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UAW Says Won't Control Chrysler

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[source: Wall Street Journal]

UAW Says Won't Control Chrysler

The United Auto Workers president is seeking to distance his union from direct responsibility for the future of Chrysler LLC, noting 55% of the auto maker will be owned by a retiree health care trust fund and not the union itself. "It's this independent trust that will own these shares," UAW President Ron Gettelfinger said on the Fox Business Network Friday morning. Mr. Gettelfinger's office did not immediately respond to interview requests.

The trust--known as a Voluntary Employee Beneficiary Association, or VEBA--is supposed to take ownership of 55% of Chrysler as part of a government-brokered cost-cutting plan that union workers ratified earlier this week. Chrysler filed for federal bankruptcy protection Thursday.

Mr. Gettelfinger also implied in the Fox interview that the UAW would be able to act independently, even strike if necessary, despite the fact that the union would own a critical piece of the company through the VEBA trust.

"The VEBA is controlled by the outside independent directors who have been appointed by a judge to serve on that," he said. "We have less UAW representation on the VEBA. And as far as the board seat that the VEBA is going to get [on the Chrysler board] with the approval of the UAW, the voting will be done by independent directors….So, I don't see that conflict of interest issue."

Mr. Gettelfinger added that "we have issues and occasionally we'll have a strike but we settle 98% of our agreements without any kind of an altercation with the employer. It's in our best interests. It's in their best interests."

As part of a restructuring worked out before the bankruptcy filing Thursday, the UAW agreed to take half of its debt obligation to its retiree health care trust in equity. The union also consented to extend the timing of the payments to 23 years.

"This creates additional risk for the retirees' health care; however, with the company being successful, we'll need to turn that stock around, and we have provisions worked in the agreement that even though it won't be a public company until later on, we'll be able to sell those shares under certain circumstances," Mr. Gettelfinger said in his television interview.

He also defended the union's position, which may have placed the UAW in a better position that Chrysler's secured lenders.

"We did the very best that we could, but let's step back. Again, in '07, we reduced the company's obligation to the retirees down to about 60%, so that's 60 cents on the dollar, and that's the position we were in going into this," Mr. Gettelfinger said. "But let me say this, and the President made it clear, that all the stakeholders had to give something."

The head of the UAW expressed confidence that the pre-packaged deal for Chrysler's reorganization in bankruptcy would receive quick court approval.

"Treasury supports this agreement, Chrysler supports this agreement, and Fiat supports this agreement. All of together are going to petition the judge to enforce these agreements," he said.

Until late Wednesday, the UAW hoped that Chrysler would remain viable on its own. "We would have preferred by far and away that Chrysler not go into bankruptcy," he said.

Now, Mr. Gettelfinger said the UAW will turn more of its attention to General Motors Corp. which has until the end of May to secure its own restructuring, according to President Obama's auto industry task force.

"Obviously, at lower levels there has been some discussions at General Motors but it is not escalated to the point where we're in Treasury and them serving as a mediator, if you will, to resolve issues," he said. "But, there's been a lot of discussion and a lot of preparation work but it's just not moved to the front burner but it will now that the Chrysler situation is in play."

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