Union Cracks in DaimlerChrysler Deal

Updated from 2:16 p.m. EDT

The resignation of the United Auto Workers union to a private-equity takeover of the Chrysler Group is a sign that Detroit's old order is starting to crumble, and the U.S. auto industry is headed for a tough battle with labor in negotiations this fall.

DaimlerChrysler (DCX Quote) agreed over the weekend to sell an 80% stake in its struggling U.S. business to Cerberus Capital Management for $7.4 billion. After unburdening itself of the bulk of Chrysler's losses and its roughly $19 billion in pension and health care liabilities, the German automaker will seek to restore its brand name to just Daimler.

Chrysler will find itself in the clutches of a private-equity maven with a history of buying bloated businesses and then slashing costs and payrolls, shuttering factories and moving production to low-cost labor markets overseas.

Ron Gettelfinger, president of the UAW, said in a statement that after it became clear that Chrysler could no longer stay under the umbrella of its German parent, he "concluded that the transaction with Cerberus is in the best interest of" the union's members, the Chrysler Group and Daimler. On WJR-AM in Detroit, he said he would have "preferred the status quo, but it's not there."

Speculation has been running rampant that DaimlerChrysler would sell the Chrysler Group since its CEO, Dieter Zetsche, said the company was exploring "all options" for the business in February, after it recorded an operating loss of $1.48 billion for 2006.

(Editor's Note: Nat Worden sat down today with Editor at Large Aaron Task to discuss the Chrysler sale. Click here to watch the video).

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