Chrysler officials quickly try to reassure workers

May 15, 2007|By Tim Higgins | Tim Higgins,Detroit Free Press

Detroit — DETROIT--After announcing a plan to sell a major U.S. automaker to a private equity firm, officials with DaimlerChrysler AG and buyer Cerberus Capital Management took extraordinary pains yesterday to reassure workers and the public that the Chrysler of the future would be kept whole.

No job cuts are planned beyond those announced in a February reorganization, said Chrysler Chief Executive Officer -RDThomas W. LaSorda, who was praised by the new buyers and is expected to remain in charge of the maker of Dodge Ram pickups and Chrysler 300 sedans.

No mention was made of a need for sweeping concessions from the UAW in talks this summer.

Cerberus Chairman John W. Snow said Chrysler could thrive without the demands placed on public companies: "Our capital is patience. We take a longer view. We are prepared to make investments that support management plans."

But despite all of the assurances of stability, workers and auto-industry observers expect Cerberus to follow a pattern more like its track record suggests: swift action to cut jobs, replace executives, jettison money-losing units, even relocate headquarters whatever is required to earn an estimated 22 percent on its investments.

But surprisingly, the deal won UAW President Ron Gettelfinger's blessing. "The transaction with Cerberus is in the best interests of our UAW members, the Chrysler Group and Daimler," said Gettelfinger, who has routinely criticized private equity firms' forays into the auto industry.

If the deal is completed in the third quarter, as the companies predict, a private company will own a major Detroit automaker for the first time in generations.

It will mark the end of a nine-year marriage between Daimler-Benz and Chrysler that at the time was billed as a merger of equals and seen as the template for global businesses.

The marriage between Daimler and Chrysler, which cost about $36 billion in 1998, was marked with strife between the units and repeated calls by German shareholders for divorce. In the end, DaimlerChrysler Chief Executive Officer Dieter Zetsche said, all possible synergies between Chrysler and Mercedes had been fully utilized.

"We're confident that we've found the solution that will create the greatest overall value both for Daimler and Chrysler," Zetsche said.

Enter Cererbus, which beat -RDtwo -RDserious groups of competitors Canadian auto supplier Magna International Inc. and -RDinvestment partner Onex Corp. and private equity firms Blackstone Group and Centerbridge to emerge at 4:31 a.m. yesterday as -RDtop bidder, paying $7.4 billion to acquire an 80.1 percent stake in Chrysler.

"This is a great day for Detroit," Snow, former U.S. Treasury secretary, said on Detroit radio station WJR-AM. "The great name of Chrysler is coming home."

Workers, meanwhile, worried about job cuts and plant closings, as they have since Feb. 14, when Zetsche said all options were on the table for Chrysler. "I have concerns about being fired by a private equity firm," said Alex Wassell, who works in EQ=#s -RDthe Warren, Mich., stamping plant. "I'm not quite won over by Cerberus."

Canadian Auto Workers union President Buzz Hargrove has voiced strong opposition to a private equity firm taking Chrysler and expressed frustration that he was not told of the deal until 4:30 a.m. yesterday. "We are not thrilled at all," Hargrove said.

Snow said his company respects the role of organized labor. "As the company succeeds, it will optimize the opportunities for the workers," he said. "Our objective here is a successful Chrysler."

Gettelfinger said he was given assurances, which he declined to enumerate, that he hopes to get reaffirmed -RDtoday in a meeting with Chrysler and Cerberus officials.

Zetsche said the deal is not contingent on any negotiations with the unions.

The new Chrysler will take pension and health care liabilities, which have been estimated to be worth nearly $20 billion. DaimlerChrysler said its pension is overfunded.

In 2006, Chrysler posted an operating loss of $1.5 billion, a number recently restated to $680 million because of accounting changes.

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