The Canadian Auto Workers (CAW) union has signed a tentative cost cutting agreement with Chrysler Canada Ltd, as part of the company's restructuring process, paving the way for Fiat SpA's minority share purchase in Chrysler.

The agreement will result in over $240 million per year in annual cost savings for Chrysler's Canadian operations, as a result of a combination of benefit reductions, compensation changes, and increased productivity through operational improvements, CAW said in a press release.

CAW members perform 12.5 million hours of work per year for Chrysler Canada. The agreement therefore meets the benchmark for negotiations which was established by the federal and Ontario governments as a condition of their continuing support for the company.

Chrysler had warned its Canadian employees that the company won't survive if the CAW union fails to accept government requested concessions. (See: Chrysler management writes to Canadian workers union to resolve pay dispute).

The agreement includes all of the cost-saving provisions originally included in the contract negotiated with General Motors Canada in early March. It also contains some additional provisions, which include the elimination of semi-private hospital coverage and employee car purchase and tuition rebate programmes, an increase in the waiting period for sickness & accident benefits, and a reduction in the maximum dispensing fee for prescriptions.

There are no immediate cuts to the union's base wage or pension benefits.

The agreement also contains several operational changes that will further enhance productivity and efficiency in Chrysler's Canadian operations.

CAW president Ken Lewenza indicated that the bargaining of the agreement was extremely challenging, but expressed his support for the solidarity which CAW members have demonstrated through the past difficult weeks.

"CAW members supported their union right through this process, rather than allowing themselves to be intimidated by crude threats. That has allowed us to bargain the very best agreement possible, imposing the minimum possible sacrifice on our members and their families, despite the incredibly tough times," Lewamze said.

CAW members working at Chrysler in Windsor, Brampton and Etobicoke will vote on the new contract in a series of meetings held over the next two days, the statement said.

Results of the ratification votes will be released late on Sunday night via Canada News Wire, it added.

The Canadian  auto industry supports 440,000 or more jobs, including in the auto parts sector, and generate many billions of dollars per year in tax revenues. 

A recent study by the Ontario Manufacturing Council estimates that should General Motors, Ford and Chrysler disappear from Canada, so too would as many as 582,000 jobs - a terrible blow to Canadian workers and the national economy at an already diffcult time.
 
Chrysler was in talks with the union for the last several weeks as the federal government has said that it will not extend support to the company if the impasse goes on and file for bankruptcy.

Fiat also said that its proposed purchase of a minrity stake of 20 per cent in Chrysler depends on an agreement with the union.

The Fiat chief last week warned that the Italian auto maker could walk away from the deal if American and Canadian unions do not agree to significant pay cuts. (See: Fiat keen on Chrysler deal, but sees union resistance).    
 
"We're living to fight another day," Lewenza said. "But the fear and uncertainty is not over. Not by a long shot."

But Lewenza did agree to significant work rule changes, including reducing break times for meals and bathroom trips to 40 minutes per shift.

Regarding the health care trust fund, Lewenza said there was much work still to do and he did not say when it would be implemented.

On Obama administration's 30  April deadline facing Chrysler to complete a deal or see Chrysler file bankruptcy, Lewenza said, "I encourage those stakeholders to make whatever compromises are neccesary to avoid bankruptcy. We did what we could."