Chrysler 'going to rebound'
Tom LaSorda, chief executive officer of the Chrysler Group, speaks to the media Tuesday.
May 16, 2007
Chrysler Group Chief Executive Officer Tom LaSorda -- confident and beaming on Tuesday, a day after it was announced that Chrysler is being sold to private equity titan Cerberus Capital Management -- provided insight into his vision for the immediate future of the Auburn Hills automaker as a stand-alone, privately held company.
• He said no brands, such as Jeep, would be sold.• Chrysler's community support and involvement will carry on.
• The automaker would try to pursue partnerships that make sense around the world and push into developing markets, such as China and India.
He brought these messages hours after the automaker announced it had lost nearly $2 billion in the first three months of the year. But LaSorda vowed that the new Chrysler -- with Cerberus' support and out of Wall Street's glare -- would be successful again.
"We are going to rebound and come back. ... I can stand here today and tell you that it is in our best interest, and I am excited," he said.
The charm offensive seemed to work so far: Canadian Auto Workers union President Buzz Hargrove, one of the more vocal opponents to a private equity firm buying Chrysler, met with Cerberus CEO Stephen Feinberg for 90 minutes Tuesday after which the labor leader changed his tune.
"After this meeting today, I would say Chrysler is better off under Cerberus ownership than they would be under Daimler," Hargrove said.
All of this occurred on a day when the Chrysler Group posted a nearly $2-billion loss for the first three months of the year, largely because of a $1.2-billion cost of the turnaround plan. The plan, the second one in the past decade, includes cutting 13,000 jobs over three years.
"We have a plan and it is working. As a stand-alone company, Chrysler will continue to operate under the vision established under our Recovery and Transformation Plan," LaSorda said.
As a private company, LaSorda noted that he will not have to file quarterly public reports.
"We'll be able to run it the way we want to run it and not worry about quarterly numbers or what somebody might think on the outside. We'll do what's best," LaSorda said.
He said that current partnerships between Chrysler and Daimler, such as procurement, diesel engines and dual-mode hybrids, will continue.
LaSorda also reiterated to reporters -- and to Hargrove -- that no jobs will be cut because of the Chrysler sale.
Hargrove said LaSorda gave him a signed letter "guaranteeing there will be no layoffs as a result of this ownership change."
UAW President Ron Gettelfinger had a similar meeting Tuesday, but a UAW spokesman declined to comment.
Several industry experts, including analyst Erich Merkle of IRN Inc., foresee job cuts. "I think there are going to be job cuts. There has to be," he said.
Gettelfinger, a member of the DaimlerChrysler supervisory board, has said he thinks Cerberus buying the company is the best deal for workers.
The 20-member supervisory board, which is like a board of directors, is expected to meet this morning to approve the deal, which is slated to be finalized in the late summer or early fall.
Union support for Cerberus is surprising.
Just a day earlier, Hargrove had said he had profound concerns about the private equity firm and its intentions.
But Feinberg seems to have made an impression.
"He talked about Chrysler and the vision and support for the Chrysler management team under Tommy LaSorda," Hargrove said.
Hargrove noted that Feinberg shared a common view on foreign trade. "They recognized that ... the problems of Chrysler aren't labor costs or the industry or health care costs or quality or productivity. Our problem is trade, the unfair trade with Asia, Japan and Korea."
Hargrove said he expects Cerberus will be an ally in lobbying for trade policy changes.
LaSorda seemed equally impressed with Feinberg.
"Not many people, including the media, have ever met nor will likely meet Stephen Feinberg. He is quite a private guy. He is just a great guy," LaSorda said.
He described Feinberg as a "straight-shooter, a grassroots guy, a blue-collar guy, that's how he grew up."
LaSorda joked: "He kind of reminds me of me, except he's got a lot more money than I do."
Cerberus and Chrysler's relationship with organized labor will be tested shortly. The UAW's labor contract with Chrysler ends in September, and a new one will be negotiated this summer.
"All negotiations will be through us," LaSorda said, "not through Cerberus."
LaSorda said the big issues for Chrysler will be health care and overall economic costs.
One of the issues that frustrated DaimlerChrysler leadership was the UAW's refusal to give Chrysler the same kind of money-saving health care concessions as it granted Ford Motor Co. and General Motors Corp.
Gettelfinger had said DaimlerChrysler had not shown Chrysler was losing money.
"We need to get at least parity with GM and Ford, that's clear," LaSorda said.
Chrysler has $17.5 billion in expected future health care costs, Bodo Uebber, DaimlerChrysler chief financial officer, said Tuesday. Chrysler's pension fund is overfunded by $2 billion, he said.
Those health care liabilities stay with the new Chrysler.
Cerberus is spending $7.4 billion to acquire an 80.1% of Chrysler and Chrysler's financial arm. Most of that money is being placed into a holding company that will own the two units and provide them with capital to start.