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Chrysler Sale Dragging Out

From thecarconnection| April 18,2007

The negotiations over the possible sale of the Chrysler Group are likely to drag on for several more weeks, despite some brave talk by DaimlerChrysler executives of making some kind of a decision by the end of the month.

For one thing, it is now apparent that any deal will require at least some semblance of approval from both the United Auto Workers and the Canadian Auto Workers, which are both showing increasing signs of resistance to any deal that turns the company over to a private equity group.

Buzz Hargrove, CAW president, said in an interview last week that he had no interest in an offer billionaire Kirk Kerkorian has laid on the table - but he doesn't think much of the private equity groups that have stepped forward to make bids.

"He's made a lot of money at the expense of throwing a lot of people out of work. It's nothing personal. It's just that anybody in his world is out to make a lot of money at the expense of the people I represent," Hargrove said. "The same with these other (buyout) firms. They've got a fancy new name but they're the same as the old leveraged-buyout groups. These folks are just in it to come and cut a lot of jobs and try and make money at our expense."

Hargrove also disclosed that he had met with UAW president Ron Gettelfinger three weeks ago to talk over strategy. "Ron's not as vocal as I am. But I'd guess he pretty close to where I am on this," Hargrove said. If Chrysler is to be sold, it should be to some one with "experience in the industry," Hargrove said.

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

DaimlerChrysler officials quietly confirmed key executives met inNew York with potential buyers. The process of reviewing the various offers, which includes strict criteria outlined earlier this month by CEO Dieter Zetsche, is still unfolding, DaimlerChrysler officials said.

DaimlerChrysler officials also admitted the union still 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 the group's unfunded liability for retiree healthcare now tops $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 officials said privately.

UAW officials also said last week that potential buyers have approached the union to open discussions about possible sale terms and what the union expects in any deal. None of the buyers approaching the union were identified, however. So far, the New York-based investment firms of Blackstone and Centerbridge, Cerberus, another New York investment firm, Canadian auto parts supplier Magna International Inc., and Kerkorian have been named as interested bidders.

Magna also reconfirmed its interest in a deal for the Chrysler Group. "There is no assurance that any transaction will result from Magna's current involvement," Magna said in a statement.

Harley Shaiken, a labor expert from the University of California-Berkeley, said the UAW basically believes it make more sense for DaimlerChrysler to stay together but if that doesn't happen, at the minimum, the union will insist on buyer interested in a long-term investment, he said.

"They had a bad year. But Chrysler has a lot of talent and resources," Shaiken said. "I think DaimlerChrysler would be better off now talking about hybrids instead of hedge funds," he added.

Local union officials around Detroit also said privately they would fight any buyer they think wants to break up the company into pieces. "I know I would fight and I would hope Gettelfinger would too," he said.

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