The large signal dynamics of passively mode-locked CPM laser diodes are studied. We derive a model which explains modelocking via the interplay of gain and loss dynamics; no bandwidth limiting element is necessary for pulse formation. It is found necessary to have both fast and slow absorber dynamics to achieve modelocking. Significant chirp is predicted for pulses emitted from long lasers, in agreement with experiment. The pulse width shows a strong dependence on both cavity and saturable absorber length.