Chrysler and the United Auto Workers union (UAW) have reportedly reached an innovative labour agreement aimed at making a new 'Big Three' engine plant in Michigan as efficient as any of the 'transplant' (foreign-owned) automotive factories in the US, which are mostly non-union sites located in southern states.

The US edition of Automotive News said the tentative agreement would give Chrysler broad flexibility to make job assignments for skilled workers, run the factory around the clock, form work teams and allow suppliers into the plant.

Automotive News said the Global Engine Manufacturing Alliance LLC - a joint venture formed two years ago by Chrysler, Mitsubishi and Hyundai - will produce 600,000 four-cylinder engines annually in the Dundee plant.

The newspaper said the plant's work rules would overturn decades of union practices that have hampered the Michigan-based Big Three's efforts to match foreign rivals' manufacturing efficiency, though the move has angered some local UAW officials who fear the union agreed to too many concessions.

The proposed work rules are spelled out in a secret agreement between the union and the automaker obtained by Automotive News, though Chrysler subsequently confirmed key details.

"From the perspective of a traditional engine plant ... it is a big leapfrog," Chrysler's executive vice president of manufacturing, Tom Lasorda, told the paper, adding: "We had great support from the union, (which said) 'Let's try this as a great experiment'."

Automotive News noted that the the joint venture's 1.8- 2.0- and 2.4-litre engines will be used in a range of small and mid-sized vehicles to be developed by Chrysler and Mitsubishi, including the next-generation Chrysler Sebring, Dodge Stratus, Dodge Neon, Mitsubishi Galant, Eclipse coupe and Eclipse Spider convertible.

Four hundred hourly and salaried employees will work in the factory, the report said, noting that the UAW supports the plan because it wants to demonstrate that it can produce four-cylinder engines efficiently at a plant that will be one of the world's most efficient factories.

One analyst told Automotive News that it was significant that the experiment is taking place in Michigan, the UAW's home.

"They agreed to a co-operative agreement that brings new investment into the very heart of the union's territory," Sean McAlinden, chief economist for the Centre for Automotive Research, told the paper.

Automotive News said that the UAW, under president Ron Gettelfinger, has demonstrated an unprecedented willingness to help the Big Three improve factory efficiency, and was rewarded for its flexibility when DaimlerChrysler recently announced plans to invest $US2.2 billion in two Jeep assembly plants near Toledo, Ohio. To secure that investment, the union agreed to let DaimlerChrysler's suppliers operate the paint and body shops, the report added.

DaimlerChrysler and the UAW reportedly spent months discussing ways to close the gap with the Japanese transplants and a source familiar with the discussions told Automotive News: "The UAW has a pretty firm understanding of what they must do be competitive."

Automotive News said that, according to the proposed agreement, Chrysler can sub-contract janitorial work and jobs in the plant's material department, waste water treatment operation, storage areas and powerhouse; employees will dress like those at the Japanese transplant companies with standard-issue uniforms; and suppliers will deliver parts to the assembly line.

According to the report, other points agreed include the posting of no-show employees on a so-called 'wall of shame' to discourage absenteeism, and grouping workers who carry out electrical and mechanical work, pipe fitting and other specialist tasks under a single job classification.

In contrast, Automotive News said, skilled workers at other UAW plants are covered by six or more job classifications with the result, for example, that an electrician is not allowed to handle a pipe fitting task.

These and other provisions could transform Dundee into a showcase of efficiency, the paper said.

Automotive News said the UAW has permitted similar experiments in the past - with perhaps the best-known precedent being NUMMI, an assembly plant in Fremont, California, that is owned jointly by General Motors and Toyota, and is one of the most productive car factories in North America.