So Fiat gets 3 seats on the board, the UAW gets one (and it can't vote). How many voting seats in total does the new board have, and who gets them?
BTW, I heard this morning that Fiat does not plan to walk away on June
15 if this deal isin't done by then.-------------------------------------------------
Union hopes to sell off its 55% stake ? if anyone will buy. by Michael Strong on May.05, 2009
The UAW becomes the majority stakeholder but a minority voice if the Chrysler-Fiat deal is ultimately approved by the bankruptcy court.
With his usual dry delivery, United Auto Workers President Ron Gettelfinger told a room full of reporters, Monday evening, just how much control the UAW?s health-care trust would have over the new Chrysler. Zip, nada, zilch.
?The board seat we?ve been given has no votes,? he said with a sarcastic smile.
Gettelfinger and other senior UAW officials met with local bargaining unit leaders in Sterling Heights, Michigan, today to provide them with an update on the status of Chrysler?s bankruptcy proceedings.
The UAW healthcare trust would receive a 55% stake in a new Chrysler, but no voting role on the board on which it would hold just one seat, according to a plan filed with a U.S. Bankruptcy Court Sunday. The plan aims to grease the skids for a quicker hook up with Italy?s Fiat SpA - which will get three seats.
Call it the new corporate math. Under the plan approved by the Treasury Department, and now facing court scrutiny, Fiat would hold a 20% stake in the new Chrysler, but effectively take control. Fiat Chief Sergio Marchionne is expected to lead the new venture. The U.S. government would control 8% and the Canadian and Ontario governments together would hold 2%.
Subscribe to TheDetroitBureau.comGettelfinger said the Voluntary Employee Beneficiary Association, a health-care trust that is exchanging debt-for-equity in the new company, is accepting a lot of risk under the plan, and will be stressed by the deal. He also used the forum to push aside complaints from a group of lenders alleging that the UAW is getting preferential treatment under the plan.
?If the UAW?s been treated (preferentially), let?s just take a look at the facts. We are trading debt-for-equity and what is the value of the equity of what we?re getting today? Let?s be honest, it?s zero today. The VEBA is going to be very stressed because of the agreement we?re under here,? Gettelfinger emphasized.
The VEBA was created as part of the 2007 contract talks between Chrysler and the UAW (with similar benefit programs created for Ford Motor Company and General Motors Corporation). The idea was to shift responsibility for managing the domestic industry?s huge health care liabilities to the union - and off of the books of the troubled Big Three ? financial engineering not unlike the kind that led to the Great Recession.
But when the U.S. auto industry began to melt down, in mid-2008, the promising program suddenly didn?t look like such a good idea, at least for the suddenly cash-strapped automakers, and in recent months, they?ve been pressing to swap equity for the promised cash contributions. In the case of Chrysler, health care obligations total $10.9 billion for
82,000 workers and retirees. But now the VEBA will have just $1.5 billion in cash, with the promise of another $300 million contribution from Chrysler, next year.?The VEBA will be on life support initially,? said the union chief, noting that some cuts in retiree benefits will be required. ?We took a lot of risks here.?
There is a potential upside. If Chrysler recovers, the stock could increase sharply in value, something that happened after the automaker was bailed out by Washington in 1981. But there are plenty of doubters who question whether history will repeat itself.
The union, of course, has to hope for the best outcome, and Gettelfinger said the VEBA will sell off its equity in the new Chrysler as soon as it can- that is, if anyone will be interested in buying.
?As you can see, as soon as the VEBA?s in a position to where we can sell stock, we will be required to sell stock in order to keep the benefits going,? Gettelfinger said. Left unsaid was another option, adjust the benefits to the VEBA?s income from dividends.
While not focusing on General Motors, he said he expected the current Chrysler plan would be used as a blueprint for a GM bankruptcy filing, if it came to that. However, Gettelfinger declined to speculate further since he felt the outcome for GM could still be dramatically different.
He again dismissed the notion that the UAW was playing puppet-master in its dealings with the two automakers: now and in the future.
?People can say whatever they want. For us, we?re in the same position we were when before we got into this from the standpoint of our control over anything. Obviously we?ve worked very closely with the companies over the years,? Gettelfinger said. ?We don?t design vehicles, we don?t engineer vehicles, we don?t make decisions on where to put product, we don?t make marketing decisions?those kind of things don?t belong to us, never have and they don?t now.?