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Zetsche: Don't blame UAW

From freep| May 18,2007

The sale of the Chrysler Group cannot be blamed on the UAW's unwillingness to grant health care concessions to DaimlerChrysler AG, the German company's top executive said Wednesday.

DaimlerChrysler Chief Executive Officer Dieter Zetsche had been frustrated with the UAW for not giving Chrysler the same kind of money-saving deal last year that it granted Ford Motor Co. and General Motors Corp. But in an interview Wednesday with the Free Press, he said the disagreement did not lead to the decision to sell, as many analysts have suggested.

"This did not affect our relationship and this did not lead to the final decision," Zetsche said.

Rather, the unraveling of DaimlerChrysler began about a year ago, after Zetsche became head of the company after spending nearly five years as Chrysler CEO in Auburn Hills.

Zetsche said he arrived in his new job at DaimlerChrysler's Stuttgart headquarters with ambitions to create even more partnerships between the U.S. and German sides of the business, but soon found that nothing more could be squeezed out of the relationship.

"In the end, it is very simple: It is a fact that Chrysler, with the three brands, is active in volume market, mainly North America, and that Mercedes, as a premium brand, is obviously focused and limited to the luxury segment of the global market," Zetsche said. "The overlap of those two positions is limited."

Christoph Stuermer, an industry analyst in Germany for Global Insight, said a stand-alone Chrysler would benefit from being more flexible.

"I think the problem was really in the pressure to find technical synergies, i.e. common parts from the same suppliers. Of course, that frees Chrysler now to become a much more flexible organization, which is better suited to react to changes in market demand than the notoriously 'strategic' Daimler structures," Stuermer said.

Mercedes and Chrysler will continue to partner in some respects. Daimler is keeping a 19.9% stake and will manage overseas sales operations, among other matters.

"We have learned a lot in the last nine years," Zetsche said. "We are certainly, on both sides, much better suited for the future than we were nine years ago."

The deal for Daimler to sell Chrysler Group to Cerberus Capital Management seems to be going over well in Germany among shareholders who vocally called for the companies to split.

"It seems that the deal is a little bit worse than expected, but the result is OK compared with the development in the preceding years," said Leonhard Knoll, a German shareholder who has been a vocal opponent of the DaimlerChrysler marriage. "To say it with a German proverb: Better an end with horror than horror without end!"

But the idea of a divorce was harder for Zetsche. "The last year, the thought process I went through was an emotional roller coaster for me," he said.

The DaimlerChrysler supervisory board, similar to a U.S. company's board of directors, unanimously approved the concept of the Chrysler-Cerberus deal Wednesday.

It could be final by late summer or early fall.

Zetsche said the support among the supervisory board was so strong because of UAW chief Ron Gettelfinger.

"It is certainly very much related to Ron Gettelfinger," he said. "Ron led the way by being convinced that this is the best alternative for Chrysler's future. They all agreed with his position," he said of the German labor representatives.

Gettelfinger has said he made a last-minute effort to persuade Zetsche to keep DaimlerChrysler together but, in the end, he realized the deal was inevitable.

"After a thorough review and several meetings with the company, the UAW is ready to move forward with the new owner. Cerberus will honor the UAW contract, and as we enter contract negotiations this summer, the sale of Chrysler will not affect our bargaining goals," Gettelfinger said in an online forum Wednesday.

Gettelfinger, joined by UAW Vice President General Holiefield, said the UAW received a written commitment that there will not be any additional job cuts because of the sale. In February, Chrysler announced 13,000 cuts over the next three years as part of a plan aimed at returning to profitability.

The union leaders quoted from the commitment: "You should know that there are no new plans -- other than those previously announced -- to reduce head-count. Excluding abnormal market conditions and productivity, there are no additional job cuts in connection with the transaction announced. This announcement also will not impact the provisions of the early retirement and buyout packages previously announced."

Canadian Auto Workers union President Buzz Hargrove has said he received a similar promise.

DaimlerChrysler has said Chrysler's pension is overfunded by $2 billion, but health care liabilities are estimated to be worth $17.5 billion.

Gettelfinger and Holiefield worked to assure workers Wednesday that the pension fund is safe, saying Cerberus had promised to contribute an additional $200 million and Daimler provided a conditional guarantee of $1 billion for up to five years. Gettelfinger met Wednesday morning with local union presidents regarding the sale. Cerberus Chief Executive Officer Stephen Feinberg addressed the group, the Free Press was told.

In the online chat, Gettelfinger and Holiefield repeated their desire for national health care.

"America's health care crisis is out of control, and that's why the UAW supports a national, single-payer, comprehensive health care plan for every man, woman and child. We cannot solve the health care crisis in any one set of negotiations with any one company," they said. Chrysler had sought health care concessions from the UAW last year similar to what the union gave Ford and GM, but the union would not go along with it.

Gettelfinger has said that last summer, when company officials showed them the numbers, Chrysler was not losing money.

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