TOM KRISHER 05.15.07, 1:43 AM इत - - Cerberus Capital Management LP and leaders of the Chrysler Group will try to convince the leaders of the automaker's workers that their $7.4 billion deal will give workers better job security, restore Chrysler's health and not "strip and flip" the company by selling it off in pieces.
Cerberus head Stephen Feinberg and Chrysler CEO Tom LaSorda were meeting Tuesday with U.S. and Canadian labor leaders, who have split on whether the pairing will benefit Chrysler's 80,000 workers.
United Auto Workers President Ron Gettelfinger said the deal was "in the best interest of our membership" and the auto companies, noting that Cerberus had vowed to bolster its commitment to Chrysler's pension benefits.
But Canadian Auto Workers President Buzz Hargrove said he had "enormous concerns" about the plan, stressing that many private equity groups have a long-standing history of slashing jobs in order to boost profits for investors.
"They're not interested in building cars. This could be a bicycle shop as far as they're concerned," Hargrove told reporters in Toronto on Monday. "As long as they see an opportunity to make a lot of money in a short period of time, then they'd be buying in."
DaimlerChrysler (nyse: DCX - news - people ) was scheduled to release its first-quarter earnings Tuesday, a day after announcing the sale of 80.1 percent of Chrysler to Cerberus. It brings to a close the $36 billion "merger of equals" that in 1998 attempted to create the ultimate global automotive powerhouse.
The maker of luxury Mercedes-Benz sedans found itself, like competitors Ford and General Motors (nyse: GM - news - people ), battered by rising pension and retiree health costs in the United States as Toyota Motor Corp. (nyse: TM - news - people ) and other Asian manufacturers won the hearts of U.S. consumers with what many view as more reliable, more fuel-efficient models.
Germany-based DaimlerChrysler AG said it would keep a 19.9 percent stake in the renamed Chrysler Holdings LLC. The private company will be run by Cerberus, which said it would keep the current management in place.
DaimlerChrysler may need to pay as much as $650 million to extract Chrysler in exchange for being absolved for $19 billion in retiree health care costs that will be the responsibility of the new Chrysler owners.
Daimler will continue to work with Chrysler on drive systems, purchasing, sales and financial services outside North America.
The meetings in Auburn Hills on Tuesday serve as precursors for talks that will begin this summer between the UAW and Detroit's automakers on a national contract. Analysts expect Cerberus, headed by former Treasury Secretary John Snow, to seek aggressive changes at its money-losing Chrysler, Jeep and Dodge operations.
Gettelfinger, who has complained in the past that private investment firms have conspired to "strip and flip" companies at the expense of workers, said he tried to maintain the status quo. But once he was told that a DaimlerChrysler break up was inevitable, he sided with the Cerberus team after receiving assurances that the new company would protect pensions and would not announce new job cuts.
Gettelfinger said he did not expect the deal to have an impact on the upcoming contract negotiations. But analysts said he was likely being pragmatic, recognizing the need to enter the negotiating phase with the new partner.
"It puts a new dimension to the contract negotiations. Now the union can literally hold the deal hostage waiting for a package," said Gary Chaison, a professor of industrial relations at Clark University. "The UAW still has the opportunity of acting as a spoiler to the deal in a much more powerful way."
Nonetheless, the entanglement with private equity has raised concerns among Chrysler workers who have weathered a restructuring plan announced earlier this year that will eliminate 13,000 jobs.
"It sounds like they are choppers. It sounds like they take companies apart," said John Jorgensen, a 48-year-old former pipefitter at Chrysler's Kenosha, Wis., plant who recently accepted a company buyout.
Bryan Currie, an electrician at the company's Sterling Heights assembly plant, said many workers have taken a "wait-and-see" attitude. "We don't know what they're going to do yet. We've got the union protection and that's what we're banking on."
Cerberus has steadily been building strength in the automobile business. It led a consortium that bought a majority stake last year in General Motors Acceptance Corp. (nyse: GMA - news - people ), the financial arm of GM, and planned to invest in ailing auto parts giant Delphi (nyse: DPH - news - people ) Corp.
Chrysler and the other Detroit automakers were hurt when gasoline prices surpassed $3 per gallon after Hurricane Katrina, sending buyers away from the truck-based models on which they made most of their money. Chrysler Group lost $1.5 billion last year.
"A decision needed to be made. The uncertainty of the past several months did little to encourage consumers to buy Chrysler products," said Sen. Tom Carper, D-Del., whose state is home to a Chrysler plant that is scheduled to be closed in 2009.
Cerberus Chairman Snow said his company is in the investment for the long term, outlining plans to keep Chrysler's management and work with unions to return the struggling automaker to profitability.
"We think at this particular point in Chrysler's history, there may be opportunities in the private world, the world of private investment, that create more room for growth and expansion, that allow management to focus with greater intensity on the day-to-day business of producing better cars," Snow said in Germany.
Some analysts said Cerberus' entry into the auto industry could help Ford Motor Co. (nyse: F - news - people ) and General Motors Corp. at the bargaining table. Formal talks between Detroit's automakers and the UAW on a new national contract are set to begin in July, with the master contract expiring in September. All three have said they need lower labor costs to compete in a global automotive market, mainly with Asian manufacturers.
With Cerberus, it's unlikely that the UAW would remain unwilling to give Chrysler the same health care concessions that it gave Ford and GM, Morgan Stanley (nyse: MS - news - people ) analyst Jonathan Steinmetz said in a note to investors.
Snow stressed that his company respects organized labor, the first public sign of a courtship that will likely continue in the months ahead.
"I think Cerberus has a good record of working successfully with companies that are organized and we respect the role of organized labor and we greatly appreciate the support the UAW has given to this transaction," he said.
AP Business Writer Matt Moore in Frankfurt, Germany, and Associated Press writers Ken Thomas in Washington, Corey Williams in Detroit and Emily Fredrix in Kenosha, Wis., contributed to this report.