REPORT: UAW's majority stake in Chrysler doesn't necessarily translate to control
The reworked contract between Chrysler and the United Auto Workers cedes 55% of Pentastar stock to the worker's retiree health care fund. That has lead to speculation that the UAW would have majority representation on the Chrysler board, but labor experts believe that won't be the case. University of California Berkeley labor professor Harley Shaiken insists that "equity stake doesn't translate into voting control." The 55% was given to the VEBA fund in lieu of the previously agreed upon cash payment. Since the only job of the VEBA is to ensure that the retiree health-care fund is properly funded, by rule, it cannot take ownership of the automaker. Though the UAW won't have majority representation, most expect the workers to receive at least one seat at the board.
Assuming that everything falls into place, the remaining owners of the new, leaner Chrysler will be Fiat at 35% and the government and lenders at a combined 10%. The changes made by the Pentastar over the past few months should equate to a healthier, more competitive Chrysler. But if things don't work out as planned (they rarely do) and Chrysler ultimately fails, retiree health car could end up being a thing of the past.
[Source: Detroit News Image Source: Bill Pugliano/Getty]
Reader Comments (Page 1 of 1)
Avinash machado 9:32AM (4/30/2009)
So I guess Fiat will be the ones pulling the strings at Chrysler.
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mad.ludwig2nd 10:18AM (4/30/2009)
Seems like only yesterday Benz paid $38 billion for it.
We shall see what Nardelli walks away with. He had quite a haul at Home Depot.
hypermiler 9:35AM (4/30/2009)
Chrysler just filed for Chapter 11 bankruptcy.
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Todd 9:45AM (4/30/2009)
I hope they filed in Delaware
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Frank 9:47AM (4/30/2009)
Me too. I used to live in Delaware. They have a great court system for business law and know what they are doing.
Frank 9:57AM (4/30/2009)
This shouldn't be a surprise to anyone. It was always in the plans, but it was hoped that it wouldn't go down that path, except that a collection of 40 or so small banks and hedge funds didn't want to accept the Treasury Department's recommendations like the big banks did. They will now take whatever the bankruptcy judge decides to give them. It could be better than what Treasury offered them. It could be worse. But it will be a quick BR, maybe a test for what GM will go thru a month from now. This could be an opportunity for a culling of the dealerships. I'm sure Chrysler has list of dealers they would like to get rid of.
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BoxerFanatic 10:54AM (4/30/2009)
Does filling a benefits package full of stocks from a bankrupt company seem like a bad idea to anyone else?
Didn't this sort of thing bite Enron employees, and others in a bad way?
Not to say that Chrysler is going chapter 7 the way Enron, WorldCom, and Gateway/MPC computers, or other companies have...
But still that doesn't mean the common stock will be worth that much.
On the other hand, I can't really feel that sympathetic that the UAW has helped raked the auto industry over the coals, and are in some ways reaping what they have sewn.
This just seems like bad idea after bad idea, from every angle.
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Erik 12:24PM (4/30/2009)
"retiree health car[e] could end up being a thing of the past"
You mean like it has been in every other industry in the counrty for years? Imagine that.
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