Successful ratification of a deal between the United Auto Workers union andLLC represents arguably the final piece to the auto maker's survival, but also will dramatically alter relations between labor and management in a manner Detroit never has seen.
In late April,reportedly reached a deal with creditors to sharply reduce its debt, another key element to finalizing a partnership with Auto Group and gaining an additional $6 billion in taxpayer loans from the U.S. Treasury.
However, the tentative deal with the UAW calls for labor to receive upwards of 55% ownership in the auto maker in exchange for halving the $10.6 billion in cash Chrysler was to contribute to a union-run health-care trust for retirees, or Voluntary Employee Benefit Assn.
The agreement also freezes blue-collar wages until 2011 and allows Chrysler to hire more workers at lower rates agreed to in a 2007 collective-bargaining agreement. Retiree health-care benefits are expected to be pulled back sharply.
In addition to a huge stake in a newly structured Chrysler, in whichreceives 20% and Treasury will own 10%, the UAW reportedly will gain representation on Chrysler's board of directors.
The Treasury also has begun reconstituting the board of directors atCorp., a shakeup that could see labor gaining board seats there, as well, in addition to taking a 39% stake in the company in return for an equity-for-cash swap on the health-care trust worth $10 billion.
Never before has the UAW had such a powerful role in determining the direction of an auto maker. But at the same time, the union's role as a bare-knuckled bargainer for its membership arguably will be weakened.
However, few alternatives existed. Without agreeing to an exchange of equity for cash due to the health-care trust, up for ratification, the UAW would have sent Chrysler on a path of bankruptcy or potential liquidation.