Majority Share Gets UAW Seat On Chrysler's Board

Chrysler has begun what it hopes will be a relatively short trip through bankruptcy court in New York. Its hopes for a comeback depend on reducing debt and completing a marriage with Italian automaker Fiat. One important aspect of the overall deal would result in a majority share of the new Chrysler being held by the union that represents its hourly work force.

For the United Auto Workers, this latest journey has been about survival. When President Obama announced the Chrysler deal a week ago, he singled out the union for praise.

"The United Auto Workers, who had already made painful concessions, agreed to further cuts in wages and benefits — cuts that will help Chrysler survive, making it possible for so many workers to keep their jobs and about 170,000 retirees and their families to keep their health care," Obama said.

The president's reference to retiree health insurance is key. As part of earlier contract talks more than a year ago, Chrysler set up a trust to fund its outstanding obligations for the lifetime health care costs of UAW retirees. Only now, there is no money for that.

Under the White House plan to save Chrysler, a major UAW concession has the union accepting company stock instead of cash to fund those retirees' health care benefits. That translates to a 55 percent share of the new Chrysler — once it emerges from bankruptcy.

That's a majority share, but the union cautions that it does not in any way give the UAW control of the company.

"The board seat we've been given, it has no votes," says UAW President Ron Gettelfinger. "We do not have control of that board."

More precisely, it will not be a seat on the board for the UAW. Instead, it is a seat on the board for the retirees' health care trust fund.

Gary Chaison, a professor of industrial relations at Clark University in Massachusetts, says the UAW is in the worst of all possible positions "because it's obligated to provide for health care benefits of retirees, but it must accept stock which is rather shaky to pay for this."

Gettelfinger made it clear that there is no joy at the union's headquarters over its sudden majority stake in Chrysler.

"We are trading debt for equity," Gettelfinger said at a Detroit-area news conference. "What is the value of the equity that we're getting today? Let's be honest: It's zero today."

Gettelfinger said the goal will be for the union to sell off the stock as soon as possible. He added that there is no plan for the union to be a long-term holder of big blocks of Chrysler stock.

"I'd take cash today," Gettelfinger said. "Let us have the money. Let somebody else take the stock, and give us the money."

The UAW president went on to say the union will do its part to make sure Chrysler has highly productive plants that build high-quality vehicles. But he says it's not the union's role to design or market those vehicles.

Chaison says the union did all it could in crisis-level negotiations. It may have gained goodwill for the way it approached a difficult process, but not much clout. There are no guarantees for Chyrsler except that big changes are coming.

"Chrysler is going to be a very different type of company," Chaison says. "We don't know what it's going to look like, what it will produce, whether it will be successful. This is the UAW's biggest nightmare: What if this all fails?"

The union says it is banking on success for the new Chrysler, and the U.S. car market will eventually rebound from its worse-than-dismal current state. Either way, the UAW is a full partner. In holding such a big chunk of a company currently in bankruptcy, the risks are very real.

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