Round Two of Chrysler Bids Expected
April 23, 2007

Parties interested in buying Chrysler are expected to submit a second round of bids, described as more detailed, refined ones, this week and beyond. After that, the bids are likely to be narrowed to only a couple and then a leading candidate.

All of the proposals currently in the hands of DaimlerChrysler reportedly include giving the UAW a stake in Chrysler in exchange for cuts in health care costs.

At the same time, UAW president Ron Gettelfinger told WJR Radio in Detroit that the union has ruled out making an offer to buy Chrysler. He said the union had reviewed a sketchy proposal by a group of 25 Chrysler employees in Toledo, Ohio, where the company has an important Jeep plant, for a 70 percent stake in Chrysler through an employee stock ownership plan (ESOP).

Asked by the radio show host whether the UAW would bid for Chrysler. "We haven't ruled anything out," Gettelfinger responded. He added that the union had set up a “war room” to review the proposals to buy Chrysler.

Experts are mixed as to whether employee ownership of Chrysler would work. Some critics don't like them because it puts employees at too much risk -- if a company goes bankrupt, they could lose their jobs and investments.  Notable ESOP failures include Polaroid, United Airlines and Weirton Steel.

Meantime, representatives of Kirk Kerkorian’s Tracinda Corp., which had bid $4.5 billion for Chrysler, met with UAW members over the weekend. DaimlerChrysler CEO Dieter Zetsche is meeting this week with labor groups, generally opposed to private equity firms bidding on the company.

Newspaper reports suggest DaimlerChrysler wants to wrap up a sale of Chrysler by midsummer, before labor contract talks between the UAW and Detroit automakers begin. However, experts predict the process will take longer.

Last week, DaimlerChrysler executives met with some of the suitors. While many questions remain about how a deal would be structured, the general consensus is that Daimler would retain a stake in the new entity at least for a time.

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