Published: June 08, 2009 12:20 pm      

‘We are still in the game:’ union chief

UAW locals to vote on concessions Wednesday

Monday morning, instead of working, Richie Boruff left Kokomo for Detroit for a 5 p.m. meeting.

In the Motor City, Boruff, president of UAW Local 685, would meet with other Chrysler union representatives and bargaining committee members.

At the meeting, they would officially hear the tentative concessions the United Auto Workers made with Chrysler LLC Sunday night.

The settlement includes revising the 2007 health-care deal. But most of all, the agreement is one component Chrysler needs to make before Thursday’s government deadline to reach a deal with Fiat and receive $6 billion in additional federal loans.

Chrysler has been operating on $4 billion in taxpayer loans. It is spending at least $1 billion monthly.

Rank-and-file union members must approve the agreement by Wednesday.

Chrysler has 4,600 hourly skilled and non-skilled workers in its four Kokomo plants. Boruff doesn’t know how they will vote. But Monday morning, Boruff was “glad we are still in the game. It gives us a chance to survive as an automaker and keep making cars.

“It’s not so much doom and gloom. At least we still have a chance. I am going to go up there and listen to what they have to say. At least we are still in the game.”

The federal government has given Chrysler a Thursday deadline to reach new deals with the UAW and the Canadian Auto Workers. The CAW ratified a deal this weekend.

Now, Chrysler needs to complete a deal with Fiat SpA, which would allow the Italian automaker a 20 percent stake in the company and supply Chrysler with its small-car technology.

“I think the Fiat deal is a good thing,” said Boruff. “We can benefit from it with their engine design and the success they’ve had with small cars. We have not had a small car that profitable. The Neon was the only good one.”

Although Chrysler still needs to complete other deals to remain out of bankruptcy, Jerry Conover thinks the labor agreement is not only good for the company, but also Chrysler’s customers.

“Reducing labor costs will mean a car more customers can afford,” said Conover, director of the Indiana Business Research Center at Indiana University’s Kelley School of Business.

“The labor agreement puts Chrysler in a better competitive position to survive in the long run,” he said. “Trimming down costs and having a partnership with Fiat will allow them to focus on brand-new customers. The main thing is the agreement left them on the playing field. If all the workers go for it, that’s even better. It’s better than having no company to go to for work.”

America’s smallest automaker still needs to reach an agreement with banks and hedge funds that have $6.9 billion in secured Chrysler loans.

Otherwise, a Chapter 11 bankruptcy hovers overhead like stale cigar smoke.

“If there is a bankruptcy, you have to transform a business and make it one that makes money,” said Dennis Long, lecturer in commercial and bankruptcy law at the Indiana University School of Law. “A Chapter 11 filing allows a debtor to reject any previous contracts. They payoff creditors with the smallest amount of money they owe, and they sell portions of the company they don’t want, so at the end of 18 months or so, you have a new company and can go forward.”

The rejection of contracts – such as the ones the unions have agreed upon – could be in danger if Chrysler went into bankruptcy, as well as customers’ warranties on their vehicles.

To uplift customer confidence, the Obama administration plans to create a $1.25 billion program guaranteeing the warranties of GM and Chrysler buyers if either automaker files for bankruptcy protection.

But Long said it may not be that easy.

“I’ve thought about it, but I have no idea the impact that would have if they filed for bankruptcy,” Long said. “It sounds like the government plans to stand behind the warranties, but the debtor can tell the court they are walking away from the contract and have no further obligations to it. If that happens, on a $1,000 job, the customer could end up getting just $100. That’s cents on the dollar. I am not saying Chrysler would do that. I have no idea, but it is a possibility with a Chapter 11 filing.”

Friday, Kokomo Mayor Greg Goodnight and his economic development team had a conference call concerning Chrysler with union and government officials.

Hearing that the UAW had reached labor deals with Chrysler, Goodnight said, “it’s only one piece of it, but it is a positive sign to have. It is a step in the right direction. Now we have to see what happens with the banks.”

And don’t forget Fiat SpA, said an automotive industry consultant.

Jim Hossack of AutoPacific said, so far, all he’s heard from Fiat is “we’ll study it. I haven’t heard anyone say they will do it.”

“This is a tough challenge to get all this done in four days,” Hossack said. “I say the odds are against it. I would even say if they had more time, I am not sure it would help. No one is willing to give enough; they are willing to give, but not enough. What I do know is that this is going to be an exciting week. I know how important this is for the nation and to you folks in Kokomo. It looks like they are skating on thin ice to get all this accomplished by Thursday.

“People said they wanted change. Well, that looks like that’s all you are going to get. It really doesn’t look like a good situation.”

K.O. Jackson can be reached at (765) 854-6739 or via e-mail kirven.jackson@kokomotribune.com



Polling places:

• Local 685 will vote on the Chrysler-UAW agreement at 8:30 a.m., noon, and 4 p.m., Wednesday, at UAW 685 Hall, 929 E. Hoffer.

• Local 1116 will vote on the Chrysler-UAW agreement at 8:30 a.m., noon, and 4:30 p.m., Wednesday at UAW 1166 Hall, 2761 North 50 East.