The United Auto Workers union and automaker Chrysler LLC remained locked in contract talks on Wednesday morning just hours before a strike deadline set by the union that could trigger the industry's second major work stoppage in as many weeks.

The UAW has warned it will go out on strike at 11 a.m. ET Wednesday if the two sides fail to agree on a new deal on wages and benefits for 49,000 U.S. factory workers and more than 77,000 families of Chrysler retirees.

Although few details of the contract talks have emerged since high-level negotiations resumed this weekend, the union has pushed for job security at the same time that Chrysler and its new private equity owner are trying to slash operating costs in areas such as health care.

A person briefed on the talks said slow progress was being made as of Wednesday morning with some key issues still unresolved.

Chrysler's larger rival General Motors Corp. reached its own cost-cutting deal on wages and benefits that ended a two-day strike on September 26.

That contract, which the UAW has said would be a framework for the Chrysler negotiations, is expected to be ratified by rank-and-file GM workers as soon as Wednesday.

The question of whether Chrysler can emerge from the UAW talks with a similar deal is seen as crucial to the success of the unprecedented bid by its new private equity owner, Cerberus Capital Management LLC, to turn around the automaker at a time of slack sales and intense competition.

Any deal -- or a UAW decision to send workers off the job -- would also have immediate implications for Ford Motor Co., which faces its own round of contract talks with the UAW once the union has finished with Chrysler.

On a combined basis, the three Detroit-based automakers lost some $15 billion last year and have argued they need deep concessions from the UAW in order to return to profitability and to keep significant production in the United States.

Analysts said Chrysler, which lost $680 million in 2006, is not in a position to grant the union the job guarantees at a time when Cerberus is pushing for a faster restructuring and scouring the automaker's future planned vehicle line-up.

I would not be surprised to see a strike at Chrysler, IRN Inc analyst Erich Merkle said, adding Chrysler could weather a strike for as long as three weeks by running down inventory.

In a move intended to show that salaried workers are also making sacrifices, Chrysler told the union this week that it planned to cut about 1,500 more white-collar jobs than initially planned, a person briefed on the plan said.

That would nearly double the nonunion job-cuts that Chrysler announced in February as part of a restructuring plan aimed at returning the company to profitability by 2009.

The UAW and Chrysler declined to comment on the talks.

MANY DIFFICULT ISSUES

Wednesday's strike deadline was announced in a letter from the UAW's top negotiators to union locals.

In the letter, UAW President Ron Gettelfinger and Vice President General Holiefield said many difficult issues had been discussed involving wages and benefits for UAW-represented workers at Chrysler.

The company has thus far failed to make an offer that adequately addresses the needs of our membership, they said.

Gettelfinger said Chrysler workers would go on strike unless negotiators reached the basis for a tentative agreement by 11 a.m. ET in the talks at Chrysler's Auburn Hills, Michigan, headquarters.

The union could also opt to extend its contract with Chrysler on a rolling basis as it did with GM in an attempt to step up pressure to reach a settlement.

The impact of any strike against Chrysler would be muted by a series of plant shutdowns the automaker has already undertaken to get rid of unsold inventory.

Five of Chrysler's U.S. assembly plants with UAW-represented workers were idled this week. Another plant in Sterling Heights, Michigan, was scheduled to be shut down next week, people familiar with those plans said.

Chrysler has the highest total wages and benefits -- more than $75 per hour for the average worker, compared with $70 for Ford and $48 for Toyota Motor Corp's U.S. unit, according to company data.

Chrysler's U.S. sales have slipped 3 percent through September, in line with a decline in the broad market. The company ranks behind GM, Toyota and Ford in sales.

Chrysler was acquired by Cerberus in a $7.4 billion deal that closed in August. Former owner Daimler AG retains a nearly 20 percent stake in the automaker.

(Additional reporting by Jui Chakravorty, editing by Steve Orlofsky)

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