Job cuts not enough to save Chrysler

Chrysler's new owners, Cerberus Capital Management LP, will need concessions from the UAW to trim costs and become competitive with Japanese automakers, industry experts say, but labor cuts alone will not turn Chrysler into a success.

Chrysler estimates that Japanese automakers, such as Toyota Motor Corp., have a $30-an-hour labor cost advantage, counting benefits and special provisions, and the gap could grow to $45 an hour by 2009 without changes to the UAW contract. Chrysler, Ford and GM begin contract talks this summer with the UAW, presenting an opportunity to rework labor costs for all three automakers. But Cerberus could be sorely disappointed if it counts on only UAW concessions, said Laurie Harbour-Felax, president of the Harbour-Felax Group.

Management decisions are equally to blame for Chrysler's problems, said Harbour-Felax, whose company released a report last fall on the profit gap between domestic and Japanese automakers.

Chrysler does pay more in labor costs than Toyota, but Chrysler, like General Motors Corp. and Ford Motor Co., also has failed to make enough vehicles that U.S. consumers want, leading to a decline in market share, revenues and profits, she said.

"What happens in negotiations is critical," Harbour-Felax said. "I think the union understands 100% what they need to do to be competitive. … But at the same time, they're going to look across the table at management and say, 'What are you doing for us?' " More at Detroit Free Press