UAW: We Shall Not Be Moved To Sell
Sergio Marchionne can’t wait to get his hands on the 41.5 percent of Chrysler, which are in the hands of the UAW’s VEBA trust. Once Fiat is in total control, Fiat and Chrysler could be merged, and the cash could be used to … but you know the drill from years back. Currently at stake are 3.3 percent. Fiat has a call option, but the UAW trust doesn’t want to fork the shares over.
Fiat’s wants to pay $139.7 million, the union demands at least $342 million, says Reuters.
The UAW says it would be a crime to sell the nice shares for anything less than $342 – literally “Sale of the called shares at the price calculated by Fiat would constitute a transaction prohibited by applicable federal law,” the UAW Retiree Medical Benefits Trust said..
Fiat sued. The fund countersued. The matter is now in Chancery court in Delaware.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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I can't find the actual filings online, but from reading the various summaries by Reuters, Businessweek, etc., it sounds like this isn't just a disagreement about market value, but about what they're valuing at all: "One point of contention is whether Chrysler's value would be determined in relation to Fiat or Fiat's parent. Fiat claimed that a clerical error in the agreement linked Chrysler's value to Fiat's North American unit, even though the parties intended it to be the parent. The UAW trust disagreed." I can't tell if Fiat is arguing that the contract is wrong and the court should apply what the parties intended, and the UAW disagrees with what Fiat's contention, or if Fiat is saying that the court should apply an obviously wrong provision of the contract, even though both parties agree that they didn't intend for the contract to read that way. Knowing that would go a long way toward answering which side is being the greedy one here.
Marchionne's offer price suggests that he's basing it on a valuation of $4.2 billion. Over the last four quarters, net profits were $1.5 billion. He's lowballing. Unless the company is heading back into bankruptcy or steep decline, there's no reason for any shareholder to sell out at that price. This story probably has more to do with the bigger picture effort to integrate Chrysler and Fiat than it does with the UAW per se. The Wall Street Journal covered this some months ago, and was probably onto something with its assessment in this article: http://blogs.wsj.com/drivers-seat/2012/06/28/fiat-to-increase-stake-in-chrysler/
Okay....So here is my question.Re the UAW Chrysler situation. Where is the money coming from to finance the retirees untill this issue is settled? In Canada the legalities were qustioned. Class action law suits were filed. The whole mess took about three years to settle. During the interim period, GM picked up the retirees health care costs.Once the dust all settled, GM had to be paid back. The payback money took a large bite out of the original sum. Now our Health Care Trust {HCT} has a shortfall of funds. All GM retirees were forced to take a cut in benifits. Chrysler, and Ford Canada retirees,with thier smaller numbers, did not have to take a reduction. At GM Canada we have 5000 active workers,and 30,000 hourly retiree's Me thinks this situation will get worse,before it gets better.
Why the heck does he want to get control of chyrco at this point and merge with fiat auto, at this point it might make more sense to move Maserati, Alfa and Ferrari over to the Fiat Industrial (along with the chryco shares and Fiat's banking Group), and divest Fiat auto. It is hanging onto Opel's and PSA's coattails (draging in the mud) in europe right now. (however might give alittle leverage and motivation when dealing with the italian unions, which seem to make dealing with the French unions pleasant), but at worst would allow him to save the good parts (didn't imagine a day I would call Chryco the good part) w/o the headache of a euro bk involving Fiat Auto.