DaimlerChrysler and the United Auto Workers have agreed on a special retirement programme designed to cut up to 5,000 of the Chrysler Group's 12,000 skilled trades workers, the Detroit News reported on Wednesday, citing union documents and company sources.

The motor city newspaper said the programme, outlined in a "side letter" to the car maker's new four-year labour contract with the UAW, will offer $US70,000 buy-out packages to eligible skilled trades workers in the first quarter of each year of the agreement.

The Detroit News said buy-outs could reduce Chrysler's unionised work force significantly beyond the job reductions connected to closing or selling up to nine parts plants and the elimination of 400 UAW salaried design jobs.

Cutting back on skilled trades workers - who earn an average of $79,000 annually - could reduce employment costs and help close the productivity gap between Chrysler and non-union, Japanese 'transplant' factories, the paper added.

"We've been saying we need to close the gap with the transplants, but we don't have any comment on what's in the contract," Chrysler spokesman Michael Aberlich told the Detroit News, which noted that Chrysler assembly plants now require 28 labour-hours per vehicle, compared to 16 hours at Nissan Motor Manufacturing and Toyota Motor plants that require 21 labour-hours per vehicle.

The Detroit News said the side letter specifies that the buy-out programme will start in the first quarter of 2004 but that phase will be limited to facilities that have skilled trades employees on indefinite leave.

In the succeeding three years, the programme will be open to a wide range of skilled trades workers, including electricians, millwrights, toolmakers and machine-repair specialists, the paper added.

Citing union and company sources, the Detroit News said Chrysler hopes to slash its skilled trade work force from 12,000 employees to 7,000 over the life of the four-year contract but there is no guarantee of the level of participation among employees.

The number of skilled trades workers in Chrysler plants, as well as at General Motors and Ford, generally exceeds the number of employees performing the same tasks at a non-union factory, the Detroit News noted.

The newspaper noted that the widening gap in productivity with Japanese plants in the United States was a key element in the negotiations this year between the UAW and Chrysler, GM, and Ford.