labour unions do not agree to sizable pay cuts.
The remarks by Sergio Marchionne, published Wednesday in a Toronto newspaper, add more uncertainty to Chrysler’s already unstable future.
U.S. President Barack Obama has ordered Chrysler to finalize a partnership with Fiat by the end of April or face restructuring in bankruptcy court. Chrysler may not survive a bankruptcy filing and its assets may eventually be picked up by other companies or simply shut down, Moody’s Economy.com chief economist Mark Zandi said in an interview.
Fiat is ready to nix the partnership with Chrysler and find another ally if the Canadian Auto Workers (CAW) union and its sister union in the United States, the United Auto Workers, do not agree to match the lower labour costs of Japanese and German plants in both countries, according to the report.
“Absolutely, we are prepared to walk. There is no doubt in my mind,” Marchionne was quoted as saying. “We cannot commit to this organization unless we see light at the end of the tunnel.”
He said workers have to rid themselves of the “historical entitlement” mindset if Chrysler is to have any chance of staying alive.
“The dialogue is out of sync. I think they need to see what state the industry is in. Canada and the U.S. are coming in as the lender of last resort,” Marchionne was quoted as saying. “No one else would put a dollar in. This is the worst condemnation of the viability of this business.”
The CAW said it expects to resume negotiations with Chrysler on a new labour contract. Talks have been on the back burner since early April as the focus shifted to the Fiat alliance. On Wednesday, CAW president Ken Lewenza said Marchionne is “unfairly targeting” Canadian labour costs.
“It’s very unfortunate that he is looking at labour costs as an issue,” he said. “We’re a very small piece of the puzzle. The role of bondholders, retiree health-care costs in the U.S., is more significant in terms of the need to turn this company around than labour rates in Canada.”
Chrysler is after a $19 per hour cost from CAW workers to put its labour costs on par with manufacturing operations of Toyota Motor Corp. in Canada. The union has balked at that demand.
Marchionne said there is only a 50/50 chance the alliance with Chrysler will go through. A lack of progress on labour negotiations in Canada and the U.S. is hampering a deal, he said.
The U.S. government has already given Chrysler $4 billion US in loans and has said it will consider giving the automaker another $6-billion loan to fund its merger with Fiat if it can strike the deal by the end of the month.
Under the proposed alliance, Fiat, a maker of popular small cars, would transfer its small car and engine technology to truck-heavy Chrysler, while Chrysler would give Fiat access to its North American assembly capacity. Fiat would take an initial 20 per cent stake in Chrysler with the option of boosting it to 49 per cent.