BID FOR A GIANT AUTO MAKER : LABOR : UAW Likely to Pressure New Chrysler Boss
Investor Kirk Kerkorian, who has alternately warred with and befriended union leaders in past dealings, stands to inherit renewed labor tensions at Chrysler if he succeeds in his proposed $22.8-billion deal to buy the nation’s No. 3 auto maker.
Officials of the United Auto Workers, after a decade of restraint, have recently begun to press the company harder to curb its reliance on “outsourcing,” or shipping work to outside suppliers, including some in Mexico, which employ lower-paid workers. Labor experts predicted Wednesday that the pressure will continue to mount regardless of who owns Chrysler, now that the company is thriving.
Kerkorian, a Beverly Hills financier, is already embroiled in a nasty labor dispute in Las Vegas, where his MGM Grand development--billed as the world’s biggest hotel--has thwarted union organizing efforts since it opened in December, 1993.
But Matthew Walker, research director for the Hotel Employees and Restaurant Employees Union, said Kerkorian “has had a long history as a developer of premier Nevada casinos, and until late 1993, when the MGM Grand opened, his labor relations with employees in the casino industry were excellent.”
He expressed hope that labor relations at the MGM Grand, whose parent company is looking for a new president, will improve once the new executive is installed.
In fact, in the airline industry, Kerkorian was regarded as a white knight by labor leaders as recently as 1991, when he teamed with unions in an ultimately unsuccessful bid to buy Trans World Airlines.
Walker cited a statement released by the Kerkorian investment vehicle Tracinda Corp. as an indication of Kerkorian’s hopes for friendly relations with the powerful UAW. In the news release, Tracinda executive Alex Yemenidijian said, “We are eager to work with the leaders of Chrysler’s union workers and with management to ensure that all employees see tangible benefits from this transaction.”
For its part, the union declined to comment officially on the Kerkorian proposal. In a statement, UAW President Owen Bieber said: “No one knows for certain what’s going to happen. Our sights and our efforts and those of our UAW-represented members at Chrysler are focused on continuing to build top-quality American cars and trucks.”
A UAW official, who asked not to be identified, said union leaders may be taking a wait-and-see attitude because they doubt Kerkorian is serious about buying the company and merely wants to turn a quick profit in the stock market.
A more important concern among UAW leaders at Chrysler, labor experts said, is that of losing union work to outside suppliers. They said Chrysler relies much more heavily on outside suppliers than does General Motors or Ford. Now that Chrysler is prosperous after years of struggling, union leaders hope to stanch the outsourcing trend.
Two weeks ago, the UAW struck a Chrysler transmission plant in Kokomo, Ind., over such concerns, but the walkout was halted after nine hours when the company agreed to expand the plant’s operations.
The UAW, which says it represents 70,000 of Chrysler’s 97,000 U.S. workers, is likely to try striking another plant soon to extract a similar concession, predicted Sean P. McAlinder, a labor economist with the University of Michigan’s Office for the Study of Automotive Transportation.
“If it works once, do it again,” he said.
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Back From the Brink: Chrysler’s Storied History * 1924: The first Chrysler car, named after company President Walter Chrysler, is introduced. * 1933: Chrysler sales surpass those of Ford after the acquisition of Dodge and the introduction of the Plymouth and De Soto models. * 1950: Chrysler slips to third in sales among U.S. auto makers after failing to change its models for eight years to cut costs. * November, 1978: Chairman John Riccardo hires Lee Iacocca--fresh from being fired from his position as president of Ford Motor Co.--as Chrysler’s president. Iacocca is elected chairman in 1979. * January, 1980: To keep the company--which posted a loss of $1 billion in 1979--out of bankruptcy, Iacocca persuades Congress to provide $1.5 billion in federal loan guarantees to Chrysler. Three years later, Chrysler pays back the loan. * March, 1987: Chrysler makes its biggest acquisition, paying $900 million for Jeep maker American Motors Corp. * December, 1990: Kirk Kerkorian’s Tracinda Corp. announces it has acquired 22 million shares of Chrysler common stock, valued at $272.2 million, at an average cost of $12.37 a share. Tracinda says the purchase is for investment purposes only. The following year, Tracinda announces the purchase of another 6 million shares at an average price of $10.125 each. * March, 1992: Iacocca says he will retire. Robert Eaton, president of General Motors Corp.’s European operations, is the surprise pick to replace him.
* August, 1992: Kerkorian requests a meeting with Chrysler board members to discuss the auto maker’s future after Iacocca. Following the discussions, Kerkorian expresses support for Eaton and withdraws his request for a seat on the board.
* December, 1992: After 13 years as chairman, Iacocca retires. * February, 1993: Tracinda announces the purchase of 4 million shares at $38.75 each. * November, 1994: Kerkorian, in a letter to Chrysler’s Board, outlines the steps he wants it to take to boost the company’s share price. He asks for permission under the Hart-Scott-Rodino act to increase his holdings in Chrysler to 15%. He reiterates his support for management * December, 1994: After Chrysler agrees to Kerkorian’s recommendations for increasing shareholder value, Tracinda reports the purchase of 4 million shares at an average of $47 each. * April, 1995: Tracinda says it intends to acquire the remaining 90% of Chrysler’s shares it doesn’t own for $55 a share, or $20.8 billion, which values the entire company at $22.8 billion. Tracinda says Iacocca is part of the group making the bid.
