Monday, May 14, 2007

Chrysler: A new beginning or the beginning of the end?

Private equity firm Cerberus, run by former US Treasury Secretary John Snow, is buying 80% of Chrysler from DaimlerChrysler for $7.4 billion.

This was a terrible acquisition for Daimler-Benz in 1998, when they purchased Chrysler for $36 billion.

But it may be a terrible acquisition, too, for Cerberus: They are taking on HUGE pension and retiree health care costs.

Pensions and healthcare costs are the 2 biggest problem areas at US automakers. It is the union, the UAW, that has negotiated, over decades, these expensive and lucrative (to the union members) benefits. However, they threaten to sink all US automakers. GM and Ford hang perilously from potential bankruptcy.

This may be a beginning to a new way to manufacture cars in America. I think the union just took a major blow.

Cerberus to buy 80 percent of Chrysler - Yahoo! News