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Pittsburgh attorney Richard Shaw worked on Chrysler plan
Thursday, June 25, 2009

Richard Shaw, an attorney with the Pittsburgh office of Jones Day, recently had a seat at the table of history. He was involved in helping Detroit automaker Chrysler, which employs almost 39,000 people, work toward a successful conclusion to its Chapter 11 bankruptcy filing.

Mr. Shaw's practice is focused on representing management in traditional labor relations matters and in employment-related counseling and litigation.

On the traditional labor side of his practice, he represents companies and advises them in developing solutions to address all aspects of labor law litigation. In addition, he has experience in negotiating collective bargaining agreements and in counseling clients in such labor issues as election campaigns, operating during strikes and bargaining in conjunction with plant relocations and shutdowns.

In the Chrysler case, Mr. Shaw, as a member of the team on labor and benefits, worked on issues such as work rules, health benefits and compensation.

The sale of Chrysler to Fiat was approved June 9 in a historic agreement that gave Chrysler access to Fiat's small car technology and Fiat access to Chrysler's North American dealership operation -- providing the Italian carmaker entry into the U.S. market it has long coveted.

Q. Exactly what were your duties in all of this? What part did you play in negotiating a successful bankruptcy?

A. It really was a huge variety of things, but it mostly involved helping Chrysler strategize the labor and benefits piece of this whole multifaceted procedure. Actually, as far as the labor piece of it was concerned, we were a very small team. On our labor and benefits team, there were less than 15 of us all together.

Q. So what really helped Chrysler come to a successful bankruptcy conclusion? How did this differ from other bankruptcies?

A. For one thing, in the Chrysler bankruptcy all the labor agreements had been modified by the time they entered into bankruptcy. So the piece they needed to do in bankruptcy was getting the sale approved and to have all of the objections of the sales of assets to the new Chrysler taken care of.

The bankruptcy for Chrysler, from the time they filed to the time they had the deal approved, was 42 days. The concept or idea of a bankruptcy achieving a successful conclusion in 42 days is path-breaking. It's groundbreaking.

Q. At its core, why did this whole thing work?

A. The strategy that there not be a full bankruptcy but a minibankruptcy structured around a provision in the law really helped. It's been in the code for years.

The other thing that made it work was that the party which had all of the money was interested in there not being a loss of a lot of value of the assets while the company was in bankruptcy.

Remember, the number of cars and trucks that were being sold at that time was very low. The asset value of Chrysler as a going concern was decreasing.

The idea of selling an asset in a bankruptcy that could potentially fail and where the asset is rapidly decreasing in value is not new.

But to use this for a company of this size was something that was absolutely necessary in order to get them out of bankruptcy before all the value in Chrysler was dissipated.

Q. So what was it like for you to be involved in all this? Was it scary? Was it tedious?

A. Normally, when you get into these kinds of deals, in the end of the process, people are usually up all night.

The government had its lawyers, Chrysler had its lawyers, Fiat had its lawyers.

A lot of people representing a lot of different interests were there.

They were all working on a solution that worked for everybody.

This was an all-out effort on the Chrysler side that started well before January. It was almost six months of incredibly intense high-stakes negotiations that made a deal uncertain.

We knew where we had to go, but it wasn't always clear how we would get there.

Q. So what did you feel at the end of this process?

A. It was a real accomplishment to be part of a team that could so creatively work on a problem that resulted in what we hoped would be a successful company, making products and contributing to the economy.

We hope it will continue to employ people here and elsewhere.

If it does that, we will all have a great sense of pride.

Q. Where was the work done?

A. Everything took place in different places, but at the end stage, most of it took place in New York and Washington. Most of the union negotiations were done in Detroit.

Q. There seemed to be a black eye for the labor movement in all this, with the public largely blaming them for the level of salaries and benefits they enjoyed. What are your thoughts on this?

A. I think a lot of people see what they want to see. As Paul Simon says, a man sees what he wants and hears what he wants and disregards the rest. A lot of things caused this situation. Employee wages were but one, and I don't even know if it was the biggest one.

Another problem was that cars were not selling.

Another was what we call legacy costs, which made up a large part of the costs of building cars and trucks.

People stopped buying cars, and the government encouraged smaller cars being made.

The costs of gasoline went up and, when they went down again, the cars that Chrysler made that had been unattractive when gas prices were high began to sell again but never again in the same numbers.

I really don't know if there truly were any bad guys involved here.

I do know that when companies get stressed, it's necessary for everybody in the company to contribute to the solutions -- management, unions and employees.

Of course they don't always agree on what the contributions should be, and that's why people like me have business to go to do.

Q. Any surprises for you in all of this? Anything that you've learned?

A. People having disparate views can focus on a single goal, and they can bridge those differences. That's what happened here.

The fact that the union, the retirees, the salaried employes and everybody else could make the concessions that they made really made a difference.

This may not have been a deal that everybody wanted, but they achieved their goal of having a viable company to protect employees, jobs and all of the constituents of the company

Q. Will the Chrysler agreement be instrumental for General Motors settling its bankruptcy?

A. GM is a different situation. For one thing, I don't know that GM has a suitor sitting out there like Fiat. For another, GM is so much larger and much more complex as an organization than Chrysler is.

The concept of a limited bankruptcy like what was used with Chrysler can be instructive, but whether it will work in the end for GM, I don't know.

Q. Do you think people will perceive all of this as a victory for President Barack Obama?

A. Some people will, some people won't. It depends upon what people bring to it.

From what I read, there are some people who thought that a bailout was a bad idea. I don't expect those people to see this a victory.

Don Hammonds can be reached at dhammonds@post-gazette.com or 412-263-1538.
First published on June 25, 2009 at 12:00 am