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April 27, 2009 1:47 PM

Cleary Advises UAW on Concession with Chrysler

Posted by Brian Baxter

UPDATED: 3:40 p.m., Apr. 27. The seventh paragraph of this story has been updated with additional attorney information.

Lawyers from Cleary Gottlieb Steen & Hamilton advised The International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America (UAW) on its negotiations with Chrysler, Fiat, and the U.S. Treasury for concessions that will help Chrysler meet its financial obligations under an April 30 deadline imposed by the Obama administration.

In order for Auburn Hills, Mich.-based Chrysler to meet the deadline to cut costs, the embattled automaker needs to reach agreements with its workers on funding for the retiree health care obligations that would be affected by Chrysler's restructuring efforts and a proposed alliance with Italian automaker Fiat.

The contractual concessions still must be voted upon by members of the UAW and Canadian Auto Workers (CAW). If the agreement is ratified by union members, it could speed up completion of an alliance between Chrysler and Turin-based Fiat that would enable Chrysler to access an additional $6 billion in federal loans. (Thousands of CAW members have already ratified the new restructuring agreement, a key benchmark for the Fiat deal.)

The Cleary team advising the UAW included corporate partners Richard Lincer and David Gottlieb, employee benefits partner A. Richard "Brick" Susko for ERISA advice, bankruptcy partner James Bromley, tax partner Jason Factor, partners Mark Nelson, James Modrall, and counsel Steven Kaiser on U.S. and E.U. antitrust issues, and associates Lauren Hakala, Jonathan Balcom, John Delaney, Lua Yuille, Catharine Slack, Mirna Zwitter-Tehovnik, and Corey Goodman.

Given the sensitivity surrounding the negotiations and looming deadline for Chrysler, the firm declined a request for comment.

Cleary previously advised the UAW on agreements with Chrysler, General Motors, and Ford more than a year ago establishing Voluntary Employee Beneficiary Association trust funds to provide health care benefits for current and future retirees. The creation of the VEBAs enabled the Big Three automakers to relieve some of the financial costs attached to their massive health plans for current and former workers.

Bruce Simon and Babette Ceccotti from New York labor firm Cohen, Weiss and Simon served as outside labor counsel to the UAW.

Chrysler, which is controlled by New York-based private equity firm Cerberus Capital Management, is thought to have relied on its substantial in-house team for the labor negotiations. Schulte Roth & Zabel, which has been advising Cerberus on Chrysler's proposed alliance with Fiat, did not have a role in the UAW talks.

It was not immediately clear whether Jones Day, advising Chrysler on its restructuring efforts, served an outside counsel role in the negotiations. (Spokespersons for the firm were checking into the matter at the time of this post.) Fiat is being advised by Sullivan & Cromwell.

The Treasury Department has been receiving outside counsel from Cadwalader, Wickersham & Taft and Sonnenschein Nath & Rosenthal on its efforts to resolve some of the problems ailing the U.S. auto industry. Last week The Am Law Daily reported on the fees Sonnenschein was set to receive from its auto work for Treasury.

Sonnenschein has also been retained by the Pension Benefit Guaranty Corporation on a separate contract to advise on Chrysler's unfunded pension liability. (The PBGC is a government agency that monitors pension plans and ensures that they are adequately funded.)

Bankruptcy partners Fruman Jacobson, Carole Neville, and Christopher Prince, and employee benefits partners Michael Maryn and Mina Amir-Mokri are advising the PBGC. A copy of Sonnenschein's PBGC contract was not immediately available.

Should the labor deal smooth the way for a Fiat alliance allowing Chrysler to access the federal funds it needs to survive, the company hopes to have a few of these babies on a road near you sometime in 2010.

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