Despite Deals, Chrysler's Fate Still Shaky

GMAC, one of the 19 financial firms currently undergoing a stress test by bank regulators, will likely need to raise more capital and obtain other forms of federal support to provide loans to Chrysler Financial's customers, according to government sources. But that would require the government to waive longstanding rules that prevent regulators from helping commercial enterprises. The Federal Deposit Insurance Corp., for one, is balking at the Treasury plan.

An important step in the Chrysler restructuring came over the weekend, when the United Auto Workers reached an agreement with Chrysler. The deal essentially relieves Chrysler of a portion of the $10 billion it owes to the union's retiree health fund, and in return gives the union a majority equity stake in the company.

Some critics have argued that the administration has treated the union more favorably than Chrysler's creditors. Though every stakeholder has made sacrifices, said one administration official, it was essential to devise a restructuring plan that Chrysler employees would embrace.

"We need workers to come to work every day," the official said. "We needed to be sure that we had a workforce here."

The multifaceted agreements surrounding Chrysler offer a window into how the government might choose to deal with General Motors during the coming month.

Like Chrysler, GM is likely to emerge with multiple owners. Under the proposed restructuring, the government could wind up with a majority ownership stake, with the union and debt holders each receiving sizeable shares in the company. Still, it remains unclear how stock ownership will translate into operational control at GM or Chrysler. Some labor experts said the union's stake in GM and Chrysler could lead to conflict between retirees and active employees, as their interests inevitably diverge.

Chrysler's employees have toyed with the idea of ownership before.

In 2007, a group of UAW members, operating independently of the union's headquarters in Detroit, proposed buying Chrysler from its German owner Daimler and taking it private as a employee-owned company.

Analysts also point to the lesson of United Airlines: In 1994, the carrier gave its workers a 55 percent stake in the carrier in exchange for pay and benefit cuts.

One of the key players in securing that deal for United workers was Ron Bloom, now a lead member of the Treasury's auto task force, who also has helped steelworkers acquire stakes in their companies.

The United deal didn't succeed. Workers and management fought over the airline's direction. Unable to resolve its labor-relations problems, United filed for bankruptcy protection in 2002, nearly wiping out the value of workers' stock.

Staff writer David Cho contributed to this report.