Chrysler's mini-strike

Even more than last time round, the strike looks like a tactical effort to appease union hardliners and focus the minds of company management. There were good reasons to expect negotiations with Chrysler to drag on. GM had one overriding aim in its talks - shifting legacy healthcare obligations off its balance sheet. For that, it was prepared to make a big upfront payment, increase pensions and offer guarantees on manufacturing plans.

Details of Chrysler's settlement remain to be seen but the carmaker's situation suggested other priorities. Its legacy costs per unit sold in the US, at $501, are about half those of GM, according to CreditSights. Moreover, Chrysler's newly installed private equity owners are presumably more concerned with cash flow than alleviating balance sheet pressures depressing a public share price. A benefits settlement would entail a huge cash outflow at the beginning of the life of their investment.

If, as seems likely, Chrysler's agreement differs markedly from that at GM, it probably involves a trade-off between the size of any benefits settlement and any promises made regarding job guarantees. Chrysler's new owners, focused on maximising returns over a finite life span and with an eye on US economic wobbles, will want as much operational flexibility as possible.

Beyond the horse-trading, the fact that the strike ended so quickly suggests both sides accept at least one thing: under the pressure of globalisation, the US car industry is shrinking. That offers some encouragement as the UAW turns towards its final target, Ford (NYSE:F). With any luck, the next strike might fit into lunchtime.