Chrysler today posted a $212 million profit in the third-quarter, for its second quarterly profit since its 2009 bankruptcy, and increased its forecast for its full-year profit to $600 million.

The net income compares with a loss of $84 million a year ago and comes the day after the UAW passed its new contract with Chrysler, despite opposition from skilled trades workers.

Chrysler’s worldwide vehicle sales in the third quarter increased 24% to 496,000, for total revenues of $13.1 billion, up 19%. The automaker’s market share in the U.S., its biggest and most lucrative market, increased nearly two points to 11.4% in the quarter, as Japanese automakers’ sales plummeted due to production disruptions after their country’s March earthquake and tsunami.

The new contract and the improved financial outlook should allow the company to invest $4.5 billion and create more than 2,000 new jobs. All of the Big Three American automakers now have completed contracts with the UAW for the next several years.

The Detroit News reports:

The new contract between Chrysler Group LLC and the United Auto Workers appears headed for ratification, with only one major plant left to vote today.

Workers at Chrysler’s Toledo North Assembly Plant cast their ballots Monday. And while the results were still being tallied Monday night, it seemed likely that members of UAW Local 12 would throw their weight behind the new agreement, given that it promises major new investments in the Jeep factory.

The contract is not as generous as the contracts with Ford and General Motors, but that is largely because Chrysler is not yet as profitable as those companies and has further to go to regain a solid, long-term financial footing in the wake of the 2009 bankruptcy.

Hourly workers at Ford Motor Co. will receive a $6,000 signing bonus as part of a new four-year contract with the automaker that also pledges $4.8 billion in new investment in U.S. plants at least $15,700 in bonuses and profit sharing payouts.

The agreement also secures more than 12,000 jobs, including 7,000 previously announced – 6,250 hourly and 750 salaried – and 5,750 new jobs that will be added by the end of 2012 and pay an entry-level wage.

Included in the plans to create more jobs is more investment in Ford’s plant in Wayne, Michigan. Some of those jobs will be created by moving work done in other countries back to American plants. UAW members will vote on the contract soon.

As the UAW prepares to head into labor talks this summer with the newly profitable Detroit automakers, several top union leaders say a showdown is brewing over this year’s contract — especially at Ford, which has made $9.3 billion over the past two years.

“If they don’t restore everything (we) gave up, the membership is going to knock it down,” said Bill Johnson, plant chairman for UAW Local 900, which represents workers at the Focus plant in Wayne. “The bonuses that were just announced are just ridiculous.”

The accumulated pay package for Ford President and CEO Alan Mulally, who is credited with rescuing Ford after arriving in 2006, is now valued at more than $300 million.

The current UAW contract with Ford expires in September and 1,200 delegates from the union are meeting this week in Detroit to plan their negotiating strategy for the new contract. The company is obviously going to want to keep labor costs as low as possible to help them compete with other carmakers.

The benefit plan was approved by the Michigan Civil Service Commission in January.

Republicans, led by Sen. Rick Jones (R-Grand Ledge), have criticized the plan as being too expensive at a time when the state is facing a nearly $2 billion budget deficit.

Grand Rapids Republican Mark Jansen chairs the committee and introduced the resolution, which was approved on a party line vote of 4 in favor and 2 against. Democratic Sens. Rebekah Warren (D-Ann Arbor) and Coleman Young, Jr. (D-Detroit) opposed the measure.

Opponents argued the resolution to eliminate the benefit program was about financial management of the state, not about social issues.

“Some people will say this is a social issue,” said Jan Winters, who runs the Office of the State Employer. “This is about cost… We don’t have the funds to cover a benefit that could be in the tens of millions of dollars.”

The total projected cost of the unmarried partner benefit is approximately .003 percent (three one-thousandths of a percent) of this year’s estimated deficit.

Winters delivered a letter to the committee from Gov. Rick Snyder saying, “I urge the legislature…[to] reject the extension of health care benefits to the unrelated live-in companions of state employees and their dependents,” Snyder wrote in his letter.

Winters said in January the program was estimated to cost $6 million, but Wednesday, said because the program was so broadly written, the program was expected to cost the state $8 million in the first year. The program is slated to go into effect Oct. 1, the beginning of the state’s new fiscal year. It would be available to an estimated 22,000 members of the United Auto Workers Local 6000 and the Service Employees International Union Local 517M, as well as 13,700 non-union employees.

Benefits such as this are considered cash income by the IRS and the state treasury, and are taxed as such. Winters said she was unsure if the cost offsets from the increased tax revenues from the benefit extension was included in the estimates, but she said the increased tax liability for the state as an employer was factored into the cost. Employers pay a portion of employment taxes.

Under the state constitution, lawmakers can override a decision by the Michigan Civil Service Commission. The Commission determines the pay schedules and benefits for employees of the state. But in order for the legislature to overrule a decision by the commission, two-thirds of both chambers must vote to do so 60 calendar days after the recommendation is submitted as part of the budget proposal by the governor’s office.

The resolution is expected to have no issues passing in the Senate, where the GOP has a super majority. But it will face an uphill climb in the House, where the GOP is the majority but need to get 74 votes to pass the resolution. The GOP majority is 63 Republicans to 47 Democrats. That means the GOP will have to peel away 11 Democrats to garner the necessary two-thirds majority to overrule the MSCS decision.

If the legislature approves the resolution with the required two-thirds vote, it will be the first time such a move has occurred in the state.

Democrats challenged the resolution and the attacks on the plan during the hearing. Young challenged the constitutionality of the resolution, while Warren raised questions as to whether this was an appropriate business decision.

“If we’re going to run it like a business, why not run it like other businesses in the state?” Warren asked Winters in the hearing.

At least one union official has questioned the move. Ray Holman, legislative liaison for UAW 6000, says he is confused as to why the legislature is undertaking the action. He tells the Lansing State Journal that the issue should be dealt with at the bargaining table — not in the legislature.

Advocates in favor of the plan expressed concern about committee’s action and the resolution.

Emily Dievendorf, policy director for Equality Michigan, a statewide organization which advocates for lesbian, gay, bisexual and transgender rights, issued the following statement following the hearing Wednesday morning:

Representative Warren raised valid concerns with today’s challenge to the Michigan Civil Service Commission decision. As she stated, Snyder’s foundation for his proposal to turn Michigan around is rooted in his claim that we need to run Michigan like a business. The fact is that more than half of Fortune 500 companies consider it a priority to offer Other Eligible Individual benefit programs to their employees. Successful, growing businesses consider their bottom line and in doing so don’t deny their employees the support they need to have a healthy stable household because social instability equates to economic liability.

Unfortunately, Jan Winters, Director of the Office of State Employer, could not address this contradiction in Michigan’s approach to our economic revival, nor could she explain where the new inflated cost estimate for the extension of benefits came from. It is a convenient oversight in her presentation that all figures being released to defend the reversal of the Civil Service Commission’s decision are worst case scenario estimates that assume everyone eligible for the benefits would take advantage of them. We know that the actual likely participation rate is below 2 percent. Furthermore, support for the MCSC’s decision reversal ignores the reality that not providing health benefits is always more expensive than providing benefits and would suck money out of the budget that Michigan doesn’t have.

The issue has drawn the attention of national LGBT groups.

“Providing employment benefits, including health insurance, to the adult partners of state employees is an issue of fundamental fairness,” said Sarah Warbelow, state legislative director for the Human Rights Campaign which is a national group advocating for LGBT rights based in Washington D.C. “It is critical for employees to provide for the best possible future for their families, and if Michigan fails to provide equal benefits, the state risks losing a notable segment of its committed, talented workforce. The Legislature must make Michigan more competitive to retain and attract workers, and ultimately private industry as well.”

The only practical purpose I can imagine for the bail-out is to slow the decline of GM to create enough time for its workers, suppliers, dealers and communities to adjust to its eventual demise. Yet if this is the goal, surely there are better ways to allocate $60bn than to buy GM? The funds would be better spent helping the Midwest diversify away from cars. Cash could be used to retrain car workers, giving them extended unemployment insurance as they retrain.

But US politicians dare not talk openly about industrial adjustment because the public does not want to hear about it. A strong constituency wants to preserve jobs and communities as they are, regardless of the public cost. Another equally powerful group wants to let markets work their will, regardless of the short-term social costs. Polls show most Americans are against bailing out GM, but if their own jobs were at stake I am sure they would have a different view.

So the Obama administration is, in effect, paying $60bn to buy off both constituencies. It is telling the first group that jobs and communities dependent on GM will be better preserved because of the bail-out, and the second that taxpayers and creditors will be rewarded by it. But it is not telling anyone the complete truth: GM will disappear, eventually. The bail-out is designed to give the economy time to reduce the social costs of the blow.

Beyond GM, an even bigger worry should be the continuing long loss of well-paying, middle-class jobs that once allowed significant numbers of Americans to share in the country’s prosperity, Reich said. The government bailout of GM, he wrote, will do little to address that problem — in fact, it will only worsen as the automaker cuts jobs to stay afloat for as long as possible. In this new economy, GM’s old adage has been turned upside down, according to Reich. What’s bad for GM these days is what’s bad for America as well.

What does this all mean? Well, it means that GM is headed for bankruptcy. The government will try to push for a speedy reorganization and sale, but the company is a big, complicated beast, and so a standard Chapter 11 process, taking several years, could instead be the result. It’s difficult to sell cars while in bankruptcy (one presumes), so  a protracted process could ultimately lead to liquidation — that is, selling off GM assets down to the last lugnut-affixing robot.

The main problem is that the government is providing the bulk of the bankruptcy financing (some $50 billion), which could give it as much as a 70 percent stake in the new automaker. This is tricky business. For one thing, it means that if the reorganized company doesn’t do well, the taxpayers take a big hit. It also means that the government has a big interest in keeping the reorganized firm afloat, which increases the likelihood of political meddling in the industry and continued cash infusions or subsidies. But the real rub is that GM’s obligations are large while its potentially successful sub-units are small. And those potentially successful sub-units will not be successful if they are saddled with too many of GM’s large obligations. So, for this to really work, the government has to swallow a lot of GM’s baggage and let free a new, trimmed down, unburdened GM. If that new company does well, the equity stake will have value and taxpayers will get back some or most of their investment. If it doesn’t — and in this economy, it will be swimming up a waterfall — then the government will have shelled out tens of billions of dollars just to prop up GM for a matter of months and delay the inevitable reallocation of workers and capital away from an utterly failed enterprise.

High risk, tiny chance of breaking even. What’s not to like?

The Obama administration is preparing to send General Motors into bankruptcy as early as the end of next week under a plan that would give the automaker tens of billions of dollars more in public financing as the company seeks to shrink and reemerge as a global competitor, sources familiar with the discussions said. [...]

Under the GM draft bankruptcy plan, the company would receive just short of $30 billion in additional federal loans, a source said.

The figure is a starting point in negotiations between the government and the company, the source said, and could change. A cash injection that large would boost the U.S. investment in GM to nearly $45 billion. The timing of the filing is also fluid, and could happen the first week of June.

The government previously indicated that it planned to take at least 50 percent of the restructured company, and likely would take the right to name members to its board of directors, as it has at Chrysler, where the government will control four of nine seats.

The United Auto Workers retiree health fund is set to own as much as 39 percent of the restructured GM, in exchange for giving up its claim to at least $10 billion that the company owes it. Yesterday, the union announced that it reached an agreement with GM that will reduce the company’s labor costs.

The boards of Chrysler LLC and Fiat SpA have given executives approval to complete an alliance deal that hinges on the terms for additional aid for the Detroit automaker, according to people with knowledge of the discussions.

The development comes before U.S. President Barack Obama’s expected announcement Monday on rescue funds for Chrysler and General Motors and more than two months after teams from Chrysler and Fiat began reviewing the proposed tie-up and developing a business plan for their combined operations.

Final terms of any deal will depend on what terms the U.S. autos task force headed by former investment banker Steve Rattner imposes on Chrysler as a condition for providing additional funding, according to the sources, who asked not to be identified because of the confidential nature of the talks.

Fiat CEO Sergio Marchionne has met with the auto task force twice and signaled his willingness to adjust the terms of the deal to satisfy the administration’s demands. The UAW supports the Fiat merger, which could save thousands of American jobs.

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Ed Brayton is a reporter for TWI’s sister site, The Michigan Messenger.

Senate Republicans are following this course for three key reasons — first is payback against a major industrial union; second is payback against states like Michigan and Ohio who have been moving away from the GOP; third is the desire to advantage Japanese auto manufacturers who disproportionately do business in their southern states.

I think the first and second points are key — that the GOP is taking a firm stand against the United Auto Workers, a core Democratic constituency, and in turn, against big-time GM states like Michigan and Ohio.

In recent history, Michigan and Ohio have been reliable swing states. But the actions of prominent Republicans may call into question whether they will retain their status as battleground states in future competitive elections.

As President Lyndon Johnson famously and presciently mused about the impact his signing of the Civil Rights Act of 1964 would have on his own Democratic Party, “There goes the South for a generation.”

I suspect some forward-thinking Republicans might harbor similar concerns about Michigan and Ohio.