UAW chief says union will sell its Chrysler stock
By KIMBERLY S. JOHNSON AP Auto Writers © 2009 The Associated
Press
May 4, 2009, 7:56PM
STERLING HEIGHTS, Mich. — The United Auto Workers union has no
intention of keeping its 55 percent stake in the new Chrysler and will
sell the shares as soon as possible to fund a trust that will take over
retiree health care costs next year, the union's president said
Monday.
Speaking to reporters at a news conference in suburban Detroit, Ron
Gettelfinger said the trust, called a voluntary employees beneficiary
association (VEBA), will struggle at first. It is starting with $1.5
billion from an existing company health care trust, and will get $300
million from the company next year. The total retiree health care
obligation is $10.9 billion for about 82,000 retirees, as well as current
workers who eventually will retire.
While he said he is confident in the trust's funding, Gettelfinger
warned that the VEBA may need to make additional cuts. Benefits such as
dental and vision coverage already have been cut.
"The VEBA will be on life support initially," he said. "We took a lot
of risks here."
Although the trust has a seat on Chrysler's new board, it essentially
has no voting rights because it must vote with a majority of independent
directors, he said. Retirees have the right to object to the VEBA
settlement in bankruptcy court.
The union endorsed a deal for Fiat to run Chrysler and potentially take
a controlling stake because it was the best option, Gettelfinger said.
"Of all of the alternatives that were out there in front of us, clearly
this is head-and-shoulders above anything else," he added.
Gettelfinger said that critics who think the union is getting a better
deal than Chrysler's secured debtholders are wrong because the UAW is
taking a big risk with Chrysler stock funding the trust. The stock is
worthless today, he noted.
"Let's be honest, it's zero today. The equity is going to be stressed,"
Gettelfinger said. "This isn't about finance, it's about people that
expected health care benefits for life."
Gettelfinger said the union made concessions in 2007 and this year that
have helped the company, although he would not place a specific number on
how much the concessions are worth.
"It is billions and billions of dollars in relief to the corporation
from the standpoint of cash flow," Gettelfinger said.
Some of Chrysler's secured creditors, however, are objecting to the
deal in bankruptcy court and the UAW's larger ownership stake.
After the automaker and Treasury couldn't come to an agreement with
certain debtholders, Chrysler filed for bankruptcy protection Thursday and
is trying to emerge in 30 to 60 days as a stronger company that could
eventually end up majority owned by Italy's Fiat Group SpA.
Gettelfinger, appearing with UAW Vice President General Holiefield,
said he was "optimistic" that Fiat's leadership and production of small
cars by at least one Chrysler factory would help. Gettelfinger and UAW
officials are planning to travel to Italy in the coming weeks to tour Fiat
plants.
The UAW will now turn its attention to General Motors Corp., which has
a June 1 deadline to get concessions from the union and bondholders. The
UAW reached a tentative agreement with GM in February that cut benefits
and wages for new hires, but the task force is asking for deeper
reductions.
Ford Motor Co., the only U.S. automaker not receiving government aid,
voluntarily reached a modified contract with its union members, who
approved the deal in March. Ford renegotiated its contract with the UAW
because it didn't want to be disadvantaged with higher labor costs than
its U.S. competitors. The $500 million in labor cost savings negotiated by
Ford and stock contributions to its VEBA were to serve as a model for GM
and Chrysler until the auto task force imposed tougher requirements.
Ford officials have said the company would go back to the UAW should GM
and Chrysler cut a significantly higher amount of costs than it recently
negotiated.
"We've been hearing a little bit of noise from across town,"
Gettelfinger said. "Our focus is to take care of retirees and get involved
in GM."
___
AP Auto Writer Tom Krisher in Detroit contributed to this report.