According to Automotive News [sub], the United Auto Workers (UAW) agreement with Chrysler/Fiat would deliver unto the union a 55 percent share of the reborn Italian – American automaker. As in the proposed (but doomed) GM bondholder offer, ChryCo union workers will forego a multi-billion dollar payment into their Voluntary Employment Beneficiary Association (VEBA) health care fund in exchange for the equity stake. In Chrysler’s case, $6 billion buys them controlling interest in Chrysler. That’s all kind of nuts on all kinds of levels. And as we’re in tail wagging the dog territory . . .
“The UAW agreed to allow Chrysler to hire as many so-called Tier 2 workers as the company can until 2015, the source said. Those workers start at $14 an hour (versus $28 an hour for veteran workers) and receive fewer benefits. The number had been capped at 20 percent of the work force. Under the existing contract, plants can have many more classifications . . . Other concessions include a reduction of job classifications. Chrysler plants will operate with just two classifications of production workers and two classifications of skilled trades.
So what was bad for the union is now good for the union, as the union controls the union’s pay and conditions. Welcome to the world according to American Leyland.
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The UAW would have a controlling share?
Why in the hell does anyone think this is a good idea?
The UAW should be told to go to hell, not be given controlling shares in companies they helped destroy.
So does this mean they won’t be filing for chapter 7 on Friday? I’m so friggin’ sick of hearing about these zombie Energizer bunny car companies. Even though anyone with a functional brain knows they’re dead, they just keep going and going.
Wow, where do we start dissecting this one?
Daimler said their small share of Chrysler was worthless, Fiat doesn’t want to put in any money at all, Cerberus won’t put any more money into their investment but the union thinks that an ownership stake is worth in effect $6B?
So what is Fiat saying about all this? Do they want to defer to union appointed management?
This is an interesting idea. Wouldn’t it effectively turn Chrysler into a worker owned co-op? If the UAW did have a controlling stake in the company perhaps that would encourage them to up the quality on the line and to be more receptive towards workable pay-schemes,as, after all, if the company goes bust, there is no one to pass the buck and the blame to other than themselves.
NulloModo : if the company goes bust, there is no one to pass the buck and the blame to other than themselves
I think that’s whole idea. They get all the trouble and none of the benefits. I even have to pay rent to stay in the HQ. No one wants this hot potato, why on earth would the union agree?
And on top of all that…
http://finance.yahoo.com/news/UAW-leaders-recommend-apf-15051585.html?.v=7
A short blurb at the bottom of the article:
Also Monday, Germany’s Daimler AG said it reached a deal to get rid of its remaining 19.9 percent stake in Chrysler, severing the last tie between the two automakers that was formed more than a decade ago.
Under the agreement, Daimler will forgive $1.9 billion in loans it extended to Auburn Hills, Mich.-based Chrysler, which it had already written off in its 2008 financial results. Daimler also agreed to pay $200 million into Chrysler’s pension plan when the deal takes effect and in each of the two years afterward. The money will help fund the pensions of former DaimlerChrysler AG workers, Daimler said.
So is it back to the De(b)t3 or would it now be De(b)t2.45+.55uaw? Too long, just call them whatever you want.
Wasn’t majority ownership in United Airlines taken over by a union negotiatied ESOP (Employee Stock Ownership Plan) in the mid 1990’s? Is that still the case or was that wiped out by the couple of bankruptcy filings they have had since then?
in a screwed up way, this makes sense – sorta…
assuming the govumnt gets its money back…
but, overall, the company is screwed, but let them live to die another day…
“If you saw Atlas, the giant who holds the world on his shoulders, if you saw that he stood, blood running down his chest, his knees buckling, his arms trembling but still trying to hold the world aloft with the last of his strength, and the greater the effort the heavier the world bore down upon his shoulders–what would you tell him to do?”
“I … don’t know. What … could he do? What would you tell him?”
“To shrug.”
-Ayn Rand
Is this a bad thing?
http://www.vancouversun.com/Worker+owned+pulp+mill+dodges+scrap+heap/1334576/story.html
These guys are running a worker owned mill and making profit in a down market, with an outdated plant, while other mills are shutting down around them.
The UAW, et al, now have a chance to really demonstrate their ability to produce a marketable, quality product. I hope them the best of it, I’d really like to see Chrysler turn around significantly from their efforts.
Resist the squandering of what you’ve just inherited, guys.
@Byobassoon I have been reading some of her stuff lately,it’s interesting that’s for sure.
Is Ayn Rand a kinda good looking skinny blond.Or is that another Ann?
So this would be a company whose primary product is jobs for it’s employees, but also happens to make cars from time to time.
Good thing this doesn’t stand a chance of happening after Thursday!
“s Ayn Rand a kinda good looking skinny blond.Or is that another Ann?”
Yeah, this worker owned thing is going to work well…
Chrysler was at the top of its game when its employees had the most control and responsibility over their area of expertise. This is just expanding that concept so that whole organization is congruent with that idea. There can’t be labor-management animosity when you’re all on the same team, people are incentivized to look after the health of the organization as a whole rather than taking as much as they can for themselves-the golden goose needs to be fed.
I think this is the most exciting development in rethinking the structure of a corporation and how companies are run to come out of this meltdown.
This may be a good thing. Now, the UAW can learn how hard it is to MANAGE a company, and how relatively easy it is to simply slap together a car on an assembly line. And, how important a factor labor (and related) costs really are. Maybe, just maybe, they’ll then change their tune a bit. Or, maybe not.
In theory, and -at least in limited practice- worker-owned-companies are possible…
Here’s a link to a list I found of the top 100 ESOP companies in the U.S.
http://www.nceo.org/library/eo100.html
Not very many of them are very large and few of them are in manufacturing….
I too have my doubts….
This kind of solution just screams “Socialist People’s Paradise” to me(And that has negative connotations to me).
However, we shall see, we shall see.
When Chrysler finally dies, at least the UAW will finally get the blame they deserve. But I have a feeling that us taxpayers will end up keeping them alive?
Good on them for making the attempt though.
you may thinking of Ann Coulter Mikey, if ones taste runs to um ‘female impersonators’, pre or post op.
@ midelectric :
“There can’t be labor-management animosity when you’re all on the same team,”
I admire your optmistic view of humanity, but you really need to see the petty inter-union arguing that goes on now to appreciate how unrealistic this idea is.
Too bad the engineers aren’t part of the UAW. Are the rank and file ready to pay top dollar for top talent at the expense of line workers?
More interestingly to me (and I am not anti-union in general), what is the reaction of the buying public? Supposing this plan happens and the UAW assumes control, is Chrysler’s success a referendum on support for the UAW?
If success really does depend on product, then, absent massive continuing subsidies, it looks Chrysler is still screwed for two years or more even if the new management makes all the right moves.
Now this should be interesting. Of the Big Three car companies…
- One will be controlled by a union
- One will be controlled by the government
- One will be controlled by shareholders
Any bets on the outcome?
It’s the PTFOA’s way of throwing Chrysler’s management under the bus and the UAW to the wolves. You get killed by a bus instantly. You can outrun the wolves for a while, and if you’re lucky, you can climb a tree. Most wolves can’t climb trees.
But if you’re up a tree, you have to wait to come down. It might not be until election day, but eventually you come down out of your tree and the wolves get you.
In this case, when it all falls to pieces again, the PTFOA’s successors will say, “Well, you wanted to run Chrysler, so we let you.” And the UAW will say, “Well maybe so, but you set us up to fail.”
We’ll see what happens. Now that Chrysler has released it’s 19.9 percent, that free’s up another potential chunk of ownership in Chrysler. Remember when Fiat said they wanted half? Well, now they can get 49.9 percent. This extra 19.9 percent of ownership is where the UAW will place the blame when it fails. Who ever gets that 19.9 percent will eventually get a finger pointed at them.
The UAW, et al, now have a chance to really demonstrate their ability to produce a marketable, quality product. I hope them the best of it, I’d really like to see Chrysler turn around significantly from their efforts.…
Not to be soft on the UAW guys, but when any of you out there really look at a Chrysler, do you say “The high wages paid to the workers are so off putting that I can’t consider buying this thing”? No, you say something like: Kmart interior materials, lame styling, crude mechanicals, outdated suspensions, marginal reliability, etc. None of which are in any way related to the people who assemble them, with the possible exception of reliability, and even there it is more likely supplier related. All those factors stem from the cost cutting management people who probably have never even seen an assembly line other than in a photo. Yes, Chrysler’s assembly is not class leading, but it is not anything remotely like what they churned out in the 70’s, and I would venture to state that actual assembly issues (as opposed to perceived issues) are probably the least of their problems.
This is probably a good deal for Chrysler. As a company, it owes $6b to the UAW. By giving shares, they just converted the debt to equity. No more $6b on the books. That makes Chrysler look stronger to prospective lenders. Cherberus can afford to give up shares to prevent having to pay out of it’s own pocket. The taxpayer wins since it means less we have to give to FIAT…I mean to support Chryco.
I don’t really care who controls the company just as long as they employ workers, pay their suppliers and continue to produce. That way they pay taxes and just maybe payback the taxpayer funded loans.
This is an interesting idea. Wouldn’t it effectively turn Chrysler into a worker owned co-op? If the UAW did have a controlling stake in the company perhaps that would encourage them to up the quality on the line and to be more receptive towards workable pay-schemes,as, after all, if the company goes bust, there is no one to pass the buck and the blame to other than themselves.
The hope is twofold:
* that it would force the UAW to think longer-term when collective bargaining comes around
* that it would force the directors who stand in for the UAW’s interest to demand better of Chrysler’s management (better cars, better plans, etc). Over the past several years, Chrysler’s existence has been geared towards enriching (or at least toeing the line of) it’s owners.
Why would the union agree to this? Even they have to know deep down that there’s no room for Chrysler in the market for the foreseeable future, and that anything other than liquidation is just expensively delaying the inevitable. If I were a Ford or GM UAW member, I’d be pissed that my dues were going to keep a brain-dead competitor on life-support.
Giving Chysler to the UAW is the outside of bankruptcy payoff, the UAW is one of Chysler’s creditors.
If Chysler goes Chapter 7 then the government will be on the hook for the underfunded pension obligations, so there is no win.
If Chysler was a successful company there would be a big risk that the UAW would run it into the ground, but since Chrysler is a failed company, finally destroyed by a private equity firm, there’s really nothing the UAW can do.
The auto bailouts are bad because they are ultimately not going to work, but in the grand scheme of things they are nothing.
This is an automotive site, so it talks about automotive issues, but compared to the kleptocracy going on in the white collar non-union “capitalist” banking industry the auto bailouts are not even worthy of attention.
This is not me using moral relativism, this is you ignoring bankers stealing trillions of dollars because you are being distracted by something not right but trivial going on in the auto industry. Seriously, if I was a conspriacy theorist I would claim that the small auto bailouts were simply designed as a cheap way to destract the masses from the unprecendented, country bankrupting banking bailouts.
The total amount of money spent on the automotive bailouts is still less that the portion of the bailout to one company, AIG, that has gone to foreign countries:
http://www.businessweek.com/the_thread/economicsunbound/archives/2009/03/german_and_fren.html
don1967:
Ha, Ford is controlled by shareholders, that’s a good one. Tell that to the Ford family. And the officer picked directors that are forced on the shareholders with every proxy.
“don1967 :
April 28th, 2009 at 8:30 am
Now this should be interesting. Of the Big Three car companies…
- One will be controlled by a union
- One will be controlled by the government
- One will be controlled by shareholders”
That last line should read:
- One will be controlled by a hereditary dynasty
Ford is not controlled by its shareholders, it is controlled by the heirs of Henry Ford who maintain voting control over the company even though they own only a small fraction of the outstanding stock.
GM was theoretically controlled by shareholders until recently, but in reality was controlled by an insular group of company lifers. In fact, no modern large public corporation is actually controlled by the shareholders.
“Too bad the engineers aren’t part of the UAW. Are the rank and file ready to pay top dollar for top talent at the expense of line workers?”
The engineers could probably join the UAW if they wanted to, and it doesn’t take top dollar to hire and retain good engineers these days.
Its one thing to have a worker co op. That can work.
It’s another thing to give the UAW control of the company.
It’s an interesting bone to throw them; what is the UAW thinking with this? Daimler is paying a few billion to escape Chrysler, the UAW is stepping in where Dr. Z and the Masters of the Universe fear to tread. I predict this will be the origin of anti-union rhetoric for the rest of the 21st century. Hopefully I’m wrong.
no_slushbox
a big +1
A lot of people seem to enjoy confusing capitalism with social darwinism.
Ayn Rand is not an intellectual heavyweight.
That is all.
“Ayn Rand is not an intellectual heavyweight.”
Her ideas sound appealing when you’re 16.
UAW controlling Chrysler is an interesting idea, they really can’t do any worse than the two previous owners of Chrysler, and it gives them a stake in seeing the company become profitable.
And I second (third, I guess?) no_slushboxes sentiments.
John Horner: Ford is not controlled by its shareholders, it is controlled by the heirs of Henry Ford who maintain voting control over the company even though they own only a small fraction of the outstanding stock.
And judging by the events of the last two years, I can only say, “Thank goodness.”
toxicroach: It’s an interesting bone to throw them; what is the UAW thinking with this?
The UAW is between a rock and a hard place. It really has no choice.
This could be interesting…the UAW can learn firsthand just what is involved in running a successful auto company.
I’ll also point out that many of these types of co-op arrangements sprung up in Argentina during their financial crisis, and some of them have lasted and become successful.
Chapter #1 in “Build your own Grosse Pointe Myopia“:
Promoting Problem Employees
I’ve seen this tale unfold more times than you can imagine. Disgusting… and status quo in this industry.
What happens if the UAW doesnt treat them fairly, and they form UAW part deux. The part II strikes on the bosses part I for a larger amount of stock in Chryco.
Now that would be some funny shit right there.
This could be interesting…the UAW can learn firsthand just what is involved in running a successful auto company.
More likely, they’ll learn what is involved in running an unsuccesful company. That said, I can’t see them being allowed to fail for at least four more years. As long as Obama is president and possibly longer, the governmetn will be certain to prop them up with more bailouts.
Is the 55% before or after dilution by government shares arising from the $6 billion?
@Conslaw: if the news reports this AM about the creditors agreeing to a
scalpingmajor haircut are correct, the UAW will have 55%, Fiat 35%, creditors 10%.UAW Motors, home of the Compass and Sebring. Doesn’t that have a lovely ring to it?
@ BDB
“Ayn Rand is not an intellectual heavyweight.”
Her ideas sound appealing when you’re 16.
BDB, did you know me in high school? It took me years to deprogram and become human again.
Today I wore my shoes made in an Argentinian co-op that was forced open by the workers after the owner shuttered the place and fled the country in the wake of the country’s financial collapse ~10 years ago. When he decided to return he wanted his factory back but last I checked the workers have been able to legally resist his claims to ownership.
There’s a lot less need for management and “smart people” than is believed. The best managers are the ones who get out of the way of the people doing the work.
Share ownership and control are two different things. One does not necessitate the other.
Giving the union equity is a way of not paying them what they’re owed, and not having to ever pay them. If the company fails, they’ll get nothing, and have to like it.
From what I’ve seen, the government position on Chrysler is to delay whatever failure may occur and to limit its downside exposure if it does fail. That’s pretty smart thinking.
It doesn’t ultimately matter if Fiat succeeds or not. All that counts is that they get pregnant and take the union with them, while cramming down the creditors in the meantime. Everyone gets to fight over their ownership share of something worth zero if things don’t work out; you couldn’t ask for anything better than that.
The same two parasites that destroyed Chrysler and GM now claim ownership…It’s like an alien parasite invading a human body…Yup…Chrysler and GM are now just bugs in Edgar suits.
“That’s all kind of nuts on all kinds of levels.”
Well, if or when the UAW screws up this awkward marriage, they’ll have only themselves to blame instead of pointing fingers at “management”. Forced accountability?
“BDB, did you know me in high school? It took me years to deprogram and become human again.”
Probably not, but I knew some people like you! Her philosophy appeals to teenagers for obvious reasons–she is asking people to have towards society and/or government the same idiot attitude 99% of teenagers have towards their parents (Feed me. Clothe me. Pay for me. *five minutes later* I HATE YOU GET OUT OF MY LIFE I WAN TO BE LEFT ALONE!!!)
“UAW Motors, home of the Compass and Sebring. Doesn’t that have a lovely ring to it?”
Who gave the OK for those abominations? The “smart” white collar managers. Maybe this will work out, maybe it won’t, but it can’t be any worse than the last two owners. Maybe instead it will be UAW Motors, home of the Wrangler, Minivans, Ram pickup, and 300c.
“Well, if and when the UAW screws up this awkward marriage, they’ll have only themselves to blame instead of pointing fingers at “management”. Forced accountability?”
That’s some of it.
I suggested something like this as a half-joke on an earlier thread, but with the UAW taking over GM and Chrysler being nationalized into the “green” car company. Looks like it’s going to be the other way around.
Who gave the OK for those abominations? The “smart” white collar managers.
Right. Along those lines, I’m waiting for someone to give credit to the UAW for the Corolla and the Corvette. My guess is that I’ll be waiting for quite awhile…
BDB: Maybe instead it will be UAW Motors, home of the Wrangler, Minivans, Ram pickup, and 300c.
The possibilities are endless.
They could call it DeSoto Motors, or Imperial Corporation.
Or, go back to the REAL beginning and call it the Maxwell Motor Car Company. Get the late Jack Benny’s family to approve the use of his image in the ads (a running gag in his routine was that he was too cheap to buy a new car, so he drove an old Maxwell).
“Twentieth Century Motors”. Fiction in 1957 (Atlas Shrugged). (Grim) reality in 2009.
http://www.google.es/search?hl=es&q=“Twentieth+Century+Motors”+”Ayn+Rand”&btnG=Buscar&meta=
Who is John Galt?.
I don’t see the problem with this…employee ownership has worked in many companies over the years.
By the way, I invite anyone who wants to “go Galt” to sell everything and move to, say, a cave in Idaho.
Enjoy yourselves.
Say what you will, but Ms. Rand was no environmentalist. The woman routinely used 900 pages to pitch a message that could have been delivered more succinctly in a short story. The forests that were destroyed in the process make her vapid crimes against literature seem modest in comparison.