Chrysler's Gordian Knot

Doron Levin is a great auto industry columnist, working for Bloomberg. In this column he speculates about the fate of Chrysler. Naturally he covers the private equity behemoths hovering over the limping carmaker. This is a very big story and the UAW ought to take note. Private equity capital represents the ultimate dose of reality for the unions the unions has ever seen. Courtesy of Wilbur Ross's reconstituting of long dead steel industry assets, we saw an inkling of the bargain that private equity capital will offer the hollowed-out shell of any US industry brought low through union dominance and intransigence. By the time Wilbur showed up thousands of steelmaking jobs had disappeared as US companies failed to compete given their high wage scales. He told the unions that he would bring back about half of the jobs that went away at half the old wages, and more flexible work rules, or he would bring back zero jobs at the old wages. The UAW isn't at that point yet but it will be. Its current choice is a continuously shrinking amount of jobs at today's wages and perks or a stable to growing base of jobs at market (greatly reduced) wages and perks. A few years of continued intransigence and the UAW will be in the exact spot as the Steelworkers were. It's certain pain now or uncertain, but likely larger, pain later. Not a good choice, but it is reality. Unless Chrysler finds a strategic buyer, which is unlikely, the UAW is looking at Cerberus, Blackstone or something of that ilk holding Wilbur Ross's playbook and calling the shots. Or they could choose slow death. It won't be the first time.

UPDATE: And the unions know it. They know it down in their bones. They have perfected the art of pushing around management and shareholders for decades, why would they trade in that group of folks for less accomodating folk? Unfortunately, last time I checked, the guys on the factory floor don't get to decide if, when or to whom to sell the company...at least here in the US...for now at least.