Chrysler, UAW contract talks near strike deadline

By Kevin Krolicki and Poornima Gupta

DETROIT (Reuters) - The United Auto Workers union and automaker Chrysler LLC remained locked in contract talks on Wednesday morning just hours before a strike deadline set by the union that could trigger the industry's second major work stoppage in as many weeks.

The UAW has warned it will go out on strike at 11 a.m. ET Wednesday if the two sides fail to agree on a new deal on wages and benefits for 49,000 U.S. factory workers and more than 77,000 families of Chrysler retirees.

Although few details of the contract talks have emerged since high-level negotiations resumed this weekend, the union has pushed for job security at the same time that Chrysler and its new private equity owner are trying to slash operating costs in areas such as health care.

A person briefed on the talks said slow progress was being made as of Wednesday morning with some key issues still unresolved.

Chrysler's larger rival General Motors Corp. reached its own cost-cutting deal on wages and benefits that ended a two-day strike on September 26.

That contract, which the UAW has said would be a framework for the Chrysler negotiations, is expected to be ratified by rank-and-file GM workers as soon as Wednesday.

The question of whether Chrysler can emerge from the UAW talks with a similar deal is seen as crucial to the success of the unprecedented bid by its new private equity owner, Cerberus Capital Management LLC, to turn around the automaker at a time of slack sales and intense competition.

Any deal -- or a UAW decision to send workers off the job -- would also have immediate implications for Ford Motor Co., which faces its own round of contract talks with the UAW once the union has finished with Chrysler.

On a combined basis, the three Detroit-based automakers lost some $15 billion last year and have argued they need deep concessions from the UAW in order to return to profitability and to keep significant production in the United States.

Analysts said Chrysler, which lost $680 million in 2006, is not in a position to grant the union the job guarantees at a time when Cerberus is pushing for a faster restructuring and scouring the automaker's future planned vehicle line-up.

"I would not be surprised to see a strike at Chrysler," IRN Inc analyst Erich Merkle said, adding Chrysler could weather a strike for as long as three weeks by running down inventory.

In a move intended to show that salaried workers are also making sacrifices, Chrysler told the union this week that it planned to cut about 1,500 more white-collar jobs than initially planned, a person briefed on the plan said.

That would nearly double the nonunion job-cuts that Chrysler announced in February as part of a restructuring plan aimed at returning the company to profitability by 2009.

The UAW and Chrysler declined to comment on the talks.

"MANY DIFFICULT ISSUES"