Chrysler, CAW reach agreement on cost cutting

25 April 2009

The Canadian Auto Workers (CAW) union has signed a tentative cost cutting agreement with Chrysler Canada Ltd, as part of the company's restructuring process, paving the way for Fiat SpA's minority share purchase in Chrysler.

The agreement will result in over $240 million per year in annual cost savings for Chrysler's Canadian operations, as a result of a combination of benefit reductions, compensation changes, and increased productivity through operational improvements, CAW said in a press release.

CAW members perform 12.5 million hours of work per year for Chrysler Canada. The agreement therefore meets the benchmark for negotiations which was established by the federal and Ontario governments as a condition of their continuing support for the company.

Chrysler had warned its Canadian employees that the company won't survive if the CAW union fails to accept government requested concessions. (See: Chrysler management writes to Canadian workers union to resolve pay dispute).

The agreement includes all of the cost-saving provisions originally included in the contract negotiated with General Motors Canada in early March. It also contains some additional provisions, which include the elimination of semi-private hospital coverage and employee car purchase and tuition rebate programmes, an increase in the waiting period for sickness & accident benefits, and a reduction in the maximum dispensing fee for prescriptions.

There are no immediate cuts to the union's base wage or pension benefits.