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Friday, April 17, 2009
Sergio Marchionne to Union: Step up or we'll walk...
The news this week on the proposed merger between Fiat and Chrysler has heated up this week. Here's it brief.
On April 15, Sergio Marchionne had an interview with a Canadian Newspaper where he put it on the line and told the UAW to match the lower costs of Japanese and German-owned plants in Canada and the US or Fiat will pass on the Chrysler alliance (the all-in labor costs at Chrysler Canada are $76 per hour while the Toyota Canada all-in rate is approximately $57 per hour*).
Marchionne has stated "Because of the lack of progress on labor negotiations, especially on the Canadian side, there was only a 50-50 chance the partnership would be formed."
"Absolutely we are prepared to walk. There is no doubt in my mind," he said. "We cannot commit to this organization unless we see light at the end of the tunnel."
Chrysler has until April 30th to merge with Fiat to qualify for long-term government aid. This amounts to about $6 billion and is needed to keep Chrysler alive.
For this deal to go through, besides needing to secure concessions from the UAW, Chrysler needs to reach an agreement with those who hold Chrysler's first-lien loans. Chrysler owes creditors $6.9 billion and has reportedly floated an initial offer of 15 cents on the dollar. Creditors rejected this and are putting together a counter offer.
Other news making the rounds are when (if) the merger goes through a new Board of directors, Chairman and CEO will be appointed. The plan drawn up by the US Treasury department calls for Sergio Marchionne to be the new CEO.
We have 2 weeks to see how this all plays out.
* Source: Chrysler