DaimlerChrysler’s (DCX) unions are objecting to the company selling its US arm, Chrysler, to private equity interests. Labor representatives hold half the seats on the DCX board, and it appears to be their view that Cerberus Capital, Blackstone Group, and Centerbridge Partners, all of which are looking at Chrysler, would cut the company into parts. Such a maneuver would make financial sense. Operations such as Jeep may be worth much more alone than they would as part of the entire Chrysler operation.
All of this may play into the hands of GM (GM), the only large car company that has expressed any public interest in Chrysler. It could cut management, product development, and marketing costs and it is in a good position to negotiate with the UAW. All three of the US car companies will begin talks for their next labor contract in September of this year. The UAW understands that it may not be able to keep all of its jobs, but private equity firms have little to lose by cutting as many blue collar jobs as possible or, perhaps even closing some of the money-losing parts of Chrysler.
GM cannot afford to turn its back on the UAW because a prolonged strike could hurt its turnaround plans. And that may give it an odd advantage in getting Chrysler at a fair price.
Douglas A. McIntyre
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