Fiat to Chrysler: We'll Scrap the Deal if Unions don't Cut Costs

In an interview with Canadian newspaper Globe and Mail that was published on Wednesday, Fiat Group's CEO Sergio Marchionne said that the Italians are going to abandon talks with Chrysler LLC unless the American automaker's unions agree to perform deep cuts in costs. "Absolutely we are prepared to walk. There is no doubt in my mind," he said. "We cannot commit to this organization unless we see light at the end of the tunnel."

Sergio Marchionne who was not only educated in Canada but also holds dual Italian-Canadian citizenship said that Chrysler LLC's workers on both sides of the U.S. border will have to match the lower labor costs of Japanese and German plants in the United States and Canada.

"The minute you talk to me about historical entitlement in an organization that is technically bankrupt, it's a nonsensical discussion. There is no wealth to be distributed." he said.

Apparently that makes sense only to Marchionne as while Chrysler LLC has demanded that CAW reduce labor costs by CD$19 to $55 to match the UAW's workers pay in the U.S., the Canadian union said no offering the firm the same $7 to $7.25 an hour it has already given General Motors of Canada Ltd plus reduced break times at Chrysler's Ontario plants.

In the interview, Marchionne said that due to the lack of progress in the negotiations with the unions especially from the Canadian side, there's only a 50-50 chance that Fiat will struck a deal with Chrysler LLC.

"From what I can tell from a distance, the CAW may have taken more rigid positions. The dialogue is out of sync. I think they need to see what state the industry is in. Canada and the U.S. are coming in as the lender of last resort. No one else would put a dollar in. This is the worst condemnation of the viability of this business, " he said.

In the event that Fiat gets what it wants from the CAW and UAW, Marchionne said that 'short of injecting funds in Chrysler', he would do whatever it takes to save the company including becoming CEO of Chrysler LLC. "Fundamentally, that's possible, but the title isn't important," he said. "What's important is that they hear me. It's possible that I will have to divide my time between running Fiat and running Chrysler."

Furthermore, if the alliance talks work out, Marchionne said that Fiat won't waste any time bringing its latest models in North America including the new 500 that could be launched as early as 2010. The retro-styled mini would be built in NA as would the group's Alfa Romeo models like the forthcoming 149 subcomact hatch and the new 159 sedan.

source: http://carscoop.blogspot.com