Investor wants to talk with Chrysler workers
Denied entry to DaimlerChrysler’s boardroom, billionaire investor Kirk Kerkorian is looking to the factory floor for support in his effort to buy the automaker’s Chrysler division.
Representatives of Kerkorian’s Tracinda Corp. could meet as early as Sunday with a group of Chrysler workers that has proposed an employee-led buyout of the company, a person familiar with the situation said Friday.
The group, based at a Chrysler plant in Toledo, Ohio, and calling itself the Employee Buyout Committee, made its pitch in an April 9 letter to DaimlerChrysler Chairman Dieter Zetsche. It’s not clear whether the overture has the official blessing of the United Auto Workers, although the head of the UAW hinted Friday that a union bid wasn’t out of the question.
Since unveiling his $4.5-billion all-cash offer for Chrysler two weeks ago, Kerkorian has been unable to arrange a meeting with DaimlerChrysler executives, who reportedly held talks this week with other interested bidders.
Representatives of the employee group couldn’t be reached for comment. Spokespeople for the UAW and Tracinda didn’t return calls seeking comment.
Han Tjan, a DaimlerChrysler spokesman, said the German automaker had received the employee group’s proposal and had forwarded it to the “appropriate department” for consideration.
The potential teaming of a Beverly Hills billionaire with blue-collar assembly line workers in Ohio is the latest twist in a saga that began Feb. 14, when Zetsche first indicated publicly that the struggling Chrysler division might be sold.
Workers are hoping to avoid widespread layoffs as DaimlerChrysler tries to return its American division to profitability. Auburn Hills, Mich.-based Chrysler, the No. 3 U.S. automaker, lost $1.46 billion last year and plans to cut 13,000 jobs, or 16% of its workforce.
The employee group proposed that the UAW acquire a 70% stake in Chrysler through an employee stock ownership plan, with DaimlerChrysler keeping a 30% stake.
The union’s interests could dovetail with Kerkorian’s. Although the investor didn’t propose setting up an employee stock ownership plan to finance the acquisition of Chrysler, his proposal includes granting a significant ownership stake to workers and management.
In addition, a recovery plan outlined by Kerkorian advisor Jerome York -- a former Chrysler executive -- stresses investment in new vehicles and technologies rather than job cuts as the route to profitability.
In addition to Kerkorian, at least three groups have reportedly expressed interest in Chrysler, which also produces Dodge and Jeep vehicles.
Canadian auto-parts supplier Magna International Inc., which has reportedly bid to buy the business for as much as $4.7 billion, is seen by some analysts as the front-runner. Chrysler is Magna’s biggest customer, and the Canadian company’s chief executive is said to have a good relationship with the UAW.
Cerberus Capital Management and a consortium of investors led by Blackstone Group each are expected to make bids.
Workers fear that ownership by a private equity firm would lead to even greater cuts as the new owners tried to reap a quick return on their investment.
“The push for this obviously is because they want to keep private equity out of it,” Catherine Madden, an automotive analyst at consulting firm Global Insight Inc., said of the Toledo employee group’s overture.
Although the UAW hasn’t publicly endorsed the workers’ proposal, union President Ron Gettelfinger told a Detroit radio audience that “we haven’t ruled out anything at this point in time.”
Bloomberg News was used in compiling this report.
