Contact Us

Home> International News> News detail

Hargrove questions Cerberus bid for Chrysler

From Automotive News | April 24,2007

Canadian Auto Workers President Buzz Hargrove said today that he believes private equity fund Cerberus Capital Management LP no longer is a front-runner to buy the Chrysler group.

Hargrove said Cerberus' commitment to the industry has been questioned after its pullback last week from a deal to buy Delphi Corp. and its effort to sell another supplier, GDX Automotive.

Cerberus also bailed last week from an agreement to buy the carpeting and acoustics parts business of Collins & Aikman Corp.

"Up until the last few days, I thought they were probably a front-runner," said Hargrove, an outspoken critic of the growing presence of private equity in the auto industry.

"But you see the troubles they've had with the automotive group they bought into three years ago (GDX). And they're backing away from Delphi. How can anybody have any confidence that they'll be a key player at the end of this thing? I think that kind of eliminates any potential for them."

A Cerberus spokeswoman declined to comment. But a Cerberus source said last week that the firm is being more selective about what it buys in the auto industry, not abandoning it.

Hargrove, whose office is in Toronto, was in Detroit today talking about the state of the industry and the need for North American Free Trade Agreement partners to require Asian countries to import as many vehicles and parts as they export.

Magna is front-runner

If Chrysler must be sold, Hargrove said he liked Magna International Inc. as the best among the bidders for Chrysler. The other known bidders include Cerberus, private equity fund Blackstone Group and Kirk Kerkorian's Tracinda Corp.

Magna has a track record of growth through good management, building plants and employing people, Hargrove said. The private equity firms tend to buy companies, close plants and fire workers to save money. Then, they turn around and sell the business in three or four years, he said. Chrysler employs about 11,000 CAW members.

Magna has "a record of creating jobs, not destroying jobs," Hargrove said.

Furthermore, Magna Chairman Frank Stronach pledged in 2005 to open Magna plants in Canada and the United States to union representation, Hargrove said. Only three of Magna's plants now have CAW representation. But that is expected to increase, he said.

Magna, also based near Toronto, is the only Chrysler bidder that has met with Hargrove, he said. Two private equity groups have called him.

Magna is the world's third largest auto parts supplier, with original-equipment parts revenue of $23.88 billion in 2006. The supplier's products include seats, roofs, frames and lighting. Magna also assembles cars in limited volumes in Graz, Austria.

Risk of business loss

Hargrove said he warned Stronach that Magna risked losing business with its other customers, especially General Motors and Ford Motor Co., if Magna were to buy the Chrysler group. But he said Stronach assured him that Magna could continue to compete for business with strong products, prices and technology.

Hargrove believes DaimlerChrysler CEO Dieter Zetsche made a serious mistake by putting Chrysler up for sale so suddenly on Feb. 14. By doing it without more consultation with the various parties involved, Zetsche only succeeded in devaluing Chrysler, Hargrove said.

"We met with their top people two days before the announcement," Hargrove said. "He never mentioned he was going to throw this out. From then on, it has been a fire sale."

Like his counterpart, UAW President Ron Gettelfinger, Hargrove believes Chrysler and its workers would be best served remaining as a unit of DaimlerChrysler. Chrysler employs about 65,000 UAW members.

"The integration is just starting to gel," with the sharing of parts and technology, Hargrove said.

"It just looked like Dieter Zetsche was just responding to public criticism from the shareholders," Hargrove said, referring to the mostly German shareholders, many of whom opposed the takeover in 1998.

All Rights Reserved. Do not reproduce, copy and use the editorial content without permission. Contact us:

Install Gasgoo APP

Anytime and anywhere to know the dynamics of China's auto industry

Hot Auto Products| e-Catalog| Auto Products Directory| Auto Parts Manufacturers|

Gasgoo Site: Automotive News| 中文站| 汽车资讯| 出口供应商| 汽车社区|

Copyright Notice © 2016 Corporation and its licensors. All rights reserved.