North American Unions Divided Over Chrysler Sale

Reaction and fallout are following in the wake of yesterday's confirmation that DaimlerChrysler (DCX) has reached an agreement to sell 80.1% of Chrysler Group to private equity firm Cerberus Capital Management for US$7.4 billion (see United States: 14 May 2007: DCX to Sell 80.1% of Chrysler to Cerberus Capital for US$7.4 bil.). Chief among the concerns is the union reaction. The president of the United Auto Workers (UAW) union Ron Gettelfinger, Chrysler's employee representative for the United States, has performed a stunning about-face in terms of his public statements on the deal. For weeks, the top union official has been firm in opposing a sale of Chrysler to a private equity firm, saying that the union was against it and would not support it. But now that the deal is done, Gettelfinger said that thorough explanations by top management and the realisation that "the status quo for DaimlerChrysler was no longer an option" convinced him that the deal was now in the best interests of the UAW workers.

But nobody told Canadian Auto Workers (CAW) union president Buzz Hargrove—literally. The top representative of the separate CAW union said in a statement that he had not been informed of the close negotiations between Chrysler and Cerberus, and did not find out about the deal until early yesterday morning (14 May) when the official statements were released. "There was absolutely no dialogue with our union. The fact that people didn't have the confidence to talk to us off the record even—I'm just frustrated and angry," Hargrove told reporters after the Chrysler deal was announced on Monday morning. "Anybody that's coming, if they're going to come in trying to throw people out of work, they're going to have a hell of a fight with the union," Hargrove said on Sunday. "We're absolutely opposed to any private-equity firm. Anyone who takes [Chrysler] over has to respect our bargaining agreement and respect our members. There's no room for cutbacks."

Hargrove is expected in Auburn Hills (Michigan) to meet with top executives from Chrysler and Cerberus today, to discuss the deal and what it means for the CAW. The union leader said that he has been contacted by Chrysler CEO Tom LaSorda, and that the conversation was encouraging. "They said all the right things," Hargrove said, according to Automotive News. "I received a call from Mr. LaSorda. He said there's going to be new investment, new cash, they'll be debt-free. They are committed to respecting our collective bargaining agreement. They said they're committed to respecting our early retirements and buyouts. There are no plans for further job cuts. That's all fine. But we have to have something in writing."

Outlook and Implications

The sudden reversal of position for UAW chief Ron Gettelfinger is both surprising in its speed and concerning for its implications. Gettelfinger's position on the UAW's role in the new American auto industry has traditionally been one of pragmatism, as he has been instrumental in helping to convince the rank and file of the importance of concessions at General Motors (GM) and Ford in the wake of disastrous financial results at those companies. But consistent statements from the union leadership about the total lack of support for a sale to private equity seem to have been washed away in the wake of the deal announcement. While that may be good news for Cerberus and Chrysler in terms of helping to get the DCX supervisory board vote out of the way as more of a formality than anything else, how it will play among the rank and file UAW members remains to be seen. Most of Chrysler's UAW employees are not at risk of losing their jobs like GM and Ford's were before the buyouts send tens of thousands into new career options. Gettelfinger's position on the sale to private equity is a reflection of his continued pragmatic approach; his delivery and timing, however, may create issues for him among the membership.

A reaction more in line with expectations is the one seen from CAW president Buzz Hargrove. Unlike his UAW counterpart, Hargrove was not approached or informed of the deal; he claims that he, like most industry watchers, felt that Magna was the front runner for winning the Chrysler bid. Magna was the only one of the bidders that the unions half-way accepted, citing the company's pre-existing relationship with organised labour and its tradition of job creation over private equity's reputation for job cuts. His continued resistance to the deal underscores his membership's sentiment that the jobs they have should be fought for; while the cost of Canadian labour is not as high as that of American labour (due largely to Canada's government healthcare programmes), the company has already embarked upon a 2,000-person headcount reduction across Chrysler Canada. Convincing Hargrove that the 10,500 Chrysler CAW members will be protected under the Cerberus ownership will be quite the task.

In the short term, neither the UAW or CAW is likely to be faced with plant closings or layoffs beyond the numbers already announced as part of the Chrysler turnaround plan. Cerberus is expected to keep the company whole, at least for the short term, giving the management an opportunity to carry out the turnaround plan as it has been laid out, which calls for a headcount reduction of 13,000 hourly personnel by 2009 (11,000 in the United States and 2,000 in Canada). In some areas, such as southeast Michigan, Chrysler has found itself slowing the rate at which it accepts early retirement buyouts (see United States: 10 May 2007: Chrysler Halts Employee Buyouts after Overwhelming Response) due to a greater number of interested personnel than can be accommodated. This year will almost certainly see the unions be approached by Cerberus during the upcoming contract talks to achieve at least the same level of concessions as have been granted to Ford and GM. Ironically, it was the UAW's refusal to grant those concessions to Chrysler Group last year that is considered to be the final straw that led to the DCX decision to sell the automaker.