In one of the strangest statements of the year, the head of the UAW Ron Gettelfinger said that he was not willing to give up on Chrysler as a part of the DaimlerChrysler AG (NYSE:DCX) corporation. According to Reuters: "I've been around the process long enough to know that I'm not ready to concede that the Chrysler Group is going to come out of DaimlerChrysler."
The last anyone checked, the UAW owned no shares in Daimler and had no other blocking rights to the sale. Gettelfinger went on to say that, if Chrysler is sold, he hopes that it is to another car company.
Since a private equity firm has no ability to take out costs through cutting overlapping management, product development, and public company overhead, the only way to improve margins is through reductions in labor expenses. With Chrysler as part of a larger parent, the UAW can look to the Daimler balance sheet as a source of keeping union benefits and pensions funded. With a private equity firm as the owner, whatever assets and liabilities go with the sales are all the all the UAW can look to as the foundation of a favorable contract.
Most private equity firms like to go to the debt markets for the majority of the capital used in a buy-out. It is entirely possible that a purchase of Chrysler could put billions of dollars in debt onto it balance sheet. Not much for the UAW to chase there.
Douglas A. McIntyre is a partner at 24/7 Wall St.
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Reader Comments (Page 1 of 1)
4-10-2007 @ 10:36AM
Pete Massey said...
I have read the UAW news and all that is going on in the Auto industry and union interference in the operation of companies. Why does the Asian car companiies do so well in sales. I belive that it is the fact that today peole in the the USA are looking for cars that are fuel efficent 30 + miles per gal and a good car that will get them from point A to B, and not cost as arm and a leg to own. No the USA car usage is not like the EEC or Asia and if public transportaation was like it is in thwe EEC or Asia car sales would be lower across the board but I regress. The UAW has to reconize that their wages and benfits do not match other simler jobs in the factory sections across the USA as they are much better than than any other Standard factory worker. With this in mind it will cause companires like Ford, GM, Chrysler to raise the cost of autos and start looking ouside the USA for better prices, lose sales to overseas companies, and lose jobs in the USA. Could engineering be better yes and simpler could this help the Auto industry yes. As far as engineering goes the old saying is still standard "KISS". If everyone in the auto industry addressed the issues that could improve the Image of the Auto industry rather than try to bring up their own individual agendas for personnel gain (both the UAW and Auto Company) then they might get the general population to look at them in a better light. Personnel speaking if I owned a auto company the prime objective is to bring a profit to the investors (Business 101) and if it means taking the business out of the USA I would.