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Chrysler Looks To Trim Benefits To Cut Costs

Automaker could lower labor costs in Canada by eliminating workers' life insurance, increasing prescription drug fees and reducing benefits for hospitalized workers, management says.

TORONTO (CP) -- Chrysler could lower its labour costs by eliminating workers' life insurance, out-of-province health-care coverage and some benefits like child care and legal services, management says.

In an email to employees, Chrysler president Tom LaSorda and CEO Bob Nardelli suggested several ways in which the company could reduce its labour costs, including increasing prescription drug fees, eliminating health-care coverage for workers outside Ontario, reducing benefits for hospitalized workers, doing away with life insurance, reducing shift premiums and increasing health-care premiums.

The company also suggests eliminating so-called "non-traditional benefits," including tuition reimbursement, scholarships for dependants, extended health-care coverage, legal services and child care.

"Unfortunately, the CAW has been opposed to these solutions," LaSorda and Nardelli wrote in the email, sent to employees Friday. "However, we are open to alternative ideas."

According to Chrysler's estimates, the proposed cuts would save the company $8.24 per hour worked.

But the company has said it need to cut costs by $19 an hour to be competitive with non-unionized plants in Canada, meaning further cuts -- including wage reductions -- will likely also be on the table when the company re-starts negotiations with the Canadian Auto Workers union on Monday.

"While we have made some progress with the CAW, it falls significantly short of closing the $19 gap," the email said.

"And yet, 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."

Chrysler has been under increasing pressure from the federal government and potential partner Fiat to slash its labour costs to a level that will make it competitive with Toyota and Honda plants in Canada.

The company has until the end of the month to reach an agreement with its unions and cement the alliance with Fiat in order to receive long-term bailout loans from governments in Canada and the U.S.

If this doesn't happen in time, it is widely assumed Chrysler will be forced to file for bankruptcy and possibly liquidate, potentially putting thousands of Canadians out of work.

"Without labour concessions, Chrysler Canada's manufacturing operations will not survive long-term. Thousands of good-paying jobs are in jeopardy, as well as the economic health of communities such as Windsor and Brampton," LaSorda and Nardelli wrote.

"Time is very short. We have only two weeks before a final decision must be made. 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."

The CAW has so far refused to bend from a pattern established in an agreement with General Motors Canada last month, which GM says reduces its labour costs by about $7 an hour.

GM CEO Fritz Henderson reiterated Friday that the agreement is competitive.

"We certainly believe we've reached a competitive agreement with the CAW," Henderson said in a conference call with media.

He added that the Ontario government has expressed concern about the company's legacy costs, including pensions, and GM is "committed to be part of a dialogue with Ontario and the CAW with respect to pensions."

Chrysler spent several days in intensive labour negotiations with the CAW at the end of March, but those talks broke off after governments rejected its original restructuring plans.

The federal and Ontario governments have already lent $750 million to Chrysler Canada out of $1 billion promised, and more could be forthcoming if the company produces an acceptable restructuring plan in time.

Chrysler employs about 10,000 hourly workers at assembly plants in Brampton, Ont., and Windsor, Ont., and a casting plant in Toronto.

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