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Report: UAW will get 55% stake in Chrysler

 
5 1,326 views Apr 28, 2009
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In a hugely positive step for Chrysler, the carmaker announced on Monday that it had reached a deal with the Canadian Auto Workers (CAW) union, while also agreeing to revised labor terms with the United Auto Workers (UAW) union. With just a few days left before the April 30 deadline for restructuring set by president Obama’s auto industry task force, Chrysler now has to focus on cutting its debt and forging an alliance with Italian auto giant Fiat.

While the alliance with Fiat appears to be progressing relatively smoothly, the issue of debt reduction is proving much more difficult for Chrysler. The carmaker still has a $10.6 billion cash obligation to the UAW’s retiree health-care trust fund, but according to latest reports half of this debt may be exchanged by the unions for a 55% stake in Chrysler.

People familiar with the matter revealed to Bloomberg that unions would also get representation on Chrysler’s board of directors in addition to the 55% stake, which is valued at $4.2 billion. The latest deal is said to have been approved by UAW leaders late yesterday and will most likely be ratified by the end of today.

While such an approach may appear drastic, with unionized employees effectively sharing the risks of the company, things may start to improve for the carmaker. Under the plan, Fiat would start off with just a 20% stake and have this increased by 5% to a total 35% once certain benchmarks are passed. The U.S. Treasury would then own the remaining 10%.

General Motors announced plans for a similar move on Monday, whereby it would offer certain bondholders shares of GM common stock and accrued interest in exchange for certain outstanding notes that total some $27 billion.



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Comments (5)

  1. ma_JSH avatar JSH Posted: 4/27/2009 6:38am PDT

    This will be a big moment for the UAW and will determine whether they survive. As I see it they either approve this contract and some of them keep their jobs or they all go down in flames.

    If they do approve this contract, GM and Ford will have to get the same deal. If the UAW can't get membership to approve the contract, Chrysler and GM will have no choice but to enter bankruptcy and void all contracts.

    Of course the UAW may play ball but if the bondholders don't it doesn't matter anyway. Either group could kill the company.

    Wednesday will be an interesting day.
     
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  2. ma_Jim avatar Jim Posted: 4/28/2009 7:04am PDT

    "...the same deal" would mean that the unions would get 55% of Ford and GM also, and that is not likely to happen.

    With regard to Chyslers' union workers, this is the best of a bunch of bad choices. Without the agreement the company certainly would go down, this at least provides the union and its members an upside if the company survives and prospers.
     
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  3. ma_54chevyman avatar 54chevyman Posted: 4/28/2009 8:15am PDT

    If or when. Go USA!
     
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  4. ma_NoNameDenton avatar NoNameDenton Posted: 4/28/2009 2:04pm PDT

    How is this positive, the UAW is the one hurting the American car companies
     
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  5. ma_JSH avatar JSH Posted: 4/29/2009 8:57am PDT

    How is this positive, the UAW is the one hurting the American car companies

    The UAW is only part of the automakers problems.

    VW passed Toyota the first quarter of this year to become the largest automaker in the world. They are heavily unionized and both government and union officials have representation on the board.
     
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