United Air Lines' three major unions bolstered their attempted employee buyout of the airline's parent corporation Wednesday by announcing that Chrysler Vice Chairman Gerald Greenwald, Lee A. Iacocca's heir apparent, has agreed to become chief executive of the newly constituted venture.
The announcement, made in Detroit, signaled that the unions had succeeded in their goal of finding a respected executive outside the aviation industry to bring the buyout effort--aimed at creating the nation's largest worker-owned company--to fruition.
Greenwald's first and most critical challenge will be to find financial institutions willing to bankroll the buyout. UAL's board has given the unions until Aug. 9 to raise half of the money needed to complete the transaction.
UAL agreed two months ago to be purchased by its 71,000 employees for $4.38 billion. But financing was regarded as a stumbling block, particularly because an earlier buyout effort last fall, made jointly by management and some employee groups, collapsed.
Persuading Greenwald to head the acquisition effort and then the corporation is a major victory, said John Peterpaul, vice president of the International Assn. of Machinists and Aerospace Workers, one of the unions that will have a seat on the board of the newly formed company.
"This guy is well-respected, he's run companies, he's internationally known. He knows the financial community. He's worked with labor. I think he'll fit perfectly in the new work ethic we're trying to bring to UAL," Peterpaul said in an interview.
Peterpaul said negotiations with financial institutions, coordinated by Salomon Bros. and Goldman Sachs, had begun earlier this week. It is likely that financing will come through several institutions, he said.
A written statement released by the machinists and United's pilots and flight attendants unions said Greenwald will serve as the head of the "acquisition corporation" previously formed by the unions and that he will become chairman and chief executive officer of UAL once the acquisition is finalized.
Greenwald, 54, spent 22 years in a variety of positions at Ford Motor Co. In 1979, he became vice president and controller of Chrysler and won in praise in the 1980s for his role in helping Chrysler recover from near-bankruptcy. He was named vice chairman in 1988.
His decision to take the UAL job came as a surprise because he had been regarded as Iacocca's likely successor.
"It could have been a situation in which he got an offer he couldn't refuse. Or it could be that he believed Lee would be staying (as chairman) longer," speculated Chris Cedegren, director of corporate assessment for J. D. Power & Associates, an Agoura Hills firm that analyzes the auto industry.
Greenwald's decision to leave could motivate Iacocca, 65, who had been expected to retire in late 1991, to remain in charge of Chrysler for another two years, Cedegren said. Iacocca has hinted in recent interviews that he may want to extend his stay.
Greenwald said in a prepared statement that he felt "privileged to be part of the turnaround and then the rebuilding" of Chrysler but added, "I can't turn down . . . an opportunity to lead another great company during a period of major transition."
"He's told me that it's time for him to run his own show," Iacocca said in a statement. "Jerry will leave a big hole in our management lineup."
Once the purchase is completed, UAL shareholders will get cash and company IOUs valued at $201 a share. To make the deal work, unions have promised $2 billion in wage and other concessions over the next five years.
The transaction is unusual not only because of its size, but because it involves 100% employee ownership.
UAL Chairman Stephen M. Wolf reportedly fought the employee buyout plan but ultimately relented. UAL's board was forced to choose between selling the nation's second-largest airline to workers or facing a proxy fight with UAL's largest shareholder, Coniston Partners, that could have ousted the carrier's directors.
"I congratulate our union leaders for recruiting someone of Jerry Greenwald's stature," Wolf said in a statement.
The buyout must be finalized by year-end, according to the agreement between the unions and the board.
The new UAL board would consist of three members of the airline's new top management, eight independent outside directors and four others, representing the three unions and the non-contract employees.
The transaction has been applauded by officials of organized labor, who for years have attempted to encourage employee buyouts of company through existing employee stock ownership plans. In March, Connecticut-based Colt Firearms was sold in a deal put together by the United Auto Workers and financed largely through the Connecticut state employees pension fund. The buyout, which gave the UAW three seats on an 11-member board, enabled the union to end a bitter four-year strike against Colt.
United Air Lines' pilots began the quest of employee ownership three years ago when they offered $4 billion for the airline. But that effort lay dormant until late last year, when financier Marvin Davis attempted to buy the airline. That effort also failed, and last September a combination of UAL managers, United's pilots and flight attendants and British Airways made an offer. Word that the financing for that deal was in trouble last October was blamed for a 190-point drop in the Dow Jones industrial average. The deal officially collapsed on Oct. 27.
UAL reported a first-quarter loss of $36.4 million on revenue of $2.19 billion.