Amidst all the hullabaloo surrounding
the Chrysler sale, the immediate
fallout concerns the company’s $18
billion health care and pension
obligation. Observers feel this will
put the company at logger heads with
the United Automobile Workers Union.
The deal which has been made public
this week says Cerberus Capital
Management, which specializes in
restructuring troubled companies, will
pay a total of $7.4 billion to take
control of Chrysler. The deal also
brings to an end a nine-year-old
merger between Chrysler and
Daimler-Benz of Germany. With Cerebrus
buying the company out, it is also
taking on Chrysler's $18 billion
obligation for health care and
pensions for employees and retirees.
However, analysts believe that any
effort to cut such perks will put it
face to face on a confrontationist
platform with the United Automobile
Workers Union.
According to a report, the issue will
gain prominence in just two months
time when the United Automobile
Workers Union and Detroit automakers
open talks on a new national contract.
Though the union has currently given
the green signal for the Cerebrus
purchase, that may take a U-turn as
and when the company and the union
start discussions on more aspects. It
has been reported that Cerberus, if it
needs to make money off its
investment, might cut costs especially
by reducing the benefits of the
workers. This would include medical
benefits for workers and their
immediate families for life, with only
modest co-payments or deductibles.
It may be recalled that a year ago,
the union refused to give Chrysler the
same concessions on medical costs that
it granted GM and Ford, which it
deemed in far worse shape. The union
also refused to grant deep wage and
benefit cuts to the Delphi
Corporation, GM's former parts arm,
which had reached agreement to sell
itself to Cerberus if a labor deal
could be reached.
It is also now being said that the
union had supported the Cerberus deal
to set the tricky groundwork of making
the prospect of concessions palatable
to union members as a way to keep
Chrysler competitive.
Do type in your comments below!
