Why contract talks between UAW and Chrysler came to a halt

Labor negotiations between the United Auto Workers (UAW) and Chrysler came to a standstill this week and have been extended for another week. While it’s not unusual for that to happen in the auto industry, the apparent reason this time is different: a culture clash between the Detroit union and the company’s new European leadership.

Talks between both parties to establish a new four-year contract were supposed to wrap up by midnight Wednesday. The negotiations, which began last month and have also included Ford and General Motors, mark a key moment for the auto industry following the GM and Chrysler bankruptcies two years ago.

At 10 p.m on Wednesday, Chrysler CEO Sergio Marchionne sent an e-mail to UAW president Bob King. According to The Detroit News, Mr. Marchionne complained that Mr. King was not present at the negotiating table and that calls to his mobile phone went unanswered. King was reportedly present in talks with rival GM.

“I know that we are the smallest of the three automakers here in Detroit, but that does not make us less relevant. Our people are no less relevant,” wrote Marchionne, who is based in Italy.

Marchionne flew back to Europe Thursday morning and is not expected back in Detroit until early next week.

This is Marchionne’s first union negotiation cycle in the United States. The CEO of Italian automaker Fiat, he gained control of Chrysler in 2009 following the company’s bankruptcy.

With Fiat being the single reining automaker in Italy, Marchionne may not be used to jockeying for time and attention from a union that operates in a market dominated by two competitors, says Harley Shaiken, a labor economist at the University of California at Berkley who specializes in the automotive market.

“There are certain principles to the endgame of bargaining and how you engage. That may be more new to him than some of the others,” he says.

The primary difference is the concept of working with a lead company to establish a set of principles that then may be applied in talks with the two competitors. The early talks don’t establish a “cookie cutter” agreement, Professor Shaiken stresses, but can be used to create a common thread that is referenced and amended in subsequent negotiations.

Marchionne is a “a quick learner,” Shaiken says. “He’s a decisive guy, a smart guy but may have reacted too quickly and too publicly.”

Chrysler ranks behind GM and Ford in sales, although the company has rebounded since the 2009 bankruptcy. Unit sales of cars and light trucks jumped 17 percent in 2010 compared with the previous year – an increase that equaled Ford and topped GM, which saw sales increase 7 percent.

Of the three automakers, Chrysler made the greatest sales gains between August 2010 and last month – up 27.5 percent to 127,013 units sold. The company credits sales of its Jeep brand, which was up 58 percent during that period.

The UAW represents 23,000 hourly and 3,000 salaried workers at Chrysler, a union spokesperson says. Union workers at Ford total 41,000 and at GM 48,500.

Talks to renew the union contract with GM an additional four years were also extended past the Wednesday deadline. On Friday, UAW vice president Joe Ashton told workers that the organization is getting “very close” to an agreement and that he was “very optimistic that the negotiation process is entering its final stage.”

Ford, likewise, signed an extension agreement with the UAW. But talks will not resume with the company until the union has reached agreements with GM and Chrysler.

As part of the bankruptcy restructuring, workers at GM and Chrysler are not allowed to strike, although binding arbitration is permissible.