Chrysler's three-headed dog

May 16 2007 by Derek Torres Print This Article

Are you working for DaimlerChrysler AG in the United States? If so, you may want to get your resume out and polish it up nicely.

Word on the street is that Cerberus Capital Management LLC is on the prowl and ready to take over a controlling share of the Chrysler group, something that is certain to put a chill on any good vibes the city of Detroit may be feeling after the recent victories by all of their professional sport teams.

If you remember from school days, Cerberus was the three-headed dog of Hades not really a pleasant image, hum? This moniker may also fit the private equity firm, which claims that "strong corporate governance is the cornerstone of their business."

Fine words, but not ones that are likely to impress any of the 50,000 union workers at Chrysler (there are 80,000 total employees).

So what's the problem? It seems the $18 billion price tag for employee retirement and health insurance liabilities is more than the company can handle. By going with a private equity firm, especially one who thrives on anonymity, Cerberus will be able to slowly dismantle the company and get it in to financial "shape".

This likely means massive layoffs, extensive dealership closures (especially in the metro Detroit area), and more jobs sent overseas. As for the retirement and health-insurance liabilities, those would be covered by a newly created private company.

It's too early to tell what will happen here, but if it's good for the company, you can bet its bad for the worker, so keep reading because I'll be following up on this story.

The impending showdown that should result this summer when the UAW (United Auto Workers) union starts re-negotiation master contracts should be quite interesting.