Monday, July 23, 2007

Cerberus' role weighed as sale is finalized



RON GETTELFINGER: The UAW president is to shake hands with Chrysler officials this morning.

    (MARY SCHROEDER/Detroit Free Press)

    Tom LaSorda: The Chrysler CEO will lead the negotiations, but Cerberus will have the final say.

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  • Wolfgang Bernhard, an ex-Chrysler executive, is a Cerberus adviser.

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When Chrysler CEO Tom LaSorda shakes hands with UAW President Ron Gettelfinger this morning to officially open negotiations on a new labor contract, many will quietly wonder what role Chrysler's future owner Cerberus Capital Management will play in the process.

Chrysler's parent company, DaimlerChrysler AG, is finalizing a $7.4-billion deal in which the private-equity firm will acquire 80.1% of the Auburn Hills-based automaker.

Officials from both Chrysler and Cerberus have emphasized that Chrysler officials will do the negotiating. But several analysts are quick to point out that Cerberus will have the ultimate say on what the automaker will agree to as its new owner.

It will be the first time a major Detroit automaker has been in private hands in recent history, and it happens at a time when the U.S. auto industry is in peril.

"I think Cerberus is the wild card because it is different. It doesn't bring in the institutional history -- the baggage -- that the others bring in," said Gary Chaison, a professor of industrial relations at Clark University in Worcester, Mass.

Chrysler lost $680 million last year and about $2 billion in the first quarter of this year. Company officials say they want to get labor costs more in line with those of Asian automakers.

The deal between DaimlerChrysler and Cerberus is expected to be completed in the final week of July, meaning a Cerberus-owned Chrysler likely will be signing a new labor contract come September when the current one expires.

Cerberus Chairman John Snow told the Free Press in a recent interview that LaSorda and his Chrysler team will be doing the negotiating, but that if LaSorda wants any help, Cerberus advisers will be available.

"There are people on this management team who have experience with these sort of issues, who will be a sounding board -- an extra pair of helping hands," Snow said of the Chrysler management team. "You don't parachute into something as complex and difficult as labor negotiations."

Snow wouldn't say whether Cerberus team members -- such as adviser Wolfgang Bernhard, a former top Chrysler executive -- will be actively involved in the process over the next several weeks.

Various scenarios are playing out at lunch tables and bar stools around Detroit, theorizing what affect Cerberus will have on the talks.

Many speculate that Cerberus will push hard for steep concessions. Private-equity firms have a reputation for making drastic cuts to turn companies around.

But some experts say a Cerberus-controlled Chrysler will push for only modest concessions.

Chrysler enters into the negotiations a step behind General Motors Corp. and Ford Motor Co. Both of those companies were able to get mid-contract concessions from the UAW that lowered the companies' spending on health care.

It is something Chrysler officials have said they want. Chaison said he could see Cerberus pushing only for a similar health care deal.

"I could see Cerberus wanting the status quo, and I could see the UAW thinking the status quo would be marvelous," he said.

Not Gerald Meyers, a University of Michigan business professor and former chairman of American Motors Corp., who expects a Cerberus-controlled Chrysler to have huge demands.

"The opportunity is there to make some progress. If I were Cerberus, I would go for the whole ball of wax," Meyers said.

Canadian Auto Workers union President Buzz Hargrove said that he would not be surprised if Bernhard played an important role for Chrysler during the talks.

"His knowledge of the UAW can't do anything but help," Hargrove said.

The UAW declined comment for this story.

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