By on November 13, 2012

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.

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19 Comments on “UAW: We Shall Not Be Moved To Sell...”

  • avatar

    Right there is a several hundred million dollar tax payer gift to the UAW from the Obama administration. I know many people who once bought GM, Ford, and Chrysler vehicles even though they were inferior and overpriced relative to Toyota and Honda. Many of these faithful now switching. Thank the UAW.

    In my opinion, the next big financial crisis will be on us shortly. Chrysler will sink. Sergio, just sit back and wait. Those UAWers will be begging for you to pay $25M for their shares.

    • 0 avatar

      What do you base your opinion on? Why will Chrysler sink before Ford or GM or Mitsubishi or Mazda, or anyone else?

      Not a word of fact, or even well thought out, just another Chrysler hater.
      Mark my words, boy, Chrysler will be around longer than you will be.

      • 0 avatar

        “Why will Chrysler sink before Ford or GM or Mitsubishi or Mazda, or anyone else? ”

        Chrysler does have a pretty consistent track record of going boom once every generation or so.

        They also have the Jeep curse working against them.

      • 0 avatar

        “Why will Chrysler sink before Ford or GM or Mitsubishi or Mazda, or anyone else?”

        Jimboy, I have nothing but love for Chrysler(second only to GM) and want to see them succeed. However, if you look at financial statements you will see Chrysler’s quarterly profits in the $300 to $600 million range with a completely revamped lineup and monthly sales increases twice the market rate. What will happen once sales inevitably decline as the product lineup gets old? Incentives need to be pumped up too once this happens.

        For comparison, GM North America is consistently making $1.8B to $2.5B in net profits every quarter, this with 70% of their sales coming from products at the very end of their life cycle. GM’s biggest cash cows, the Silvy, Sierra, Avalanche, Tahoe, Suburban, Escalade, Yukon, Acadia, Enclave and Traverse are at least 6 years old needing heavy incentives to sell and are selling at a depressed rate due to being so outdated.

        These factors in addition to Fiat’s troubles in Europe along with being tied to a boat anchor called the UAW has me worried about Chrysler’s future.

      • 0 avatar

        alluster, I would look at it more this way; What will Chrysler’s profits be like when all of the product currently in the pipeline hits the showrooms?

        The current lineup of profit generators is for all intents an purposes, legacy product. The only true new Fiatsler model currently on the floor is the Dart (selling quite well but only on the market for a few months now).

        If Chrysler is outpacing market growth on the backs of 200s and Avengers (83% growth!) what happens when the launch of their new more competitive D segment hits? I don’t think it’ll be more cash on the hood.

    • 0 avatar

      Chrysler’s still in phoenix mode, happens ever twenty years or so. I don’t see them failing in the short term, perhaps after a decade of mismanagement I could see it.

  • avatar

    The UAW sounds kind of like that home owner in 2006 that was holding out just “a couple more years” for a higher price. By all accounts Chrysler is riding high right now. If history is any lesson, it will not last forever. They would be wise to sell.

  • avatar

    @200k-min…I have to agree with you,sell now and diversify. In Canada our retiree health fund is set up diffferent. The CAW settled for a lump sum of cash. What we do have in common wth the UAW is that there is no more cash comming.

    It needs to be wisely administered. We have a board of trustees that are charged with investing our money. Thankfully half of said trustees,are non union appoinments.

    Fact of the matter is,a fund is a fund,subject to funding.

    However,all that said, the shares do belong to the UAW. The UAW and the U.S treasury, along with the Canadian federal and Ontario governments all own share in GM and Chrysler.

    A share holder can buy, and sell, and keep, as they see fit.

    • 0 avatar
      bumpy ii

      They can, unless the acquisition of those shares came with conditions. This is where the chancery court comes in. To take a wild guess, the UAW will have to either honor Fiat’s call, or buy it off with cash the UAW doesn’t have.

  • avatar
    el scotto

    So basically Fiat and the UAW are in a pissing contest over the value of a stock that’s been privately held since Cerebus took over Chrysler. Let the festival of 10,000 PowerPoints begin.

  • avatar

    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.

    • 0 avatar

      Somehow you’d think that Chrysler’s value would be linked to Chrysler, unless I’m missing something obvious?

      A signed contract is a contract, regardless of whether its content was written in clerical error or not. Wouldn’t a company like Fiat make sure that someone has thoroughly proof-read a multi-billion dollar contract?

      • 0 avatar

        It’s not about what I think, it’s about what the parties intended. If both parties clearly understood that the value would be determined in a certain way, that’s the way value should be determined. I can’t tell from the story (Reuters’ story; Bertel’s doesn’t get into that level of detail at all) whether Fiat’s trying to get out of paying $200 million dollars based on a typo, or if the UAW is trying to grab an extra $200 million dollars by arguing that the parties didn’t mean what they said. There’s a difference.

    • 0 avatar

      “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.”

      Presumably, the VEBA owns shares in Chrysler Group, LLC. Chrysler Group, LLC was created as a result of the 2009 bankruptcy, and it acquired the assets of the old Chrysler-Cerberus entity.

      If Chrysler Group, LLC subsequently acquired the Fiat unit, then I suppose that this could make sense. But why the shareholders would have approved of such a thing, I don’t know.

      It sounds as if Fiat is trying to create a sort of poison pill. They want to deliberately depress the share value in order to justify a low price. The VEBA is wise to give them pushback for that claim.

  • avatar

    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:

  • avatar

    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.

    • 0 avatar

      The situation you describe with the Big 3 is only a symptom of what is to come for our health care and pension programs in our society as a whole as the entitled Boomers come to collect.

  • avatar

    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.

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