August 24, 2007 (LPAC)--The big Cerberus Capital Management hedge fund/private equity fund, suffering losses from its recent multiple buyouts in the U.S. auto sector, etc., is so hungry for huge labor cost cuts at its captive Chrysler Corporation, that it may wind up provoking a national auto strike. Bloomberg news service reports today from sources in the auto industry, that Cerberus is breaking the front of the 'Big Three' with Ford and GM, in contract negotiations with the United Auto Workers, because even the $2.5-3.0 billion annual cuts in healthcare expenditures which Ford and GM are demanding from the UAW, is nowhere near enough, or short-term enough, for Cerberus-Chrysler.
Cerberus needs up-front cash; it has taken on steep losses in the mortgage market from its recent buyout of General Motors Acceptance Corp., the financial arm of GM; from the troubles of the Austrian BAWAG bank it recently bought; and from inability to sell the debt from its takeover of Chrysler itself.
Leaks from the automakers to Detroit News columnist Daniel Howe on Aug. 23, show that what Ford and GM want in labor cost cutting is brutal enough--though not enough for Cerberus/Chrysler. Ford Motor Co. has told union bargainers it wants to cut hourly labor costs by 30% in the national negotiations--taking combined wages, benefits, pensions and retiree healthcare down to a combined $48-51/hour, from $71/hour currently. The 30%-lower labor costs are claimed to be what Toyota Motor Corp., et al. spend in their non-union plants in the United States.
The bulk of the cuts, nearly $3 billion a year, are to come by divesting the companies of the healthcare plans, and dumping them on the UAW to manage, with an up-front lump-sum payment from the companies. The automakers are threatening, otherwise, the wholesale move of assembly operations overseas. "If we're going to continue to do work in the North American market, we must have labor costs within the range of the [Japanese] transplants," the source says, according to Howe. "If we get within that range, there's no reason to leave North America for final assembly."
Cerberus is evidently too panicked even to participate in that lump-sum payment to dump the healthcare plan on the union; and is demanding other immediate concessions besides.
