UAW role in Chrysler mulled by workers, Wall Street

DETROIT (Reuters) - A funny thing happened on the way to the sale of Chrysler Group.

The United Auto Workers union, which had been expected to take a hard line against the sale of the struggling automaker, immediately endorsed the deal by parent company DaimlerChrysler AG DCXGn.DE to unload Chrysler in a $7.4-billion deal with Cerberus Capital Management.

The unexpected shift by the UAW, which represents about 50,000 Chrysler workers, left Wall Street analysts, labor leaders and rank-and-file to ponder the implications for a new era as the struggling automaker is taken private.

UAW President Ron Gettelfinger, who had railed just last month against financial buyers like Cerberus as "strip-and-flip" players, stunned analysts and some of his own members by releasing a statement backing the Cerberus deal as the best option for all parties.

Bear Stearns analyst Peter Nesvold upgraded his outlook for Chrysler rivals General Motors Corp. GM.N and Ford Motor Co. (F.N), citing the tone of the UAW reaction to Cerberus.

"We are favorably impressed with the UAW's seemingly even-handed initial response, considering how adamantly the union had sounded against a sale to private equity just a few weeks ago, he said in a note. "In our view the sale opens the door to further restructuring in Detroit."

Back from a hastily arranged weekend visit to Daimler's headquarters in Stuttgart, Germany, Gettelfinger, who sits on DaimlerChrysler AG's DCXGn.DE supervisory board, said he became convinced that the union could not press Daimler Chief Executive Dieter Zetsche to keep Chrysler.

"We can maintain that position from now until eternity but that's not going to happen," Gettelfinger told reporters in Detroit on Monday. "We didn't get a choice in the selection."

GETTELFINGER REASSURED

Given the circumstances, Gettelfinger said he was reassured about the intentions of Cerberus, based on his weekend talk with Zetsche and Chrysler Group Chief Executive Tom LaSorda.

"Based on everything we heard we were comfortable enough to say we support this decision," he said.

Gettelfinger said he did not expect that the deal would affect upcoming contract talks with Chrysler, adding that the automaker's new owner had not asked for anything from the UAW.

Even so, some Chrysler workers said they were worried that the UAW's role in the sudden sale would be read as a concession weeks before the union gears up for a round of contract talks to replace a four-year contract expiring in September.

"We're a union and we're not going to let any capital management firm tell us what to do," said Mike Yanoulakis, a worker at Chrysler's Sterling Heights, Michigan plant.

"A lot of people are talking doom and gloom here because we've just been bought by a bank -- and to a lot of us, that's what it is, a bank," he said of Cerberus.

Michele Mauder, a Chrysler worker who spearheaded a renegade group of UAW workers that tried to get a hearing at Daimler for a proposed employee buyout, said UAW leadership would face skepticism on the factory floor.

"You can't say you're not going to deal with private equity and then go and do it," Mauder said. "It's just a contradiction and I don't what else to say about that."

FOCUS ON TUESDAY MEETINGS

Gettelfinger said he would meet on Tuesday with LaSorda and senior representatives of Cerberus to hear directly about the financial firm's plans for Chrysler.

"I feel very comfortable that the answers we are looking for will come straight forward from Cerberus," he said.

By contrast, Canadian Auto Workers President Buzz Hargrove, who represents about 10,000 Chrysler workers, said he was angry that his union was never consulted about Cerberus until early Monday morning as the deal was being announced.

"They're not interested in making cars," Hargrove said of Cerberus. "This could be a bicycle shop as far as they are concerned if there's an opportunity to make money."

Hargrove said he would press Cerberus for a guarantee that no more Chrysler jobs would be cut in Canada between now and September 2008 when the CAW's current contract expires.

JP Morgan analyst Himanshu Patel said the developments were a sign that contract negotiations were already effectively underway between Chrysler and its main union, with Cerberus already having a sense of "the scope of possible concessions."

Said Argus Research analyst Kevin Tynan: "The talks were going to be tough anyway, but private equity is going to ask for what is necessary. They are likely to be tougher."

(Additional reporting by Poornima Gupta, Jui Chakravorty and Ben Klayman in Chicago)