Can Cerberus Still Bail If Unions Don’t Relent?
May 15, 2007

The timing of union contract negotiations and Cerberus closing on its purchase of Chrysler prompts the question: Can Cerberus bail if contract talks are looking favorable?

National contracts between Chrysler (General Motors and Ford as well) with the United Auto Workers union expires in September. The official kickoff handshake occurs in June, with negotiations in full swing throughout the summer. They will be at round-the-clock fever pitch by early September.

At the same time, DaimlerChrysler said yesterday it plans to close the sale of Chrysler with Cerberus sometime in the July-to-September quarter.

If at the point that Cerberus and DaimlerChrysler are to ink the deal union contract talks are not going smoothly and favorably, can Cerberus bail out of the deal?

Word on the street is that Chrysler wants to be the union’s target. The union traditionally selects a target to negotiate with first –- one with which it thinks it can get the best deal –- and then it negotiates a pattern contract with the other automakers.

GM and Ford wouldn’t mind having Chrysler be the target. But Chrysler may well drive the toughest deal with the union so it might not be picked.

At the moment, the UAW is embracing Cerberus. UAW President Ron Gettelfinger and Cerberus Chairman John Snow meet today in Detroit.

Gettelfinger, who had opposed private equity ownership of Chrysler, ultimately endorsed the deal. In the press statement issued by DaimlerChrysler announcing the deal, Gettelfinger is quoted as saying the sale to Cerberus “is in the best interest of our membership, the Chrysler Group and Daimler.”

The Financial Times in London reports Gettelfinger’s change of heart came at a meeting in Stuttgart, Germany, when DaimlerChrysler management briefed Gettelfinger and his chief lieutenant at Chrysler, General Holiefield, on the deal. They were assured Chrysler CEO Tom LaSorda would remain in the top job.

Indeed, LaSorda is popular with the union; he’s one of them. A fourth-generation Chrysler employee, LaSorda grew up in Windsor, Ontario, across the river from Detroit. In fact, LaSorda became an American citizen only last year. LaSorda is fond of telling stories about union meetings held in the basement of his family’s home.

But that’s only part of the story.

Gettelfinger told a Detroit radio station yesterday Cerberus' offer to make additional pension contributions sealed the deal. "That was a huge concern for us,'' Gettelfinger said in an interview on WJR-AM's "Paul W. Smith Show." He declined to provide specifics about the contributions.

"It's time for all of us to get this behind us,'' he said of the sales process. "We're going to close that chapter.''

And face it. Gettelfinger's choices were few. Sure, he could have lobbied for the proposed offer from Canadian supplier Magna International. But Magna has a long track record of keeping unions out of its shops, and Magna chairman Frank Stronach is as anti-union as Gettelfinger is pro-union.

Gettelfinger is a smart man. The handwriting was on the wall. It came down to someone buying Chrysler and saving some union jobs or risking Chrysler going away and losing all of the union jobs. Unions already have lost massive amounts of jobs, and along with that membership and clout.

Gettelfinger said he made "a last-ditch effort" to persuade Daimler not to sell Chrysler during a 90-minute meeting on May 12. But DaimlerChrysler CEO Dieter Zetsche "made it unequivocally clear that was no longer an option,'' Gettelfinger said in the Detroit radio interview.

It probably didn't hurt that Cerberus, with the high-horsepower automotive talent it has hired and the numerous acquisitions it has made in the automotive sector, seems to be serious about the auto industry.

Meantime, CAW President Buzz Hargrove, who wasn’t kept in the loop as Gettelfinger, a Chrysler board member, was and didn’t know about the sale to Cerberus until Monday morning, is, in his words, “pissed off.” Getting Hargrove onboard is important since some of Chrysler's most important plants -- ones that produce minivans and its large rear-drive cars -- are in Canada.

Posted by Michelle Krebs at 5:13 AM under Chrysler , Commentary , Personalities , Rumors | Comments (0) | digg this | Seed Newsvine