Chrysler Group LLC and the United Auto Workers union expect to reach a deal on a new labor contract without resorting to arbitration, officials for the company and union said on Monday.

In the four years since the two sides last negotiated a labor contract, the Detroit automakers were pushed into crisis by collapsing vehicle demand and the financial convulsion of 2008. Both General Motors Co and Chrysler, now majority-owned by Italy's Fiat SpA, were bailed out by the Obama administration.

Chrysler and the union would prefer to avoid arbitration as that process would increase the chance for an imposed settlement that neither side finds palatable.

If arbitration happens, if anything like that happens, then I'd say we haven't done our job, said UAW President Bob King, whose union represents about 112,000 U.S. production autoworkers, of which about 22,800 are at Chrysler.

We don't want some third-party outsider who doesn't know the industry as well as we know the industry making decisions that impact our long-term viability.

Negotiators for the two sides wore matching maroon jackets as they entered an amphitheater at Chrysler headquarters on Monday, in a gesture of cooperation as the talks kicked off.

King and General Holiefield, the UAW's vice president for Chrysler relations, spoke for the union. Scott Garberding, head of manufacturing, and Al Iacobelli, head of labor relations, represented the No. 3 U.S. automaker.

As a precondition to Chrysler's bankruptcy, the UAW agreed to a no-strike clause. If talks reach an impasse, either side can seek binding arbitration, an option that GM has as well.

Both companies obtained no-strike clauses from workers -- a concession not granted by UAW members to Ford Motor Co.

Chrysler emerged from a federally funded bankruptcy a little more than two years ago operated by Fiat.

Last week, the Italian automaker bought the remaining Chrysler stakes held by the U.S. and Canadian governments and took majority control. That leaves Fiat and UAW, through its retiree healthcare trust, the two main Chrysler shareholders.

Chrysler's Iacobelli and the UAW's Holiefield each said that the union and the car company owe a lot to U.S. taxpayers for bringing Chrysler back from the abyss.

We have a responsibility to the American public and the Canadian government, said Iacobelli.

The current labor contract expires on September 14. GM and Ford are also expected to launch talks this week, on Wednesday and Friday, respectively.

President Barack Obama was present last year when Chrysler's Grand Cherokee was launched at the Detroit auto plant where Chrysler now has the most so-called second-tier workers who earn about half the wages of established workers.

LABOR, HEALTHCARE COSTS

Chrysler's all-in labor costs of about $50-$51 per hour are the lowest among the Detroit auto companies and on par with Japanese automakers that have U.S. plants. Iacobelli said the company would not resort to the old formulas of the past that saddled it with uncompetitive labor costs.

Chrysler would like between $2 and $3 of hourly worker wages to be tied to the company's performance, a person close to the situation said before the talks began. To make room, Chrysler needs to cut that much in costs, said the person, who asked not to be identified discussing the negotiations.

Four years ago when the two sides met at the table, Chrysler's all-in labor costs were about $76 per hour. Much of that savings came from the establishment of the Voluntary Employee Beneficiary Association, or VEBA, that shifted retiree healthcare costs from the company balance sheets.

The person familiar with the talks said the UAW's financial stake in Chrysler changes the dynamics of the talks. It tempers the dialogue substantially, to be quite honest with you, because they own part of the company, the person said.

King last week agreed the union is deeply invested in the ongoing profitability of the automakers.

Our goal is to help Chrysler be as successful as possible so we can get the maximum value for the stock we hold, he told Reuters, adding the union would look to exit its stake as soon as possible so the trust could diversify its holdings.

King opened Monday's news conference with a pledge to find further savings on healthcare for Chrysler, which he said can be achieved without further cost to UAW members.

Active UAW members at Chrysler pay 7 percent to 8 percent of overall healthcare costs, compared with about 31 percent for the average American worker.

King reiterated his stance that he hopes to negotiate agreements with all three Detroit automakers simultaneously rather than to pick a target company to single out, as has been the practice in years past.

King and Chrysler's Iacobelli and Garberding did not say which issues are off the table this year, but King said the UAW will not entertain more financial concessions from its workers, whom he said sacrificed greatly in the 2007 full talks and 2009 reopening of the contracts after the 2008-2009 auto industry downturn and GM and Chrysler bankruptcies.

King noted the talks are starting later than usual this year and are expected to be of shorter duration. In 2007, the final contract for the three automakers was signed in mid-November. He and Chrysler's Iacobelli said the two sides have already worked through some of the major issues including changes in work rules and streamlining manufacturing processes, which often take considerable time during talks.

(Reporting by Bernie Woodall and Deepa Seetharaman, additional reporting by Ben Klayman, editing by Matthew Lewis and Maureen Bavdek)

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