Chrysler targets concessions from UAW, suppliers

Chrysler CEO Robert Nardelli delivers testimony about a proposed government bailout plan for the US auto industry at a hearing of the House Financial Services Committee on Capitol Hill in Washington, December 5, 2008.

DETROIT (Reuters) - Chrysler Chief Executive Bob Nardelli on Monday said the struggling automaker had begun talks with the United Auto Workers and was working to win concessions from the union, key suppliers and creditors.

Nardelli also said in an email to Chrysler employees that he had meet over the weekend at the automaker's Auburn Hills, Michigan headquarters with Fiat CEO Sergio Marchionne.

The meeting came less than a week after Marchionne agreed to swap access to Fiat's small-car platforms and development expertise for a 35-percent stake in Chrysler.

"This was a very positive meeting," Nardelli said. "This potential alliance would give us access to substantially all Fiat group vehicle platforms, which would complement our current product lineup with fuel-efficient, environmentally friendly small cars and powertrain technology."

Chrysler, which is owned by Cerberus Capital Management, has been given $4 billion in emergency loans from the U.S. government and has asked for another $3 billion in order to ride out a steep decline in U.S. auto sales.

As a condition for its federal bailout, Chrysler and its larger rival General Motors Corp (GM.N) have until February 17 to detail a turnaround plan intended to make them viable through cost-saving deals with the UAW and creditors.

"Progress is being made in our discussions with every constituent group, and we're especially pleased with the cooperative and productive discussions taking place," Nardelli said in his email to employees.

Although GM has been active in briefing financial analysts on its progress in preparing a restructuring plan in recent days, privately Chrysler had kept a lower profile.

Nardelli said Chrysler representatives had begun talks with the UAW and praised union leadership for giving up a contract provision known as the "jobs bank" that had guaranteed wages for auto workers even after their jobs had been eliminated.

TURNING UAW INTO A SHAREHOLDER

Chrysler, Nardelli said, is seeking to contribute stock in a restructured company to a UAW-affiliated health care fund instead of cash, a concession GM also is seeking.

UAW President Ron Gettelfinger has spoken against those terms, which would shift more risk and potentially higher costs to blue-collar retirees.

Nardelli also said Chrysler's remaining white-collar workers would share in the sacrifice. Salary merit increases and matching payments into 401(k) retirement funds have been suspended, he said.

Nardelli also said "key executives" had signed waivers prohibiting them from being paid bonuses or severance payments known as "golden parachutes."

The issue is a sensitive one for Nardelli, who was named to the Chrysler top job by Cerberus immediately after it bought an 80.1-percent stake in the automaker from Germany's Daimler AG (DAIGn.DE) in 2007. The choice was notable in part because of the controversy surrounding Nardelli's $210 million severance package from his prior post as the head of Home Depot.

Without specifying a target, Nardelli said Chrysler was seeking to reduce the $7 billion in loans that financed the acquisition of Chrysler and would offer equity in exchange.

Nardelli said Chrysler also was looking to reduce the number of its dealers and would review both dealer payment terms and their profit margins on new vehicles.

Nardelli said Chrysler was seeking price reductions from all of its suppliers and would not accept suppliers passing on higher material costs for 2009.

The push for lower costs comes at a sensitive time for cash-strapped auto suppliers who are struggling at a time when Chrysler, GM and Ford Motor Co (F.N) have slashed production.

Daimler and Cerberus had been in talks last year about a deal for the German automaker to sell or transfer its remaining stake in Chrysler, which it now values at zero.

Those talks broke down after Cerberus demanded a rebate of over $7 billion from Daimler and accused the German automaker of mismanaging the company before the deal closed in 2007.

In his letter, Nardelli indicated that the two sides could still reach an agreement. "Cerberus will work with Daimler AG to resolve their ownership stake," he said.

(Reporting by Kevin Krolicki, editing by Carol Bishopric)