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Bob Lutz Forecast: “Brilliant Future for The U.S. Auto Industry”

Daily Ticker

Last week marked the end of three months of negotiations between the United Auto Workers and the big three U.S automakers — the first round of talks since the 2009 bailouts. Chrysler was the last to strike a deal with the UAW on Wednesday, following Ford and GM.

The highlights of Chrysler's deal include the following, according to a Chrysler press release:

· New four-year labor agreement continues Company's forward progress

· Chrysler Group to increase investments in U.S. facilities to $4.5 billion

· Company looks to add as many as 2,100 employees

· Hourly employees to share in prosperity when achieved

"The money was a big, big issue and especially because they saw their sisters and brothers at GM and Ford getting a lot more money," said UAW President Bob King. GM and Ford employees will receive one-time bonuses of $5,000 and $6,000 respectively, while Chrysler workers ended up with considerable less—a two-time payment of $1,750. But Chrysler is the only one of the big three that's not turned a profit since 2009.

Former vice chairman of GM and industry veteran, Bob Lutz, joined The Daily Ticker's Aaron Task to weigh in on the overall fairness of the deal. He calls it a "good deal." Not only does it "contains costs," but it "makes costs predictable" by tying pay to company performance.

"We did what was necessary to do to keep the companies, over the long term, viable," King said in regard to all three contracts. "I think it is kind of a major shift in how we approached negotiations and how we approached compensation."

Lutz, who is also the author of Car Guys vs Bean Counters, said just as much in the accompanying interview. "[The] short, sharp, shock of chapter 11 was a wake up call for management and the UAW and now I think there is much more of a focus on retaining jobs as opposed to ever-improving benefits for the people who are already on board."

This round of contracts was one of the most modest ever. "Historically, new union contracts have meant annual increases in labor costs in this country of 5 percent or more," reports The New York Times. "But the 2011 talks resulted in a much more manageable increase of about 1 percent a year."

"Brilliant Future" Forecast

There is a promise to created 20,000 jobs between all three UAW contracts, which according to Lutz, sounds "completely reasonable."

"The U.S. auto industry is in a growth phase right now," he says. All three automakers are very cost competitive and "all three companies are producing the best product in their history."

Plus, since the 1980s and 1990s, there are three key headwinds which have somewhat dissipated and will allow the big three to flourish, says Lutz.

#1 - management incompetence (the premise of his new book)

#2 - exchanges rates (the dollar is at historic lows compared to the Japanese Yen)

#3 - government regulations

The way he sees it, the U.S. automakers are making a comeback. "I forecast a brilliant future for the U.S. auto industry," he says.