Oct. 11 (Bloomberg) -- Chrysler LLC and the United Auto Workers ended a six-hour strike after agreeing on a contract that echoes last month's historic accord on retiree health care between the union and General Motors Corp.

The UAW and Chrysler, the third-largest U.S. automaker, announced a settlement late yesterday that brought workers back to plants today. In a similar showdown last month, GM employees staged a two-day strike. GM and Chrysler will set up union- controlled trusts with payments equaling about 60 percent of their retiree health-care liabilities.

The four-year agreements attempt to narrow the cost gap between the U.S. automakers and Japanese rivals Toyota Motor Corp. and Honda Motor Co. Chrysler will spend $11 billion to finance the union-run health fund and will pay beginning employees lower wages while protecting the jobs of others, people with knowledge of the negotiations said.

``Chrysler's labor costs will be a lot like those at Japanese automakers in the U.S.,'' said Dan Luria, an analyst at the Michigan Manufacturing Technology Institute in Plymouth, Michigan, after being told of the terms. ``In return, the UAW gets a certain amount of jobs, but it isn't all the jobs they have now.''

Under the contract, Chrysler's $11 billion would create a trust fund giving the UAW control of an estimated $19 billion in future retiree health-care liabilities. Chrysler's investment takes retiree liabilities off its books.

Bending Principles

The UAW had insisted the employers bear sole responsibility for health care since 1954 and had fought the idea of multiple- wage tiers since its inception in 1935. The union is bending on these core principles to save as many jobs as possible.

Chrysler is eight months into a plan to cut 13,000 jobs. GM is closing 12 North American locations by the end of next year; Ford Motor Co. still hasn't identified six of 16 plants it plans to close by 2012. The UAW bargains with Ford next.

GM, the biggest U.S.-owned automaker, agreed last month to finance a $50 billion fund, called a Voluntary Employee Beneficiary Association, with an investment of $29.9 billion. The contract was approved yesterday by two-thirds of voting union members.

GM's Agreement

The GM accord allows the company to shift some of its union labor force to jobs that pay about half as much as current UAW rates, helping the carmaker proceed with plans to introduce new models to stop an eight-year U.S. sales decline. The company lost $12.4 billion in 2005 and 2006 as its domestic market share slid and Toyota's surged.

UAW President Ron Gettelfinger, 63, had sought a Chrysler contract modeled after GM's, including job guarantees in exchange for the health-care trust. The contract is ``consistent'' with the GM pattern, Chrysler President Tom LaSorda said in a statement.

LaSorda ceded his position as chief executive officer after Chrysler's new owner, Cerberus Capital Management LP, named former Home Depot Inc. chief Robert Nardelli as CEO in August.

Michele Tinson, a spokeswoman for Auburn Hills, Michigan- based Chrysler, declined to comment on the contract details. Roger Kerson, a UAW spokesman, didn't return calls seeking comment. The deal must by approved by Chrysler's 45,000 UAW members.

Worker Bonuses

Like their GM counterparts, Chrysler workers will receive a $3,000 bonus in the first year, a 3 percent bonus in the second year, 4 percent in the third and 3 percent in the fourth, the people said.

In 2005, the UAW agreed with GM and Ford to divert $1 an hour in future pay increases to finance retiree-health care. To provide the same concession to Chrysler now, the UAW will divert $1 an hour in pay increases triggered by future inflation to health care, the people said.

Under the new agreement, 11,000 positions will be labeled as ``non-core,'' and pay about half as much as current UAW members earn at Chrysler, the people said. The jobs, including sweepers and forklift drivers, won't provide a full UAW pension or retiree health care. GM applied the same label to ``in excess of 16,766'' workers.

Enticements to Quit

To make room for these workers, Chrysler will offer a ``special attrition program,'' or buyouts, to entice long-time workers to leave, the people said.

GM also assured future work for at least 55 of 82 UAW plants, in some cases starting in 2013 and extending well into the next decade. Chrysler told existing factories that they'll continue to build the products they're assigned now and provided weaker assurances than GM about future vehicles, the people said.

The Chrysler agreement lacks the same commitment as GM's to ``in-source'' jobs now being performed by outside suppliers, the people said. In part because of the resolution of today's strike, Chrysler agreed to a moratorium on sending work to outside suppliers, the people said.

In addition, Chrysler reversed plans to sell its Mopar parts operation and Chrysler Transport, which together employ about 1,300 UAW workers, the people said. Future workers at these units will be designated as ``non-core,'' while existing workers won't see a change in their pay and benefits, the people said.

Chrysler didn't agree to permanently hire temporary workers now filling the third shift at its Belvidere, Illinois, car assembly plant, the people said. The GM accord included a similar agreement.

Unaffordable

``Neither side can really afford a long strike, so it's no surprise they settled quickly,'' said David Lipsky, a labor relations professor at Cornell University in Ithaca, New York, in an interview.

Now that it has a deal with Chrysler, the UAW will turn its attention to Ford, the second-largest U.S. automaker. Ford has been operating under a contract extension since Sept. 14 as the union bargained with GM and then Chrysler.

Dearborn, Michigan-based Ford lost $12.6 billion last year, accounting for most of the combined $15 billion in losses posted by the three U.S. automakers.

The cost of a credit-default swap contract based on Chrysler loans fell 10 basis points to 305 basis points, according to CMA Datavision. The contracts decline as perceptions of credit quality improve.

A basis point on a credit-default swap contract protecting $10 million of debt for five years is $1,000.

To contact the reporter on this story: John Lippert in Southfield, Michigan, at jlippert@bloomberg.net

Last Updated: October 11, 2007 09:52 EDT