Platform: It's come to this: the German owner of Chrysler, bleeding cash and facing untold billions in retiree healthcare costs, will shell out $1.5 billion to get a private-equity firm to take the auto-maker off its hands writes Steven Pearlstein.
This is a transaction so full of symbolic significance it's hard to know where to begin.It is another milestone in the long, slow decline of the "Big Three" auto-makers and American manufacturing generally.
It is yet the latest example of the folly of so many corporate mergers, in particular those involving foreign investors who overpay for US assets in the midst of a bubble. It heralds the arrival of private equity as the most powerful force in business and finance. And it represents the culmination of years of miscalculation by the US labour movement of what is in its own long-term best interests.
For all that symbolism, however, the "sale" of Chrysler to Cerberus Capital Management is a big disappointment, a complicated transaction that, in the end, solves very little.
Although Cerberus has a number of seasoned auto executives on its bench, among them a former vice-chairman of Ford and the recently-fired chief executive of Volkswagen, there was no evidence this week of a new business model to pull Chrysler out of its rut.
It hardly inspires confidence that, instead of sending its dynamic founder and chief executive Stephen Feinberg to Germany to announce the deal, Cerberus dispatched its figurehead chairman John Snow, who mouthed mindless platitudes the way he did as Treasury secretary.
It also tells you something that the first meeting between Feinberg and the union chiefs did not occur until a day after the transaction was announced - after months of failed talks between Cerberus and the same union over terms of a new contract that Cerberus was demanding as a condition for buying Delphi, the bankrupt auto-parts maker.
In an environment in which striking a new bargain with workers and retirees is the crucial first step to restoring these companies to competitive health, Cerberus's failure to successfully engage the unions is hardly an encouraging signal.
In fact, the two sides seem to be stuck in the same old mindsets that got the industry in trouble in the first place.
In those Delphi talks, for example, the sticking point has been the demand from Cerberus and its partners for a $12-an-hour starting wage. There's no denying that, at upwards of $30 an hour, United Auto Workers' wages were way out of line with those of other workers with similar skills and working conditions. However, it's hard to have much sympathy with a vision for US manufacturers built around driving wages down to $12 an hour.
The point of the exercise shouldn't be to mindlessly cut costs, but to redesign products and re-engineer production so a smaller, higher-skilled workforce can attain a middle-class standard of living.
Meanwhile, it was clear from their reactions to their meeting with Feinberg yesterday that union leaders are also clueless about the challenges ahead. The idea shouldn't be to wring promises from the new owners that they won't cut more jobs, or close more plants. Rather it should be to give Chrysler roughly the same unit labour costs as the foreign-owned, non-union competitors in the US in exchange for a share of the company's cash flow if things turn out as planned.
Yes, these are painful changes. And yes, they are hard to swallow when workers see big-shot executives grabbing grossly oversized pay and benefit packages. But for unionised workers and retirees the pain will only be worse if they continue to delay these changes rather than accept their inevitability.
