Union approval key to Chrysler sale

“I know it’s not the prevailing wisdom on Wall Street,” said Harley Shaiken, a labor analyst from the University of California Berkeley, “but the union has a big role to play. They have a strategic position.”

Union (UAW) officials privately confirmed that potential buyers have approached it to open discussions about possible sale terms and what it expects in any deal.

DaimlerChrysler officials admitted the union has a lot of leverage because it can shape the talks on so-called legacy costs.

The Chrysler Group’s pension fund is fully funded but its unfunded liability for retiree health care now tops US$18 billion, according to the company’s financial statements.

The legacy costs are a huge barrier to any sale which must be resolved for a deal to move ahead, one DaimlerChrysler executive told AFP.

UAW President Ron Gettelfinger has said nothing publicly about the discussions but he acknowledged in a recent interview that he expected DaimlerChrysler to move ahead with its effort to sell the Chrysler Group.

Buzz Hargrove, the president of the Canadian Auto Workers union representing Chrysler workers, said he met recently with Gettelfinger to plot a response to a possible buyout of Chrysler.

They oppose a sale to any buyer unfamiliar with the auto industry or likely to institute mass layoffs, he said.

Billionaire Kirk Kerkorian, the Canadian auto parts supplier Magna and two investment firms, Cerberus, and Blackstone and Centerbridge, have expressed interest in buying the Chrysler group.

DaimlerChrysler officials confirmed that key executives met in New York with potential buyers on Wednesday.

The process of reviewing the various offers, which include strict criteria outlined by CEO Dieter Zetsche, is still unfolding, said DaimlerChrysler spokeswoman Shawn Morgan, who declined further comment.

Hargrove said selling to an investor like Kerkorian would provoke a reaction from his union.

“He’s made a lot of money at the expense of throwing a lot of people out of work. It’s nothing personal,” Hargrove told AFP.

“It’s just that anybody in his world is out to make a lot of money at the expense of the people I represent. The same with these other (buyout) firms. These folks are just in it to come and cut a lot of jobs and try and make money at our expense.”

The CAW represents about 11,000 Chrysler workers in Canada and its current labor contract won’t expire until September 2008.

UAW officials around Detroit also said privately they would fight any buyer they sense wants to break up the company into pieces.

“I know I would fight and I would hope Gettelfinger would too,” one official told AFP.

While the UAW has been badly hurt by the downturn in the industry, it still has the power to shape events, said Kate Bronfenbrenner, director of Labor Education Research at Cornell University.

“They are thinking more strategically,” she said.

Chrysler management and the union have made a lot of progress jointly in improving Chrysler’s productivity which could be lost if the labor situation gets tense, said Greg Gardener of Harbor Consulting.

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