J
Jim Higgins
Chrysler for sale? It's a hot topic
http://www.freep.com/apps/pbcs.dll/article?AID=/20070216/BUSINESS01/702160322/1014
Speculation swirled Thursday about the fate of the Chrysler Group in the
wake of DaimlerChrysler Chairman Dieter Zetsche's indication that a sale of
the Auburn Hills-based unit is being considered.
Meanwhile, the Chrysler Group reached an agreement Thursday with the
Canadian Auto Workers over 2,000 buyouts and retirement packages worth up to
$115,000 Canadian ($98,000 U.S.) that observers say will set the table for
what will be offered to U.S. hourly workers to trim their ranks by 9,000.
The job cuts -- 13,000, including 2,000 salaried positions -- were the
centerpiece of cost-saving actions outlined Wednesday in Chrysler's second
restructuring effort of the 21st Century.
But most of the attention -- and impetus for DaimlerChrysler's soaring stock
price -- went to Zetsche's refusal to rule out the sale or spin-off of the
Chrysler Group, which lost $1.5 billion last year.
"This has been a hotter topic than whatever GM or Ford did last year," said
George Magliano, director of automotive research for the Americas at
consulting firm Global Insight.
Speculation grows
Zetsche's statements represent a dramatic change of message from
DaimlerChrysler, which had up to that point been saying the Auburn
Hills-based unit was not for sale.
A top German magazine has reported that General Motors Corp. might buy
Chrysler. Other reports say GM and Chrysler are talking about developing
models together, including a report in the Wall Street Journal of a jointly
developed large SUV like the Chevrolet Suburban.
German business newspaper Handelsblatt reported that JPMorgan has been hired
to examine three options for Chrysler: a sale, a possible spin-off or a
continued integration of the companies.
Chrysler and GM officials declined comment. "We do not comment on
speculation," a GM spokesperson said. Chrysler spokespeople say they don't
want to add to even more speculation after weeks of buildup to Wednesday's
announcement of the company's plan to return to profitability by 2008.
"All of the rumors that are out -- whether they be in Europe or on Wall
Street -- everybody seems to be an expert on everything and who has talked
to who or whatever. We're just not going to comment on the rumors, and I
will just go back that strategic options are open," Chrysler Chief Executive
Officer Tom LaSorda told Paul W. Smith on WJR-AM (760) on Thursday. "We'll
look at it."
Ronald Tadross, an analyst with Bank of America Equity Research, estimated
in a note that Chrysler Group could be worth $5 billion.
How separation could work
JPMorgan analysts Himanshu Patel and Ranjit Unnithan wrote in a note
Thursday that a narrow alliance between Chrysler and GM could make sense if
it focused on select products, such as minivans and small cars or
technology.
"A sweeping alliance between the two (Renault-Nissan style), however, would
seem to benefit Chrysler much more than GM given GM's" size: twice as big as
Chrysler in the United States and three times as big worldwide, they wrote.
"Without an 'equalizing payment' (to GM), we suspect GM would reject such a
sweeping alliance on the argument that the potential synergies would be
largely skewed towards Chrysler (as it did with Renault-Nissan alliance
proposal)."
One other way it could happen, they said: if the unions gave significant
concessions on health care and headcount, because they fear the prospect of
Chrysler being purchased by a private investor.
"The lure of such a deal could be a strong incentive (for the union) to
agree to a Goodyear-style health care deal for the Big Three carmakers,"
they wrote.
Last month, GM Chief Executive Officer Rick Wagoner said the Detroit
automaker was studying Goodyear's contract with the United Steelworkers of
America, which ended a 3-month strike and transferred health care
liabilities to an independent trust fund.
Zetsche's comments came just months before the labor contract between the
UAW and company expires in September. Official negotiations are to begin
this summer.
Harley Shaiken, a professor at the University of California, Berkeley, who
specializes in labor issues, called the timing "quite significant."
"Putting it on the table on the eve of the negotiations is an interesting
move. ... In some way, they may want that as a signal for the UAW, but it is
unclear what that signal is going to mean."
He said a spin-off or sale would be difficult before negotiations are
concluded. "Any buyer is going to want to know what the outcome of the
negotiations are going to look like before they move," he said.
About the CAW packages
CAW members at Windsor Assembly Plant, Brampton Assembly Plant and Etobicoke
Casting Plant eligible for early retirement will be offered packages ranging
from $70,000 to $85,000 Canadian, plus a $30,000 car voucher.
People eligible to retire who decline all postretirement benefits -- other
than pension -- would receive an additional $40,000 Canadian.
Other workers will be offered buyout packages worth between $50,000 and
$100,000 Canadian, depending upon length of service.
"These incentives are an effort on the part of the union and company to
protect the jobs of CAW members with young families, and at the same time
will help with the transition for retirement-eligible workers," CAW
President Buzz Hargrove said in a statement.
Ken McCarter, DaimlerChrysler vice president of labor relations, said in a
statement that the package allows the company "to become more productive and
thus more competitive" with "socially responsible separation incentives."
"With this agreement, we can support those who choose to leave the company
and lower the number of employees on layoff," he said.
The plan unveiled Wednesday also calls for closing an SUV plant in Newark,
Del., and eliminating one shift each at a St. Louis minivan plant and at the
Warren Truck Plant.
About 5,300 of the 13,000 jobs to be cut will be in Michigan.
"With this recovery and transformation plan, the headcount reductions are
tough. I mean, it's tough for the employees," LaSorda said in the radio
interview Thursday. "But when we looked at our overall attrition curves,
there's a lot of people that we would hope that fall into the retirement
category, and we could follow a volunteer approach here. I think that will
help somewhat."
The company has not reached an agreement with the UAW on buyout or
early-retirement packages. Chrysler has said hourly workers should learn of
buyout and retirement packages within a month.
Chrysler spokesman David Elshoff cautioned "not to draw parallels between
the two."
"I think the UAW packages will have to be a little bit more generous ...
considering the health care differences between Canada and the U.S.," said
Bradley Rubin, an automotive analyst with BNP Paribas in New York.
Shaiken said the delay for UAW buyout packages is not surprising, especially
considering the UAW contract with Chrysler expires soon.
"There is more at stake here on the eve of the negotiations," Shaiken said.
"Even though you've got packages already in place with Ford and General
Motors, I think the UAW wants to be sure that what it negotiates here both
meets the needs of Chrysler workers. And Chrysler may be asking for
something in relation to what its bargaining strategy is going to be -- it
may be raising other issues."
Chrysler Group has failed to win mid-contract health care cost concessions
from the UAW that workers at GM and Ford Motor Co. have approved.
Spokespeople for the UAW could not be reached for comment.
Despite the turmoil and uncertainty, LaSorda said the company has to work to
control its own fate.
"We are here regardless of what happens," LaSorda said on the radio. "We
must deliver this transformation plan and get this company back on solid
footing financially."
http://www.freep.com/apps/pbcs.dll/article?AID=/20070216/BUSINESS01/702160322/1014
Speculation swirled Thursday about the fate of the Chrysler Group in the
wake of DaimlerChrysler Chairman Dieter Zetsche's indication that a sale of
the Auburn Hills-based unit is being considered.
Meanwhile, the Chrysler Group reached an agreement Thursday with the
Canadian Auto Workers over 2,000 buyouts and retirement packages worth up to
$115,000 Canadian ($98,000 U.S.) that observers say will set the table for
what will be offered to U.S. hourly workers to trim their ranks by 9,000.
The job cuts -- 13,000, including 2,000 salaried positions -- were the
centerpiece of cost-saving actions outlined Wednesday in Chrysler's second
restructuring effort of the 21st Century.
But most of the attention -- and impetus for DaimlerChrysler's soaring stock
price -- went to Zetsche's refusal to rule out the sale or spin-off of the
Chrysler Group, which lost $1.5 billion last year.
"This has been a hotter topic than whatever GM or Ford did last year," said
George Magliano, director of automotive research for the Americas at
consulting firm Global Insight.
Speculation grows
Zetsche's statements represent a dramatic change of message from
DaimlerChrysler, which had up to that point been saying the Auburn
Hills-based unit was not for sale.
A top German magazine has reported that General Motors Corp. might buy
Chrysler. Other reports say GM and Chrysler are talking about developing
models together, including a report in the Wall Street Journal of a jointly
developed large SUV like the Chevrolet Suburban.
German business newspaper Handelsblatt reported that JPMorgan has been hired
to examine three options for Chrysler: a sale, a possible spin-off or a
continued integration of the companies.
Chrysler and GM officials declined comment. "We do not comment on
speculation," a GM spokesperson said. Chrysler spokespeople say they don't
want to add to even more speculation after weeks of buildup to Wednesday's
announcement of the company's plan to return to profitability by 2008.
"All of the rumors that are out -- whether they be in Europe or on Wall
Street -- everybody seems to be an expert on everything and who has talked
to who or whatever. We're just not going to comment on the rumors, and I
will just go back that strategic options are open," Chrysler Chief Executive
Officer Tom LaSorda told Paul W. Smith on WJR-AM (760) on Thursday. "We'll
look at it."
Ronald Tadross, an analyst with Bank of America Equity Research, estimated
in a note that Chrysler Group could be worth $5 billion.
How separation could work
JPMorgan analysts Himanshu Patel and Ranjit Unnithan wrote in a note
Thursday that a narrow alliance between Chrysler and GM could make sense if
it focused on select products, such as minivans and small cars or
technology.
"A sweeping alliance between the two (Renault-Nissan style), however, would
seem to benefit Chrysler much more than GM given GM's" size: twice as big as
Chrysler in the United States and three times as big worldwide, they wrote.
"Without an 'equalizing payment' (to GM), we suspect GM would reject such a
sweeping alliance on the argument that the potential synergies would be
largely skewed towards Chrysler (as it did with Renault-Nissan alliance
proposal)."
One other way it could happen, they said: if the unions gave significant
concessions on health care and headcount, because they fear the prospect of
Chrysler being purchased by a private investor.
"The lure of such a deal could be a strong incentive (for the union) to
agree to a Goodyear-style health care deal for the Big Three carmakers,"
they wrote.
Last month, GM Chief Executive Officer Rick Wagoner said the Detroit
automaker was studying Goodyear's contract with the United Steelworkers of
America, which ended a 3-month strike and transferred health care
liabilities to an independent trust fund.
Zetsche's comments came just months before the labor contract between the
UAW and company expires in September. Official negotiations are to begin
this summer.
Harley Shaiken, a professor at the University of California, Berkeley, who
specializes in labor issues, called the timing "quite significant."
"Putting it on the table on the eve of the negotiations is an interesting
move. ... In some way, they may want that as a signal for the UAW, but it is
unclear what that signal is going to mean."
He said a spin-off or sale would be difficult before negotiations are
concluded. "Any buyer is going to want to know what the outcome of the
negotiations are going to look like before they move," he said.
About the CAW packages
CAW members at Windsor Assembly Plant, Brampton Assembly Plant and Etobicoke
Casting Plant eligible for early retirement will be offered packages ranging
from $70,000 to $85,000 Canadian, plus a $30,000 car voucher.
People eligible to retire who decline all postretirement benefits -- other
than pension -- would receive an additional $40,000 Canadian.
Other workers will be offered buyout packages worth between $50,000 and
$100,000 Canadian, depending upon length of service.
"These incentives are an effort on the part of the union and company to
protect the jobs of CAW members with young families, and at the same time
will help with the transition for retirement-eligible workers," CAW
President Buzz Hargrove said in a statement.
Ken McCarter, DaimlerChrysler vice president of labor relations, said in a
statement that the package allows the company "to become more productive and
thus more competitive" with "socially responsible separation incentives."
"With this agreement, we can support those who choose to leave the company
and lower the number of employees on layoff," he said.
The plan unveiled Wednesday also calls for closing an SUV plant in Newark,
Del., and eliminating one shift each at a St. Louis minivan plant and at the
Warren Truck Plant.
About 5,300 of the 13,000 jobs to be cut will be in Michigan.
"With this recovery and transformation plan, the headcount reductions are
tough. I mean, it's tough for the employees," LaSorda said in the radio
interview Thursday. "But when we looked at our overall attrition curves,
there's a lot of people that we would hope that fall into the retirement
category, and we could follow a volunteer approach here. I think that will
help somewhat."
The company has not reached an agreement with the UAW on buyout or
early-retirement packages. Chrysler has said hourly workers should learn of
buyout and retirement packages within a month.
Chrysler spokesman David Elshoff cautioned "not to draw parallels between
the two."
"I think the UAW packages will have to be a little bit more generous ...
considering the health care differences between Canada and the U.S.," said
Bradley Rubin, an automotive analyst with BNP Paribas in New York.
Shaiken said the delay for UAW buyout packages is not surprising, especially
considering the UAW contract with Chrysler expires soon.
"There is more at stake here on the eve of the negotiations," Shaiken said.
"Even though you've got packages already in place with Ford and General
Motors, I think the UAW wants to be sure that what it negotiates here both
meets the needs of Chrysler workers. And Chrysler may be asking for
something in relation to what its bargaining strategy is going to be -- it
may be raising other issues."
Chrysler Group has failed to win mid-contract health care cost concessions
from the UAW that workers at GM and Ford Motor Co. have approved.
Spokespeople for the UAW could not be reached for comment.
Despite the turmoil and uncertainty, LaSorda said the company has to work to
control its own fate.
"We are here regardless of what happens," LaSorda said on the radio. "We
must deliver this transformation plan and get this company back on solid
footing financially."