STERLING HEIGHTS, Mich. — The United Auto Workers union has no intention of keeping its 55 per cent stake in the new Chrysler and will sell the shares to fund a trust that will take over retiree health care costs next year, the union’s president said Monday.
Speaking to reporters at a news conference in suburban Detroit, Ron Gettelfinger said the trust, called a voluntary employees beneficiary association (VEBA), will struggle at first. It is starting with US$1.5 billion from an existing company health care trust, and will get $300 million from the company next year.
Gettelfinger said that critics who think the union is getting a better deal than Chrysler’s secured debtholders are wrong because the UAW is taking a big risk with Chrysler stock funding the trust. The stock is worthless today, he said.
Some of Chrysler’s creditors, however, are objecting to the deal in bankruptcy court.
After the automaker and Treasury couldn’t come to an agreement with certain debtholders, Chrysler filed for bankruptcy protection Thursday and is trying to emerge in 30 to 60 days as a stronger company that could eventually end up majority owned by Italy’s Fiat Group SpA.
Gettelfinger said the union made concessions in 2007 and this year that have helped the company, although he would not place a specific number on how much the concessions are worth.
“It is billions and billions of dollars in relief to the corporation from the standpoint of cash flow,” Gettelfinger said.
While he said he is confident in the trust’s funding, Gettelfinger warned that VEBA will be “on life support” initially. Benefits already have been cut and could be further reduced depending on funding, he said.
Although the trust has a seat on Chrysler’s new board, it essentially has no voting rights because it must vote with a majority of independent directors, he said.
The union endorsed a deal for Fiat to run Chrysler and potentially take a controlling stake because it was the best option, Gettelfinger said.
“Of all of the alternatives that were out there in front of us, clearly this is head-and-shoulders above anything else,” he added.