Despite 55 Percent Stake, UAW Will Not Control Chrysler
As it grows more likely that the United Auto Workers will approve a tentative agreement reached with Chrysler on Sunday that would give the union 55 percent equity in the automaker, speculation that the union will essentially have control of the company has taken root. However, sources close to the negotiation have confirmed that the union will not get control of Chrysler.
The UAW is expected to approve an agreement that would create an independent trust to oversee the Voluntary Employees’ Beneficiary Association fund, which would then receive half of its value in Chrysler equity – which amounts to 55 percent. Some have said this will give the UAW control through voting rights.
Citing “two people familiar with the negotiations,” the Detroit News says it has been confirmed that the health care trust’s stake in Chrysler will not translate to voting rights. While the trust is likely to get at least one member on the new Chrysler board, the UAW will not have control through majority voting rights.
Chrysler’s equity is currently divvied up between private investing company Cerberus Capital Management and former owner Daimler. Daimler sold 80.1 percent of its stake in Chrysler to Cerberus in 2007. If Chrysler manages to convince its lenders to accept concessions and avoid bankruptcy, Cerberus would have no interest in the restructured automaker. Daimler has already agreed to forfeit its stake.
The UAW wants Chrysler to avoid liquidation, as that would likely eliminate all VEBA funding, immediately terminating the health care coverage of all retirees.
Source: The Detroit News