By Peter Whoriskey
Washington Post Staff Writer
Tuesday, April 28, 2009
The United Auto Workers would own a majority stake in Chrysler under a deal reached between the company and the union over the weekend, according to a source familiar with the agreement.
If the restructuring of the storied American automaker is completed according to the tentative deal, the union would have a 55 percent stake in the company, the Italian automaker Fiat would eventually hold a 35 percent stake, and the government and Chrysler's lenders would share a 10 percent stake in the company. The source spoke on condition of anonymity because he was not authorized to comment publicly on the talks.
The agreement, which must be ratified by union members, is a milestone in the effort to keep Chrysler and its 54,000 employees out of bankruptcy.
It comes as the Obama administration seeks to make the automaker viable once again by stripping it of its overwhelming debt load and partially merging it with Fiat.
The deal essentially relieves Chrysler of a portion of the $10 billion it owes to the union's retiree health fund. In exchange for giving up its claims to some of that $10 billion, the union is getting the significant equity stake in the company.
Chrysler and the Obama administration likewise want the automaker's senior lenders to give up their claims of $6.9 billion in loans against the company.
So far, however, Chrysler and its lenders are billions of dollars apart in the negotiations.
Some of those lenders have already complained that the Obama administration is giving too much to the union while shorting the lenders who note that, legally, their debt claims should take priority. This agreement is unlikely to change those sentiments because it forces the lenders to accept an ownership stake of less than 10 percent.
Gary Chaison, professor of industrial relations at Clark University in Worcester, Mass., said that if the union winds up with a majority stake in its employer, that "puts the UAW in a strange position."
"If it takes company stock as a part owner in the company, it would be bargaining against itself," he said. "It can never act as adversarial in that relationship. Also it's in a position that to make the company more stable, it has to reduce health-care benefits of its own retirees."
Also yesterday, the German automaker Daimler said it has reached a deal to shed its remaining 19.9 percent stake in Chrysler. Daimler had previously written down the value of its Chrysler stake to zero.
Under the deal, Daimler will pay $600 million into Chrysler's pension plan over the next three years. Daimler will also surrender its claims to the loans it extended to Chrysler when it sold most of the company to Cerberus in 2007.
Staff writer Kendra Marr contributed to this report.