Call Sale Off, Says UAW to DaimlerChrysler

By Brendan Moore

04.18.2007

Ron Gettelfinger, President of the UAW, told Reuters reporters earlier today that DaimlerChrysler should abandon its efforts to sell its American subsidiary and just keep Chrysler.

Gettelfinger said he believed the sales process that began in February, is currently being conducted with four potential buyers, and has pushed up DaimlerChrysler’s share price in the last two months could still be halted. Gettelfinger stated that there was a lot of support on DaimlerChrysler’s supervisory board for abandoning sale efforts, but did not elaborate. He told reporters that the UAW, Chrysler’s biggest union, would prefer that there were no changes in Chrysler ownership.

There is much speculation that a sale to one of the four potential buyers, all of whom are private-equity groups or backed by private-equity groups would be a nightmare scenario for UAW. Private-equity groups are known for their strong emphasis on financial indicators like IRR and ROE during their usually-short stewardship of companies they acquire, and the UAW is not seen as a strong contributor to those types of calculations. Chrysler sustained a loss of nearly $1.5 billion in 2006, is trending towards large losses this year, and any new owner will be under intense pressure to reverse those numbers.

Of course, the UAW is very capable themselves of producing nightmares for any new owner through protracted labor negotiations, work stoppages or strikes if there is anything happening that the union members are opposed to, either short-term or long-term. Any new owner will need a cooperative UAW for the first couple of years at the very least.

It seems ridiculous that DaimlerChrysler is even considering abandoning their efforts to make Chrysler go away, but maybe Gettelfinger knows something the industry analysts do not. Then again, maybe his statement today was simply a negotiating tactic; Gettelfinger has met privately with every potential buyer and should know better than anyone just how serious DaimlerChrysler is about selling their American problem child.

Chrysler’s only response to Gettelfinger’s statements today was basically a non-response: they said only that “all options were on the table regarding a sale of Chrysler”, which I guess also includes not selling.

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Author: Brendan Moore

Brendan Moore is a Principal Consultant with Cedar Point Consulting , a management consulting practice based in the Washington, DC area. He also manages Autosavant Consulting, a separate practice within Cedar Point Consulting. where he advises businesses connected to the auto industry. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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2 Comments

  1. Gettelfinger is smoking the best weed in the world if he thinks Daimler is going to just start backing up now on selling Chrysler. I’m sure the UAW woulod like everything to just stay the same, but that is not going to happen.

  2. If Daimler doesn’t get the price for Chrysler that they feel it is worth, then I could still see them not selling it, but now I think that it will be sold to one of the private equity firms (and not Kerkorian’s Tracinda).

    I’m not surprised to see that there was support on the DCX supervisory board for NOT selling Chrysler – those on the board opposed to it are probably the labor representatives that have to be on the board as required by German law. They’re just showing solidarity with the union folks in the US – plus, Gettelfinger himself is on the board as one of the labor representatives.

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