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Chrysler Warns Canadian Workers About Survival

Automaker is warning its Canadian employees that the company won't survive if the Canadian Auto Workers union doesn't accept government requested concessions.

TORONTO (AP) -- Chrysler LLC is warning its Canadian employees that the company won't survive if the Canadian Auto Workers union fails to accept government requested concessions that would make its labor costs competitive with non-unionized plants in Canada.

Chief Executive Robert Nardelli and President Tom LaSorda said Friday in a letter to employees that the automaker has to get its labor costs at Chrysler Canada down from 76 Canadian dollars (US$62.68) per hour to Toyota Motor Corp's Canada's labor rate of about 57 Canadian dollars (US$47) per hour. It said the CAW's refusal "to work within the government's guidelines jeopardizes the future of Chrysler and our operations in Canada."

The CAW and Chrysler are scheduled to resume bargaining talks Monday. Conservative Industry Minister Tony Clement said there has to be a deal between the CAW and Chrysler in the next two weeks or the Canadian and U.S. governments won't provide further bailouts.

"Let me be clear, our negotiations are about saving Chrysler Canada. We are coming down to the wire in the fight for our company's survival — and we need your support," Nardelli and LaSorda said in the letter.

The letter said both the federal Canadian and Ontario provincial governments met Chrysler and the CAW on April 14 where they asked that the Toyota guideline be met in return for providing further financial support.

The letter follows comments by Clement on Wednesday calling on the union to cut costs by $19 per hour.

"As recent as Wednesday this week, the CAW continues to ignore this clear mandate from the government stating that they will not go any further. This unwillingness to work within the government's guidelines jeopardizes the future of Chrysler and our operations in Canada," the letter states.

The letter adds that thousands of good-paying jobs are in jeopardy, as well as the economic health of two communities in Ontario. Chrysler employs 8,500 Canadian Auto Workers.

In a separate e-mail to all Chrysler employees Nardelli noted the CAW talks and said "without a successful resolution, the alliance with Fiat and our continued viability is at risk."

Ken Lewenza, the president of the CAW, told the Associated Press on Thursday that the $19 per hour figure is "ridiculous" because the CAW's labor costs don't compete with Toyota, they compete on labor costs with Chrysler facilities in the U.S. and that it should be about maintaining that investment advantage.

Lewenza called Clement's request an attack on workers and said Canada's Conservative government is making the request because if the deal with Fiat breaks down the government would like to blame the workers and the union.

He has offered the same 7 Canadian dollars (US$5.76) an hour in concession it gave General Motors of Canada Ltd. recently but Clement has said the CAW's recent agreement with GM doesn't meet the conditions of long-term government loans and has asked the two parties to cut labor costs further.

General Motors Corp. CEO Fritz Henderson, in a conference call with reporters on Friday, indicated that GM does not plan to reopen its contract talks with the CAW.

GM, he said, believes it has a competitive agreement with the CAW, although he said the government of Ontario is questioning the company's pension obligations. GM will work with the union and Ontario to address those reservations, he said.

Fiat Chief Executive Sergio Marchionne, in an interview published Wednesday, said the Italian automaker will walk away from a nonbinding agreement to take a 20 percent stake in Chrysler and share its small car technology unless the U.S. automaker's unions agree to major cost cuts.

Chrysler, which is living on loans from the U.S. and Canadian governments, has to take on a partner and gain concessions from unions and debtholders by April 30, or the Canadian governments and the Obama administration will stop lending it money.

No other suitors have emerged, and it's likely that no bankruptcy financing will be available, so Chrysler would have little choice but to be auctioned off in pieces.

The federal Canadian government and Ontario provincial government have already given Chrysler Canada 750 million Canadian dollars (US$618 million) of a 1 billion Canadian dollar (US$825 million) Canadian loan and have promised further support if a viable plan is put forward by April 30.

The Canadian government has said Chrysler and General Motors must present plans that maintain the 20 percent Canadian share of production. The auto industry directly employs over 150,000 Canadians plus another 340,000 Canadians indirectly.

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