Marchionne may struggle to secure UAW's Chrysler stake; $6 billion at stake

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Thread: Marchionne may struggle to secure UAW's Chrysler stake; $6 billion at stake

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    Marchionne may struggle to secure UAW's Chrysler stake; $6 billion at stake

    Marchionne may have a struggle to secure U.S. union's Chrysler stake
    Fiat CEO to face UAW's Chrysler director over $6 billion in stock

    August 13, 2012

    DETROIT (Bloomberg) -- Sergio Marchionne drives a hard bargain. After all, the Fiat CEO gained control of Chrysler Group in 2009 for nothing.

    Now, he may have met his match in his own boardroom.

    Erickson Perkins, a close adviser to United Auto Workers President Bob King with an extensive Wall Street background, is on Chrysler's board as the representative of the U.S. union's retiree health care trust. He and Marchionne are about to begin a multibillion-dollar struggle over the union's Chrysler stake.

    Marchionne needs the trust's 41.5 percent of Chrysler to get full control and access to the automaker's cash, so he's a motivated buyer and Perkins knows it. At the same time, the trust has much of its assets tied up in stock that doesn't trade on any market. It can't pay its bills with shares of Chrysler, a company that required two government rescues in 30 years, so it's a motivated seller. Marchionne knows that, too.

    At stake: About $6 billion.

    "You've got a savvy discount buyer in Marchionne, who got 60 percent of Chrysler for bargain-basement value, negotiating with a guy with Wall Street background that has impetus to wind his trust's equity stake down," Eric Selle, a JPMorgan Chase & Co. analyst, who advised Perkins during GM's bankruptcy process, said in a telephone interview. "It's going to be a tough negotiation."

    Shrewd, 'invaluable'

    Perkins, 57, is described by those who have worked with him as shrewd and analytical, with a gift for absorbing information. King called him "invaluable." He joined Chrysler's board June 10 to represent the union's Voluntary Employee Beneficiary Association, known as VEBA. The fund holds all the equity in Chrysler that isn't owned by Fiat.

    A full merger with Chrysler means access for Fiat to its American partner's cash, a stockpile that had swelled to $12.1 billion by the end of the first half. The U.S. carmaker has been propping up its majority owner, Fiat, as it piles up losses in Europe's auto market, which is headed for a fifth straight year of declines.

    Asked by an analyst on Chrysler's second-quarter earnings call on July 31 if Fiat could access Chrysler's cash with the capital structure that's in place, Marchionne responded, "No. Firewalls are up; can't get to it."

    Analyst days

    Perkins spent some of his 12 years at AllianceBernstein LP, then known as Alliance Capital Management, through 1999 as a buy-side auto analyst, said Joe Phillippi, an industry consultant who counted Perkins as one of his best customers when he was on the sell side at Lehman Brothers.

    Perkins was "very smart, very sharp, always asked lots of good, solid, penetrating questions, and very fair to deal with," Phillippi, principal of consulting firm AutoTrends Inc. in Short Hills, New Jersey, said in a telephone interview. "He understands the investment business intimately. Given the UAW's ownership positions, that's going to be important -- to have a straight-shooting, tell-it-like-it-is kind of guy."

    Perkins left Wall Street in 1999 to became an independent consultant advising labor organizations, including the AFL-CIO and the UAW, according to his biography on Chrysler's Web site. He was "deeply affected" by Russia's privatization process in the 1990s, said Michele Martin, a spokeswoman for the UAW. The process followed the dissolution of the Soviet Union and put much of the nation's wealth into the control of a small group of oligarchs.

    'Common good'

    "He believes that building a strong labor movement is one of the ways U.S. citizens can protect themselves from similar outrageous depredations that benefit an elite that has trouble distinguishing between the common good and their own self-interest," Martin said in an e-mail. Perkins declined a request for an interview, she said.

    By 2006, Perkins became a consultant for the UAW's Ford department, the same year that King was appointed vice president overseeing the division that negotiates with Ford Motor Co.

    "When he went into Ford, they were not happy with him because he went in and he was like an analyst, asking a lot of tough questions," King said in a July 2011 interview. "Six months later, they all had tremendous respect for him. He had added a lot of value by the tough questions he had asked, getting them to relook at some of their strategies and ideas."

    King said Perkins was "invaluable on the VEBA," the funds created in 2007 to remove retiree health care liabilities from the balance sheets and labor-cost estimates of Ford and the predecessors of GM and Chrysler.

    VEBA stakes

    The trusts for GM and Chrysler hourly retirees were allocated some ownership of the companies by President Barack Obama's automotive task force during their 2009 bankruptcies.

    By exercising options at a cost of $1.97 billion and meeting some performance milestones, Fiat has boosted its ownership stake in Chrysler to 58.5 percent. The company said last month that its stake will rise to 61.8 percent by exercising an option to buy a small portion of the VEBA's holding every six months.

    Perkins sought input from Selle about the value of the equity the VEBA was getting in 2009, the JPMorgan analyst said.

    "He was the guy making sure the numbers add up," he said. "I envisioned him as the kind of accountant for the whole deal. He's obviously a numbers guy. I found him to be very business-savvy and astute to accounting and valuation."

    Since July 2010, Perkins has been director of a UAW department created by King called Strategic Research. The division is a due-diligence group that supports bargaining and organizing by finding everything there is to know about a company that the union is entering negotiations with.

    "Chrysler's added a guy to the board that you can't hoodwink," Selle said.

    2011 bargaining

    Perkins enters Chrysler's board after having served as a member of the national negotiating teams that bargained with all three U.S. automakers late last year on new four-year contracts.

    The UAW's Chrysler department was "in the toughest spot" of the union's three teams during those negotiations, said Rich Boruff, the chairman of that bargaining committee. The company was the least well-off financially of the three and argued it couldn't fit the pattern of GM and Ford.

    The VEBA could be in an even more precarious position. A significant portion of the assets that the fund has to pay for retirees' health care is its Chrysler equity and a $4.59 billion note that Chrysler issued to the VEBA in June 2009, said JPMorgan's Selle.

    The VEBA's equity stake may be worth about $6 billion, he estimated. The note pays 9 percent interest per year and matures in July 2023.

    Right person

    "You're supposed to diversify a trust and not put all your eggs in one basket," Selle said. If Chrysler or the U.S. auto industry suddenly collapsed, the assets could be quickly depleted. "The guy running that trust has to be shaking in his boots every day," Selle said.

    After seeing Perkins negotiate the UAW's national contract with Chrysler, committee chairman Boruff said the VEBA has chosen the right person for the job.

    CONTINUE AT: http://europe.autonews.com/apps/pbcs...chrysler-stake
    "La vita è come un albero di Natale..c'è sempre qualcuno che ti rompe le palle!"

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    Re: Marchionne may struggle to secure UAW's Chrysler stake; $6 billion at stake

    If I was a Chrysler fan, I'd be worried that Marchionne wants to own all of Chrysler just so he can get to the $12.1 billion cash stockpile. Sounds similar to Daimler plundering Chrysler's cash in the late 90s. "Fiat is in a downward spiral, so let's go to the Bank of Chrysler."
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    Re: Marchionne may struggle to secure UAW's Chrysler stake; $6 billion at stake

    Quote Originally Posted by Chevy Ryan View Post
    If I was a Chrysler fan, I'd be worried that Marchionne wants to own all of Chrysler just so he can get to the $12.1 billion cash stockpile. Sounds similar to Daimler plundering Chrysler's cash in the late 90s. "Fiat is in a downward spiral, so let's go to the Bank of Chrysler."
    I'm not that much of a fan, except for the Jeep Wrangler, but I agree with Chevy Ryan
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    Re: Marchionne may struggle to secure UAW's Chrysler stake; $6 billion at stake

    Quote Originally Posted by Chevy Ryan View Post
    If I was a Chrysler fan, I'd be worried that Marchionne wants to own all of Chrysler just so he can get to the $12.1 billion cash stockpile. Sounds similar to Daimler plundering Chrysler's cash in the late 90s. "Fiat is in a downward spiral, so let's go to the Bank of Chrysler."
    No worries. Marchionne will move Fiat headquarters to the US, relocate to Auburn Hills full-time himself, renounce soccer in favor of American Football, drink only Budweiser from now on, and guard Chrysler's cash hoard with his own life. At least, that's what I keep reading around here.
    "The irony of the Information Age is that it has given new respectability to uninformed opinion" -- John Lawton

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    Re: Marchionne may struggle to secure UAW's Chrysler stake; $6 billion at stake

    Quote Originally Posted by emh View Post
    No worries. Marchionne will move Fiat headquarters to the US, relocate to Auburn Hills full-time himself, renounce soccer in favor of American Football, drink only Budweiser from now on, and guard Chrysler's cash hoard with his own life. At least, that's what I keep reading around here.
    Yes, and the Budwiser is the tip off that things are not what they appear to be. Budwiser is not an American brand. He will take the money and leave Chrysler lifeless like Diamler did.

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    Re: Marchionne may struggle to secure UAW's Chrysler stake; $6 billion at stake

    Fiat was also in a downward spiral when GM was partnered with them, then GM gave them the 2 billion dollars and all of a sudden Fiat has a new 500 just like that. I still view that as a big reason GM went in a downward spiral.
    It is time for Fiat to go bankrupt.

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    Re: Marchionne may struggle to secure UAW's Chrysler stake; $6 billion at stake

    Is that the american taxpayers cash that is in there, if so them he should not be allowed anywhere near it. That is the only reason he took Chrysler on, to get to the cash.
    Goldman Sachs , AIG , Wells Fargo, Berkshire Hathaway , UAW, & SEIU.......Todays organized crime mobs

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    Re: Marchionne may struggle to secure UAW's Chrysler stake; $6 billion at stake

    The uaw is smart enough to know you don't sell the cow that gives you milk. Because once you do you'll starve when they outsource the rest of your jobs to Mexico for $26 bucks a day.

    If the uaw were really really smart they would buy up all the gm shares they can while it's still dirt cheap so they can have a leg to stand on every time gm thinks its ok to move a ****load more jobs to china.
    Last edited by Bejeweled; 08-13-2012 at 08:11 PM.

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    Re: Marchionne may struggle to secure UAW's Chrysler stake; $6 billion at stake

    Sergio is a snake and Fiat is a shady organization. Hopefully the UAW treads lightly and keeps Sergio at bay.
    From the office of the Burnout Czar.

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    Re: Marchionne may struggle to secure UAW's Chrysler stake; $6 billion at stake

    Funny how the UAW is the good guy here now in this situation.

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    Re: Marchionne may struggle to secure UAW's Chrysler stake; $6 billion at stake

    So Sergio did not buy Chrysler because they had an actual viable way to success in a market that would support them?
    I want a car so violent that the mere thought of full throttle would cause a heart attack. That actually going wide open throttle in would result in nothing less than instant death!
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    Re: Marchionne may struggle to secure UAW's Chrysler stake; $6 billion at stake

    A bit off-topic, I spotted a interesting rant at http://carindustryanalysis.wordpress...ults-analysis/ about the first half results analysts of Fiat-Chrysler.

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    Re: Marchionne may struggle to secure UAW's Chrysler stake; $6 billion at stake

    Quote Originally Posted by Chevy Ryan View Post
    If I was a Chrysler fan, I'd be worried that Marchionne wants to own all of Chrysler just so he can get to the $12.1 billion cash stockpile. Sounds similar to Daimler plundering Chrysler's cash in the late 90s. "Fiat is in a downward spiral, so let's go to the Bank of Chrysler."
    It is your opinion that he would prefer to use this money in the shrinking Euro market instead of the growing US market?
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    Re: Marchionne may struggle to secure UAW's Chrysler stake; $6 billion at stake

    Quote Originally Posted by AdmiralViscen View Post
    It is your opinion that he would prefer to use this money in the shrinking Euro market instead of the growing US market?
    Definitely. If Chrysler in North America is making money and self-sustaining, and Fiat is losing money, why else would he want the cash? He's already publicly expressed his frustration at not having access to the $$$.
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    Re: Marchionne may struggle to secure UAW's Chrysler stake; $6 billion at stake

    Quote Originally Posted by Chevy Ryan View Post
    Definitely. If Chrysler in North America is making money and self-sustaining, and Fiat is losing money, why else would he want the cash? He's already publicly expressed his frustration at not having access to the $$$.
    I agree with you sir.
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