UAW strikes Chrysler plants as talks break down

By Kevin Krolicki and David Bailey

DETROIT (Reuters) - Some 37,000 workers represented by the United Auto Workers union walked out on strike against Chrysler LLC on Wednesday, shuttering all but five of its U.S. plants in the first strike against the automaker in a decade.

The strike marked the second work stoppage called by the UAW in as many weeks against an American automaker and came after contract talks broke down over the issues of job security and cost-cutting.

The union settled a two-day strike with General Motors Corp late last month with a tentative contract expected to be ratified as soon as Wednesday.

But analysts said the standoff between the UAW and Chrysler reflected a deeper uncertainty as the struggling No. 3 U.S. automaker pushes for operational savings under the ownership of Cerberus Capital Management, a private equity firm with the potential to challenge Detroit's established labor practices.

Forbes.com reported that the two sides had reached a tentative agreement less than an hour after the strike began and that UAW President Ron Gettelfinger was reviewing the terms.

Chrysler declined comment. The UAW could not be reached.

The parties broke off talks and had not returned to the bargaining table at Chrysler's Auburn Hills, Michigan, headquarters by early afternoon after a failed marathon bargaining session that had run more than 25 hours.

The UAW excluded five U.S. assembly plants from its strike action. Those plants had already been idled by Chrysler in a bid to reduce excess inventory.

For that reason, the UAW's tactical decision to strike only 20 of Chrysler's 25 major facilities was intended to make the work stoppage more costly for Cerberus. The move meant Chrysler could have to continue paying wages and benefits for almost 12,000 workers at the idled plants -- about a quarter of its blue-collar work force.

UAW-represented workers who are laid off collect nearly full wages that average over $60,000 per year at Chrysler. By contrast, striking workers collect only $200 per week from the union's strike fund.

"My impression is that the two sides are further apart than they were in the case of GM, and that Chrysler is well-prepared for a strike," said David Healy, analyst with Burnham Securities. "It could go for a while."

'SACRIFICIAL LAMB'?

Shortly after the union's 11 a.m. strike deadline, UAW-represented workers began streaming out of factories and other facilities as the first strike against Chrysler since 1997 began.

Several workers said they were ready to stay off the job for a long time in order to win guarantees of job security from Cerberus, a Wall Street wild card in Detroit's labor politics.

"The American labor force is the sacrificial lamb for the global economy," said Michael Garner, 51, a pipe-fitter walking a picket line at a Chrysler stamping plant in Warren, Michigan.

The UAW kept three Detroit-area assembly plants outside the strike: Conner Avenue, Jefferson North and Warren Truck. It also excluded plants in Belvidere, Illinois, and Newark, Delaware.

All five facilities make vehicles with excess inventory, such as Dodge Durango and Ram 1500 trucks, and had been previously idled by Chrysler.

Even so, the impact of the strike spilled over to other sectors and to Chrysler plants outside the United States.

The Teamsters union said its members would not haul Chrysler vehicles during the strike.

Parts shortages also forced the closure on Wednesday of Chrysler's Windsor, Ontario plant, which has been producing an all-new version of Chrysler's highly-touted minivans since late August.

The UAW had warned earlier this week that it would go out on strike if the two sides failed 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.

THE END OF PATTERN BARGAINING?

The strike comes after the union pushed for job security in the negotiations at the same time that Chrysler and Cerberus looked to slash operating costs in areas such as health care.

The UAW denied Chrysler a concessionary deal on retiree health care in 2005 that it offered GM and Ford. Chrysler has offered that a similar concession could save it some $300 million per year.

GM reached its own cost-cutting deal with the UAW that ended a two-day strike on September 26. But analysts said Chrysler's position appeared tougher for the UAW.

Under Cerberus, Chrysler has focused on improving cash flow through asset sales and has been reluctant to commit to future U.S. investment since its product plans remain under review.

"I think what this is evidence of that for the first time the economic fortunes of the individual Big Three are very different, so it's hard to do the pattern bargaining thing," said Kim Korth, president of industry tracking firm IRN Inc.

Analysts said Chrysler could absorb a strike of several weeks because of its inventory of Chrysler, Jeep and Dodge vehicles. The company had an inventory of over 450,000 vehicles at the end of September, equivalent to about 71 days' supply.

Chrysler was taken private by Cerberus Capital Management in August in a $7.4-billion deal. Former parent Daimler AG retains a stake of about 20 percent.

Chrysler's U.S. sales have slipped 3 percent through September, in line with a slump in the broad market. The company ranks behind GM, Toyota and Ford in U.S. sales.

The last UAW strike against Chrysler was in 1997.

(Reporting by Poornima Gupta and Rebecca Cook in Detroit, Nick Carey in Belvidere, Illinois, Ben Klayman in Chicago, Nick Zieminski in New York, writing by Kevin Krolicki)