Labor Leaders Argue Over Chrysler Sale to Cerberus

By: Mike Bartley

Labor leaders in the United States and Canada have opposing views whether DaimlerChrysler AG's sale of a majority stake of its American division Chrysler Group to the Cerberus Capital Management LP, a private equity firm, will protect the jobs of auto workers and their retirement benefits.

The United Auto Workers (UAW) President Ron Gettelfinger said Monday that the deal with Cerberus was "in the best interest of our membership, the Chrysler Group and Daimler" and the private equity would make extra commitments to the Chrysler's pension benefits. could not put the opposing views to a halt. As a fact, the Canadian Auto Workers President Buzz Hargrove said that he had "enormous concerns" about the deal, noting that many private equity groups have a long-standing history of "job cuts as opposed to job creation."

"We're not thrilled at all with the decision by Daimler to sell the majority share to Cerberus, and we would've been saying the same thing if it had been Tracinda or Blackstone or whomever," Hargrove said in Toronto, referring to other private equity firms that had expressed interest.

Daimler said last Monday that it will sell 80.1 percent of the money-losing Chrysler to Cerberus for $7.4 billion. The deal brought unease from workers who were quite wary of the track record of private equity firms that have slashed jobs to boost returns for investors. "It's pretty much a wait-and-see," said Bryan Currie, an electrician at Daimler's Sterling Heights assembly plant outside Detroit. "We don't know what they're going to do yet. We've got the union protection and that's what we're banking on," he asserts.

Russell Phillips, a UAW steward at the Sterling Heights facility, said he was optimistic that his union would be protected but acknowledged that "there's a very good chance they can sell us off even though they don't want to. People are out there to make money."

Gettelfinger told reporters in Detroit that the deal would not have any bearing on upcoming collective bargaining talks with the UAW this summer. Detroit automakers, which have been injured in recent years, are expected to seek concessions from the unions.

Analysts in the industry said they were surprised that Gettelfinger favored the deal, based on his past reservations about the role of private investment firms in the auto industry. But they suggested that the union leader may be taking a pragmatic step to negotiate protections for his membership's pension and health care benefits.

"If he can get an agreement to preserve the pension plans and he feels that he's got a group of investors that are willing to negotiate with the union, he might be able to create an interim period of stability for the company," said Bob Bruno, an associate professor of industrial and labor relations at the University of Illinois in Chicago.

Gettelfinger, a member of Daimler's board of supervisors, said he received a 90-minute briefing from Daimler Chairman Dieter Zetsche and Chrysler Chief Executive Tom LaSorda on the decision-making process. The union leader said that he made a last-minute appeal to maintain the current structure of the company, but he was told that "the status quo for the Chrysler Group was no longer an option."

In an interview with WJR Radio in Detroit, Gettelfinger said investment firms were tied to all of the potential suitors and that Cerberus would make an additional commitment to the pension fund, along with a "backup commitment" from Daimler. Gettelfinger will meet Tuesday with Cerberus head Stephen Feinberg and Chrysler officials.

Hargrove, on the other hand, said that he was surprised by the early morning announcement. His union, which represents about 11,000 Chrysler workers, was given no advance warning of the sale, leaving him "frustrated and angry." Hargrove will meet Tuesday with Chrysler CEO Tom LaSorda and the senior Cerberus management in Detroit, where he hoped to receive assurances that no additional job cuts would be made before the expiration of the current labor agreement. The Canadian labor leader said that he respected Gettelfinger but "that doesn't necessarily mean that we all arrive at the same conclusions or that this buyout will be in the best interest of CAW members in Canada."

Cerberus officials said that they would try to develop a positive relationship with labor. Cerberus Chairman John Snow, a former U.S. treasury secretary, said, "We respect the role of organized labor and we greatly appreciate the support the UAW has given to this transaction."

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