UAW reaches deal with Chrysler, Fiat to avert bankruptcy

Chrysler LLC, the smallest of the US-based car makers, on Sunday moved a step closer to averting bankruptcy when it reached tentative concession agreements with the United Auto Workers and won ratification of its cost-cutting deal with the Canadian Auto Workers.

The UAW, in a statement, said the agreement was reached with Chrysler, Fiat and the treasury department. It said the deal includes modifications to the union's 2007 collective bargaining agreement and the trust programme dedicated to retiree health benefits. The UAW did not specify the concessions.

That still leaves two obstacles between Chrysler and up to $6 billion in additional loans from the US government. It needs a partnership deal with Italy's Fiat Group, as the treasury department's auto industry task force has said Chrysler is not viable on a stand-alone basis.

It also needs an agreement to swap equity for debt with banks and hedge funds that hold $6.9 billion in secured Chrysler loans. Chrysler faces a Thursday deadline to restructure to the government's satisfaction.

"We commend the UAW's leadership for their endless determination and perseverance in reaching this tentative agreement especially during these unprecedented economic circumstances that are plaguing the automotive industry," Al Iacobelli, Chrysler's chief labour negotiator and vice president of employee relations, said in a statement.

But the deal still needs to be ratified by the rank-and-file union members at Chrysler to take effect, with a vote due to take effect by Wednesday. The UAW said it could not disclose the details before first presenting them to its membership. But the union said the agreement met the demands laid out under terms of the $4 billion loan package that Chrysler received from the treasury in December.