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United Auto Workers union to get 55% stake in Chrysler

By Amarendra Bhushan for CEOWORLD Magazine Updated:April 28, 2009

The United Auto Workers union will own 55pc of a restructured Chrysler and its retiree health care trust will get a seat on the board, could reduce the chance the Auburn Hills automaker will file for bankruptcy.

Under an agreement struck between the United Auto Workers union and Chrysler LLC, the union would eventually own 55% of the auto maker’s stock once the company is restructured, according to a report late Monday from The Wall Street Journal.

The summary of the agreement also shows that Fiat SpA will “eventually” own 35% of Chrysler, and the U.S. government and Chrysler’s secured lenders will own another 10% of the company following its reorganization, the report said. Read full WSJ.com story on Chrysler deal.

The agreement came four days before President Barack Obama’s deadline for Chrysler to complete a partnership with Fiat and receive a $6-billion government loan, or face bankruptcy.

The Treasury Department has also reached an agreement with Daimler of Germany, the former owner of Chrysler, to settle tax and other claims left over from its sale of Chrysler in 2007 to Cerberus Capital Management, the private equity firm.

In order to persuade the union to back the sale to Cerberus, Daimler agreed to pay $1 billion to Chrysler if the company’s pension plans were terminated in a subsequent bankruptcy filing. Details of the Treasury’s deal with Daimler were not available.

Last week, the union reached an agreement in principle with the administration and Chrysler that would protect workers’ pensions in the event of a bankruptcy filing and provide for a change in the financing of a health care trust set up in 2007.

Under that pension deal, workers would lose some benefits after the bankruptcy filing but would receive more protection than they would with a Chapter 11 filing that lacked government direction, people with knowledge of the agreement said, nytimes reported.

PRESS RELEASE

Chrysler LLC Statement in Response to UAW and Chrysler Reaching a Tentative Agreement

Auburn Hills, Mich., Apr 26, 2009 – Chrysler LLC Statement in Response to UAW and Chrysler Reaching a Tentative Agreement Attributed to Al Iacobelli, Chief Bargainer and Vice President – Employee Relations:

Chrysler LLC has reached an agreement today with the UAW subject to ratification. We commend the UAW’s leadership for their endless determination and perseverance in reaching this tentative agreement especially during these unprecedented economic circumstances that plague the automotive industry.

The provisional agreement provides the framework needed to ensure manufacturing competitiveness and helps to meet the guidelines set forth by the U. S. Treasury Department.

As a result, Chrysler LLC can continue to pursue a partnership with Fiat SpA.

Chrysler management has the utmost respect for thousands of men and women who are an integral part of our manufacturing operations.

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