Cerberus Capital Management and leaders of the Chrysler Group on Tuesday will try to convince union leaders that their $US7.4bn deal will give workers better job security, restore Chrysler’s health and not “strip and flip” the company by selling it off in pieces, a news agency report said.


Cerberus head Stephen Feinberg and Chrysler CEO Tom LaSorda are due to meet with US and Canadian labour leaders, who are divided on whether the pairing will benefit Chrysler’s 80,000 workers, The Associated Press (AP) said.


On Monday, in a statement posted on the union’s website, and quoted in a DaimlerChrysler press release, United Auto Workers president Ron Gettelfinger said the deal was “in the best interest of our membership” and the auto companies, noting that Cerberus had vowed to bolster its commitment to Chrysler’s pension benefits.


But Canadian Auto Workers president Buzz Hargrove was reported to have said he had “enormous concerns” about the plan, which he also called “worrisome”, stressing that many private equity groups have a long-standing history of slashing jobs in order to boost profits for investors.


“They’re not interested in building cars. This could be a bicycle shop as far as they’re concerned,” Hargrove told reporters in Toronto on Monday, according to AP. “As long as they see an opportunity to make a lot of money in a short period of time, then they’d be buying in.”


Renamed Chrysler Holdings will be run by Cerberus, which said it would keep the current management in place, while DaimlerChrysler, renamed just Daimler, will retain a 19.1% share.


According to the Associated Press (AP), DaimlerChrysler may need to pay as much as $650m to extract Chrysler in exchange for being absolved for $19bn in retiree health care costs that will be the responsibility of the new Chrysler owners.


Daimler will continue to work with Chrysler on drive systems, purchasing, sales and financial services outside North America, AP noted.


The news agency said the meetings with union leaders in Auburn Hills on Tuesday will serve as precursors for talks that begin this summer between the UAW and Detroit’s automakers on a national contract.


Analysts reportedly expect Cerberus, headed by former treasury secretary John Snow, to seek aggressive changes at its money-losing Chrysler, Jeep and Dodge operations.


Gettelfinger, who has complained in the past that private investment firms have conspired to “strip and flip” companies at the expense of workers, told the Associated Press he tried to maintain the status quo. But once he was told that a DaimlerChrysler break up was inevitable, he sided with the Cerberus team after receiving assurances that the new company would protect pensions and would not announce new job cuts.


Gettelfinger reportedly said he did not expect the deal to have an impact on the upcoming contract negotiations but analysts told the news agency he was likely being pragmatic, recognising the need to enter the negotiating phase with the new partner.


“It puts a new dimension to the contract negotiations. Now the union can literally hold the deal hostage waiting for a package,” Gary Chaison, a professor of industrial relations at Clark University, told the Associated Press. “The UAW still has the opportunity of acting as a spoiler to the deal in a much more powerful way.”


AP said the entanglement with private equity has raised concerns among Chrysler workers who have already had to endure a restructuring plan announced last February that will eliminate 13,000 jobs.


Bryan Currie, an electrician at the company’s Sterling Heights assembly plant, told the Associated Press that many workers have taken a “wait-and-see” attitude. “We don’t know what they’re going to do yet. We’ve got the union protection and that’s what we’re banking on.”


Some analysts told the news agency that Cerberus’ entry into the auto industry could help Ford and General Motors at the bargaining table. Formal talks between Detroit’s automakers and the UAW on a new national contract are set to begin in July, with the master contract expiring in September. All three have said they need lower labour costs to compete in a global automotive market, mainly with Asian manufacturers.


With Cerberus, it’s unlikely that the UAW would remain unwilling to give Chrysler the same health care concessions that it gave Ford and GM, Morgan Stanley analyst Jonathan Steinmetz said in a note to investors cited by AP.


His view echoed that of Global Insight analyst George Magliano who told just-auto.com on Monday that the UAW was likely to give Chrysler similar concessions to those already offered to GM and Ford.


“They cannot deny Chrysler what they have already offered the other guys and hopefully that will defuse this thing,” he said. “Chrysler has shown it needs concessions.”


“Cerberus brings a fresh perspective and likely a stronger backbone to union negotiations,” Lehman Brothers analyst Brian Johnson said in a note cited by AP.


During the Monday press conference in Germany, Cerberus chairman John Snow said that Cerberus had a good record of working successfully with companies that are organised (unionised).


“We respect the role of organised labour and we greatly appreciate the support the UAW has given to this transaction. The statement that this is in the best interest of Chrysler from Mr Gettelfinger tells us a lot and we’re going to work to make sure that this company succeeds.


“Our objective here is a successful Chrysler and a successful Chrysler creates good opportunities for employees.”