York: Chrysler suitor needs to talk with UAW

March 22, 2007

BY KATIE MERX |FREE PRESS BUSINESS WRITER

Controversial former Chrysler Chief Financial Officer and General Motors Corp. board member Jerry York said Wednesday that anybody thinking about buying the Chrysler Group better forge a solid partnership with the UAW.

Speaking to the Michigan chapter of the Turnaround Management Association in downtown Detroit, York said the key to any potential purchase of Chrysler from DaimlerChrysler AG hinges on the buyer's ability to negotiate more significant concessions from the automaker's largest union.

"If I were going to buy Chrysler, first of all I wouldn't even think about it unless I could form a true partner relationship with the UAW," York said. "That is absolutely essential."

Any buyer would need to change the UAW wage and benefit structure from "high-fixed, low-variable to lower fixed and more variable," York said.

And variable benefits would only pay out when the company made profits that warranted them, he said.

"Secondly, I think you have to raise enough money not only to pay the purchase price of the company," York said, "but probably a lot more on top of that to maybe buy out a lot of people and fund the losses."

Additionally, York said:

• He'd immediately drop the level of inventory from levels that often average around 95 days' worth of cars, down to the 50-day level that is more in line with Toyota Motor Corp. and Honda Motor Co.

• Keep fleet sales at about 15% of vehicle sales. Currently, he said, the Detroit automakers' fleet sales make up closer to 25% or 30% of sales. Chrysler does not provide a regular breakdown of its fleet sales.

• Increase the pace at which the company turns out new vehicles to about every three years, instead of four or five, so that it is fully competitive with the Japanese.

"Everything he said, I agree with," said Bradley Rubin, an auto analyst with BNP Paribas. "He was referring to Chrysler, but those are certainly things that all of the Detroit automakers need to be looking at."

An adviser to former GM shareholder Kirk Kerkorian, York briefly held a seat on the GM board last year before resigning in November. As part of his resignation letter, York called GM's board too passive and raised doubts about the company's ability to compete against Asian automakers.

The pace of putting new iron on the showroom floor is today's auto war, York said Wednesday.

"If you look at the stuff on the showroom floor at the Asian producers in any given year, about 22% of the stuff on the showroom floor will be new," York said. "With the Big Three, it drops to 15%. ... And to the extent that vehicles are fashion statements, if you will -- where styling and freshness and the latest technology are important to customers -- this is a very, very significant difference, and I believe the Big Three are all going to have to step up to it as quickly as possible."

Citing data from a Merrill Lynch report, York said GM has recognized that challenge and will produce new vehicles faster in the second half of the decade than it did in the first.

Ford Motor Co., York said, is flat.

"I don't think it's clear to anybody yet what's going to happen at Ford."

Jerry York
Age: 68

Title: Chief executive officer of Harwinton Capital Corp., a private investment company he founded; board member for Apple Computer Inc. and Tyco International Ltd.

Most recent news: An adviser to former GM shareholder Kirk Kerkorian, York resigned from the GM board in November saying the board was too passive and the company may have trouble competing against Asian automakers.

Auto background: GM board member, Feb.-Nov. 2006; held various positions, including chief financial officer, at Chrysler Corp., 1979-93; worked at Ford Motor Co. in product planning, 1967-70; began career as an engineer with GM, 1963-67.