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Chrysler's Fiat future not just a Michigan worry--Ohio's worried too

May 19, 2009 |  2:17 pm


When it comes to turning Detroit’s Big Three into the Big Two, some Midwestern politicians are joining the chorus of those unhappy about Italian automaker Fiat snapping up troubled Chrysler.

They’re not fighting to retain manufacturing jobs or keep local dealerships open. Nope. They’re worried that their financially strapped states are going to get stuck picking up the bill for hundreds of self-insured workers’ compensation claims.

Take Ohio Atty. Gen. Richard Cordray. He recently filed an objection to the Chrysler sale in U.S. Bankruptcy Court for the Southern District of New York. The filing, done on behalf of the Ohio Bureau of Workers’ Compensation, asked the court to deny the sale until some arrangement was made to ensure the state would not have to take over the estimated $4.5 million that Chrysler is paying for hundreds of compensation claims.

Chrysler officials have assured Ohio media outlets that the company is committed to covering these claims. But Cordray pointed out late last week that such commitments don’t have to be honored by a new owner.

If Fiat shrugs off that bill — and really, why would a company take on more debt these days? — the state’s self-insured guaranty fund is going to be hobbled, Cordray said. That could create a ripple effect for other self-insured companies in Ohio — companies that, Cordray warned, are barely hanging on.

“The pending sale could create undue stress on our workers’ compensation system,” Cordray said. “We will fight every step of the way to ensure Ohio’s self-insured employers and their workforce are protected." (Here’s Cordray's whole statement.)

Think Cordray’s whining? Consider this: The Buckeye State has decades-deep roots in the auto manufacturing industry, not only with the Big Three’s factories (that's a Chrysler plant in Toledo, above), but parts suppliers and dealerships.

Cordray’s office said there are about 5,000 people in Chrysler facilities scattered across the state’s northern stretch. Many of those workers are based in the greater Toledo area, where Chrysler has a stamping factory and a Jeep assembly center.

Even without the auto industry’s troubles, the state’s still not doing well economically. Ohio’s income tax revenues for April were 22% short of projections made by state economists. Ohio lawmakers have fewer than 60 days to close a $1-billion budget deficit — and are likely going to have to dip into a state “rainy day” savings fund.

That money, however, has already been slated to cover other bills over the next couple of fiscal years.

Cordray’s also not alone in raising this red flag. Earlier this month, Michigan Atty. Gen. Mike Cox submitted a similar objection to the court over the Fiat-Chrysler deal. Cox’s filing said the sale would result in the state’s workers’ compensation fund potentially losing $25 million in annual payments. The loss of those dollars could make the fund insolvent, according the court filing.

So far, Bankruptcy Judge Arthur J. Gonzalez seems to be taking a wait-and-see approach: He responded to Michigan’s filing by saying the workers compensation issue can be figured out when he’s asked to rule on Chrysler’s final sale plan. As of this afternoon, he had not replied yet to the Ohio attorney general’s office. The Ohio AG has not heard response from Chrysler, either.

-- P.J. Huffstutter

Photo: Getty Images