Fiat could abandon Chrysler deal: union has to cut labor costs

Fiat SpA’s chief executive has just two weeks to try to come to a deal with Chrysler LLC over a planned partnership. He has warned that unless Chrysler’s unions agree to cut labor costs, then he would abandon the deal.

Reuters have reported that Sergio Marchionne warned that this deal has a 50-50 chance of succeeding, due to the lack of progress with union leaders. He said that the Canadian unions were especially resistant. Marchionne wishes for Chrysler unions to agree to match lower labor costs of plants that are run by German and Japanese carmakers in Canada and the U.S.

The proposed partnership deal will see Fiat take a 20 percent stake in Chrysler, this will be in exchange for technology for Chrysler to make small cars as well as have access to foreign markets. A deal has to be reached by the April 30, 2009, which has been set by the U.S. government.

If Fiat and Chrysler reach a deal, then the troubled American carmaker will receive $6 billion in additional funding from the government, this is on top of the $4 billion that they have received so far.