chrysler is sold, and its workers’ future too?

Posted on May 14, 2007

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I have a friend who wakes up at dawn every morning to go to work at Chrysler.

He has done it for the past 20 years.

His job has helped him raise his family, put his son in one of the country’s top colleges, while his daughter is going in a couple of years. The job has also paid for a comfortable ranch house in the suburbs outside of Detroit.

At a time when he should be thinking about the pension and health care benefits he has been guaranteed, the brakes are suddenly pulled on. Hard.

Today, the rumor that has been brewing for months has become reality. Chrysler, one of Detroit’s struggling auto companies, will be severed from its “equal partner” Germany’s DaimlerChrysler, to be bought by private equity group Cerberus for $7.4 billion. (Compare that to 1998, when Daimler paid $35 billion for Chrysler as a “merger of equals”.)

With that, Daimler and Chrysler will unwind a nine-year partnership that has not borne the fruit that was hoped.

Daimler will also be free of much of the pension and health care costs that belongs to Chrysler.

What will happen to my friend?

Organizations that were supposed to protect him and had initially opposed the sale, like the United Automobiles Workers union, have come out in support of the deal, calling it in the best interest of its members although it said it couldn’t disclose why.

Cerberus said they would keep the existing management in place and also won’t enact more job cuts than those already announced. Earlier this year, it had announced 13,000 job cuts.

Having a private equity firm owning Chrysler, even one as involved in the auto industry as Cerberus, is cold comfort to my friend the Chrysler employee.

Equity firms are known for being asset strippers and its brutal focus on the bottomline, which usually means heavy job cuts and loss of benefits. Companies like Chrysler could also be torn up and resold, to flip a profit.

No new job cuts for now doesn’t mean no more job cuts ever. And being a privately-held firm, it could take action swiftly if (and when) it decides on dropping the axe.

In a free market, the rules dictate that the best companies survive. No doubt companies like Detroit’s big three are having a hard time competing against the nimbler and more efficient Japanese auto companies.

Shareholders, some of whom have invested their hard-earned cash into Chrysler’s shares, deserve to see their holdings make money.

I understand it’s about the survival of the fittest. We’re all subjected to it. It’s a tough world, but I can’t help feeling for guys like my friend out there. Guys who had been loyal, worked hard and put more than half their lives into a company, hoping to reap the benefits of that labor when they get older, now being the most vulnerable to possibly losing it all.

Shareholders can praise the sale as helping the company finally focus on getting better and that would ultimately benefit those tied to it. No doubt it would work towards that direction. But before it gets there, would guys like my friend have a chance of seeing that happen? Will they enjoy the comfortable retirement that they had worked so hard for and deserve? I really hope so, but I’m not optimistic.

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Posted in: business, cars, job, US