Chrysler sale threatens more job losses in auto

This past Valentine’s Day, when Chrysler workers should have been relaxing with their companions, some 80,000 pairs of eyes were glued to the TV or the Internet. They were waiting for DaimlerChrysler (DCX) to announce how many of their jobs would be cut, and where.

In what workers termed the St. Valentine’s Day Massacre, the bosses announced cuts of a whopping 13,000 jobs in the United States and Canada. With 5,500 of these cuts in Michigan, this constituted a racist attack on Black auto workers.

Last fall DCX insisted that the Chrysler Group was not for sale. Yet on Valentine’s Day DCX management said it wasn’t ruling out any options.

Now the bombshell has hit the papers: Chrysler is for sale.

Possible suitors include General Motors—whose management recently cut 35,000 jobs, insisting that GM was poor and impoverished. The GM bosses got workers to take a pay cut by crying about the high price of health care, which they claimed cost them $1,500 per vehicle. Yet the concessions were worth $2,000 per vehicle by GM’s own figures. $2,000 minus $1,500 means that GM management gains $500 for each vehicle sold.

That’s enough to allow them to go shopping for acquisitions.

Another ominous scenario for the workers is that Chrysler will be bought by one or more private equity firms.

What is “private equity”? The term has not been explained to the workers whose jobs are on the chopping block. An article in Business Week defined it as “giant pools of capital just waiting to pounce on takeover targets.”

In a discussion on public television, Andrew Ross Sorkin of the New York Times elaborated: “Well, you know, a private equity firm actually is a polite term for what we used to call LBO firms, or leveraged buyout firms, in the 1980s. ... [They] take money from pension funds, wealthy individuals. They put it in a pot, and then they leverage it, so then they take out effectively a mortgage on it. So they may take $100, and they may get a $900 mortgage from the bank, and then they go and buy a company. They buy that company, they turn it around, hopefully for them, in a couple of years, fix it up. They may strip the company down. Sometimes they—a lot of people lose jobs. ... And then they sell the company. And that’s pretty much what private equity is today.”

Adding to the discussion, private-equity expert Colin Blaydon said: “They are now coming together, in what they’re calling clubs, and groups of them are now bidding for these companies. So they’ve got more money that they’ve been able to raise, that the pension funds have largely given them, more debt to put on the deal. And these clubs have gone elephant hunting, because the big companies out there are the ones that are probably today among the most attractive targets for them to take over and take private.”

Chrysler salespeople have wined and dined several potential New-York-based members of a buyout “club,” including the Wall Street firm Blackstone Group. Blackstone has stakes in over 100 companies ranging from real estate to pickles. With annual revenues of over $85 billion, these investors are the majority shareholders in TRW automotive holdings. Blackstone CEO Stephen Schwartzman, dubbed by Fortune magazine “the King of Wall Street,” is notoriously extravagant. The day before the Valentine’s Day Massacre he spent millions of dollars on his 60th birthday party, which featured a private concert by Rod Stewart.

Another firm shopping for a car company is Cerberus. According to the Detroit News, Cerberus Capital “has been an increasingly aggressive player in the auto sector, with former Ford Motor Co. executive David Thursfield spearheading its auto investment activities. Last year, the firm agreed to buy a 51-percent stake in GM’s highly profitable finance business. Cerberus is also leading a group of investors attempting to buy bankrupt parts supplier Delphi Corp.”

Top Cerberus executives include former Treasury Secretary John Snow and former Vice President Dan Quayle. In Greek mythology, Cerberus was the guard-dog of the underworld, usually depicted with three but sometimes 50 heads, with snakes for its tail and mane. Cerberus CEO Steve Feinberg has brushed aside suggestions that the firm change its name to something gentler.

The third contender to emerge is Centerbridge, founded less than two years ago by former Blackstone Director Mark Gallogly and Jeffrey Aronson. Joining them in a meeting with Chrysler CEO Tom LaSorda was Stephen Girsky, formerly an auto analyst with Morgan Stanley and a special adviser to GM Chair and CEO Rick Wagoner.

Whether these firms lock horns in a bidding war or form a buyers “club”—or if GM walks away with the loot—workers will most likely read or hear about it after it’s a done deal. Meanwhile those who ran the company into the ground are set for life: 2006 salaries for DCX CEO Dieter Zetsche and Chrysler Group CEO Tom LaSorda were $6.7 million and $3.16 million respectively.

What all these multi-headed beasts have in common is that they are part of the capitalist system, with its built-in tendency to cut jobs and concentrate wealth in fewer and fewer hands. This goes for GM, DCX, Blackstone, Centerbridge and Cerberus.

In mythology, the 12th and final task for Hercules was to capture Cerberus with his bare hands in order to secure his release from bondage. But Hercules’ brute strength was nothing compared to the muscle of the modern working class. In 1937 the 44-day occupation of GM was followed by a powerful 31-day sit-down at Chrysler. Next, by seizing hold of this corporate beast, the working class can accomplish its own Herculean task—to free all who toil from the bondage of wage slavery and restructure society to put people before profits and guarantee every worker the right to a job.

Martha Grevatt is an auto worker and an elected trustee of UAW Local 122.