UAW cleared in Chrysler sale

Lack of concessions by union didn't lead to split, CEO says

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May 17, 2007|By Tim Higgins | Tim Higgins,Detroit Free Press

DETROIT -- The sale of the Chrysler Group cannot be blamed on the United Auto Worker's unwillingness to grant health care concessions to DaimlerChrysler AG, the German company's top executive said yesterday.

DaimlerChrysler chief executive 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 yesterday with the Detroit Free Press, Zetsche said the disagreement did not lead to the decision to sell, as many analysts had suggested.

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

Zetsche said he arrived in his new job at DaimlerChrysler's headquarters in Stuttgart, Germany, with ambitions to create more partnerships between the U.S. and German sides of the business but soon found that little more could be gained from 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 B. Stuermer, an industry analyst in Germany for Global Insight, said a stand-alone Chrysler will 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 percent stake Chrysler 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 sale of Chrysler to Cerberus Capital Management for $7.4 billion seems to be going over well in Germany among shareholders who had called for a 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 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 board unanimously approved the "concept" of the Chrysler-Cerberus deal yesterday. It could be final by the late summer or early fall.

Zetsche said the support among board members was so strong because of Ron Gettelfinger, the UAW's president.

"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."

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

Gettelfinger, joined by General Holiefield, a UAW vice president, said the union received a written commitment that there will not be any additional job cuts because of the sale. In February, Chrysler announced 13,000 cuts as part of a three-year 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 headcount. 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."

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