Thursday, May 17, 2007

Daimler, Cerberus to shore up Chrysler pension, UAW says

Reuters |
May 17, 2007 - 10:00 am

DETROIT (Reuters) -- The United Auto Workers union said it received a guarantee that the pension fund for Chrysler workers would get an additional $1.2 billion as a result of the pending sale of the struggling automaker.

UAW President Ron Gettelfinger, a member of the DaimlerChrysler AG supervisory board who has endorsed the Chrysler deal, said both the future Daimler AG, and Chrysler's new owner, Cerberus Capital Management LP, would contribute to the pension plan.

"Cerberus has committed to contributing an additional $200 million to the pension fund and Daimler is providing a conditional guarantee of $1 billion for up to five years," Gettelfinger said.

The comments came in an online discussion on Wednesday, May 16, between union members, Gettelfinger and UAW Vice President General Holiefield, who will take charge of negotiating a new contract with Chrysler to replace a four-year deal on wages and benefits expiring in September.

The UAW officials also said Cerberus had provided a written commitment that there were "no new plans" to cut jobs at Chrysler in addition to the 13,000 jobs already being eliminated as part of a turnaround effort.

"Excluding abnormal market conditions ... there are no additional job cuts in connection with the transaction," the union said, quoting a letter from Chrysler.

Chrysler's roughly $17 billion in health care liabilities and the pension burden for its unionized work force have been a major uncertainty as the No. 4 U.S. automaker heads into contract talks under private ownership.

The UAW comments marked the first time terms for any additional Chrysler pension funding had been detailed since the sale of an 80 percent stake in the company to the private equity firm was announced on Monday, May 14.

In a conference call with analysts and reporters to discuss the sale, DaimlerChrysler CEO Dieter Zetsche declined to comment when asked whether Daimler and Cerberus had committed additional pension funding as part of the $7.4 billion sale of Chrysler.

"Those discussions ... are confidential discussions without any outcome," Zetsche said then.

Representatives for the Chrysler group and Cerberus had no comment on Gettelfinger's remarks on Wednesday.

A DaimlerChrysler spokesman confirmed the German automaker had extended the pension guarantee, but said he could not provide further detail on the terms.

Gettelfinger's comments on the new pension funding came after he surprised some industry analysts with his immediate endorsement of the Cerberus deal this week, given his earlier hostility toward a private equity owner for Chrysler.

In his remarks to union members on Wednesday, Gettelfinger pointed to areas where the UAW, a union with strong ties to the Democratic Party, had common cause with Cerberus, whose chairman is former Bush administration Treasury Secretary John Snow.

Gettelfinger noted that a Cerberus-owned company NewPage had filed a trade complaint in conjunction with its union, the United Steelworkers, against what they claimed were subsidized paper imports from China, Indonesia and South Korea.

Gettelfinger called the lawsuit and an initial U.S. Commerce Department finding for NewPage "a tremendous accomplishment by Cerberus and the (union)."

Taking a question from a concerned union member outside Detroit, Gettelfinger also said the UAW recognized Chrysler would have to compete on quality and customer service. He added: "Cerberus management has assured us that they feel the same way."

Some analysts have suggested that Chrysler under Cerberus could consider shifting health care liabilities for retired workers to a trust aligned with the UAW and separate from the company in exchange for a one-time payment.

That would mark a major shift for a Detroit automaker and follow the outline of a strike settlement reached earlier this year between Goodyear Tire & Rubber Co. and its major union, the United Steelworkers.

On Wednesday, a UAW member called on Gettelfinger to consider having the union take a role in running the Chrysler pension.

Gettelfinger avoided commenting on the specific suggestion.

"The UAW has and will continue to negotiate responsible agreements that include pension plans," he added.

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