CAW, UAW Deals Reached; Fiat Partnership Moving Forward

In a surprising turn of events, while things turn gloomy at General Motors, things are looking up at Chrysler. A string of positive news has made prospects for the company making a dramatic turnaround. Who would have thought? The Chrysler-Fiat partnership is moving forward as Fiat is seeing what it was looking for in terms of progress with bondholders and unions at Chrysler. 

One of the biggest things Chrysler has been involved in is an new labor agreement with the Canadian Auto Workers Union (CAW). Chrysler threatened to pull out of Canada if a competitive agreement couldn't be reached. The U.S government has said it will only offer loans to Chrysler if it partners with Fiat and reduces costs. In turn, Fiat says it will only partner (and then merge) with Chrysler if unions and bondholders agree to significant concessions.

In that respect, this is significant. The agreement reduces costs by $240 million a year. Surprising, I would think it would save more but it's better then nothing in helping Chrysler to achieve profitability right?

The agreement that been reached with the CAW was ratified yesterday, with 87% voting in favo. The deal cuts the hourly labor cost (but not pay rates, if I understand correctly) for Chrysler workers by about $19 an hour. In addition, a tentative agreement with the UAW, the CAW's American counterpart, has been reached. The UAW agreement is expected to cruise to ratification as well.  

This is big! Chrysler had to complete these to get another round of government funding. Now all the company has to do is reach an agreement with bondholders to cut debt (highly likely) and complete the Fiat partnership (again, highly likely). Daimler, which still was holding a 19.9 percent stake in the company, has agreed to write off it's stake as well as all loans. They will still contribute $200 million to Chrysler's pension plan from 2009 to 2011 as part of the deal.

With that, the government will deem the company "viable" and the combined Chrysler-Fiat company will receive an infusion of government funding. Voila! Chrysler is doing what it needs to survive. Let's see, Chrysler, Ford; GM? Some speculated only 2 out of the three would survive, but it looks like all 3 might, albeit in drastically different forms (in GM's case).