UAW negotiations appear likely to delay Chrysler sale

A deal to sell the Chrysler Group likely will get tied up in the upcoming contract negotiations between Detroit automakers and the UAW, a growing number of auto industry experts say.

That means a final deal to sell Chrysler is unlikely to be made before Sept. 14, the day the labor contract expires, complicating both the talks for a new labor agreement and negotiations to sell the Auburn Hills-based unit of DaimlerChrysler AG.

Early on, the thinking had been that DaimlerChrysler would sell Chrysler quickly, so the new buyer could negotiate the contract, but that now looks unlikely, experts say.

Contract negotiations will begin officially in July and, if history is any guide, will go up to the deadline -- if not past it.

Any serious buyer for Chrysler likely will want concessions from the union on health care costs -- concessions the UAW won't want to accept before it negotiates new contracts with Ford Motor Co. and General Motors Corp., industry observers say.

Even if DaimlerChrysler picks a final bidder with which to negotiate in the next three weeks, as some suspect, it's unlikely a deal could be finalized quickly.

"The UAW is going to want to go all of the way until the 14th of September on everything," said Gerald Meyers, University of Michigan business professor and former chairman of American Motors Corp. That makes the labor negotiations "ambiguous, speculative and depressing because you can't get much done except hypothetically. There will be a lot of qualifiers, and ifs and buts and maybes until you get down to the very end when you see what the UAW will really settle for."

Harley Shaiken, a professor at the University of California at Berkeley who specializes in labor issues, agreed that the situation becomes even more complicated as September approaches.

"Every passing week tangles this up much, much more tightly with the contract expiration. That means from the union's point of view, it isn't simply the issue regarding Chrysler, it's the issues through the entire industry that could be determined at Chrysler," Shaiken said. "In effect, Chrysler could become the target company by default -- that may be very different than what the UAW wants to see happen."

Such massive contract negotiations are always difficult, but the possibility of a sale puts even more pressure on the process.

Mergers and acquisitions expert Van Conway, senior managing director with Conway MacKenzie & Dunleavy, said most deals he has negotiated that involved organized labor were contingent on negotiating with the union before a purchase was finalized.

"I used to do a lot of union acquisitions back in the old days ... and we always did them subject to a negotiation" with the union, he said. "If we couldn't get the negotiation done, we didn't do" the deal.

"Sometimes we didn't get it done, by the way. Then typically what happened was that the companies were shut down."

In Chrysler's case, an estimated $16.5 billion in pension and health care liabilities is at stake.

"It's such a huge contingency, it's hard to imagine that a buyer would do this deal without resolution of that contingency," Conway said.@@page@@

DaimlerChrysler spokesman Han Tjan declined to comment Monday. Chrysler workers in Auburn Hills had hoped for a quick resolution Feb. 14, when DaimlerChrysler Chief Executive Officer Dieter Zetsche indicated that Chrysler might be sold.

The U.S. unit posted operating losses of $1.5 billion in 2006 and Chrysler is undergoing its second major turnaround plan in the past decade. It involves shedding 13,000 jobs, closing an assembly plant and investing in more fuel-efficient engine technology.

DaimlerChrysler executives appear to be taking three potential bidders most seriously. Blackstone Group, a private- equity firm, has put in the highest offer, a German magazine has reported. Another private-equity firm, Cerberus Capital Management, apparently has gotten an edge by hiring former Chrysler Chief Operating Officer Wolfgang Bernhard. A possible union favorite is Canadian auto supplier Magna International Inc.

CAW President Buzz Hargrove said he expects the sale process to go into the late part of the year.

"To have it narrowed down, I think, would probably be the best they could do in the next couple of months," he said. "Then shoot for something late in the year."

A year ago, the UAW never would have predicted that Chrysler would be in such shape. Last year, the union declined to give Chrysler the same kind of money-saving concessions on health care that it gave Ford and GM.

UAW President Ron Gettelfinger has said that DaimlerChrysler gave union leaders no insight into the losses that would come in the second half of 2006. DaimlerChrysler as a whole did well last year, with net income rising to $4.3 billion.

Gettelfinger has made clear in recent weeks that he believes Chrysler should remain within DaimlerChrysler, and he is expected to make that case during Wednesday's DCX supervisory board meeting in Stuttgart, Germany.

As an example of how important the UAW is in the sale of Chrysler, many of the would-be buyers have been contacting union leaders.

Gettelfinger, German labor union IG Metall and a representative of the CAW are expected to meet today with Zetsche in Stuttgart. The Free Press has been told the meeting is routine and will not be an announcement about Chrysler's fate.