The Driving Argument Behind Fiat/Chrysler

Fiat is playing hardball. The company is going directly to the UAW and wants Chrysler to cut union costs significantly, or the deal to save Chrysler is off.

In a clear message to U.S. and Canadian unions, Sergio Marchionne told Wednesday's Globe and Mail newspaper a deal on the partnership had only a 50-50 chance of succeeding because of lack of progress in talks with union leaders.

"Absolutely we are prepared to walk. There is no doubt in my mind," Marchionne said in an interview posted on the Toronto newspaper's website.

The Chrysler unions had to agree to match the lower labor costs of plants run by Japanese and German carmakers in the United States and Canada, he said, adding that Canadian unions were especially resistant to the idea.

Nomura analyst Michael Tyndall said Marchionne was probably not bluffing in talking tough with the unions.

"He's playing hardball," he said, adding that the unions' position would make the deal too costly for Fiat. "We want them (Fiat) to walk away ... I don't see any benefits in this deal."

Under the latest version of the proposed partnership, first announced in January, Fiat would take an initial 20 percent stake in Chrysler in exchange for the technology to make small cars and access to foreign markets.

The two carmakers are under pressure to reach a deal on the proposal with Chrysler's unions and bondholders before an April 30 deadline set by the U.S. government.

I don't see where the UAW has any choice here whatsoever. With two weeks to go, Chrysler has to get a deal in place, or it's over. It's unfortunate that the deal has to be balanced on the backs of the workers here, but having a job is better than the thousands lost should Chrysler have to declare bankruptcy.

Fiat's not bluffing here, I agree. It's time for Ron Gettlefinger and the UAW to eat this crap sammich and smile while doing it, as unfair as it is. That's how bad the situation is right now.