You’re right. Bad labor deals had nothing to do with the quagmire in Detroit. In fact, the whole labor situation was such a non-factor that the UAW will probably end up owning huge stakes in both companies due to the albatross-like liabilities on the books allocated to the VEBA, which manages the health-care coverage of UAW workers and retirees.
Guys? Thanks for helping out in our hour of need and refusing to restructure much of anything, especially in the area of benefits. We can’t pay you cash, so we’ll probably just make you an owner, OK?
More on the UAW now being forced to act like an owner from Business Week:
“If General Motors (GM) and Chrysler somehow survive the current crisis, the United Auto Workers will end up with huge equity stakes in both companies under new restructuring plans. Is this good news for UAW President Ron Gettelfinger and his union?
Maybe not. First, these equity stakes come at a huge cost in terms of lost jobs and benefit concessions. The UAW Voluntary Employee Beneficiary Assn. (VEBA) trust, which manages the health-care coverage of workers and retirees, is owed $9 billion by Chrysler and some $20 billion by GM. The UAW has agreed to take stock in exchange for half those future obligations.
The union via the VEBA trust may end up owning 55% of Chrysler’s shares and 39% of GM.”
Still waiting for the first union to negotiate a deal where they advocate no increase in wages, but look to take 25% of the revenue generated by helping a company to outperform a 5 year plan. Simply put, you help us outperform the expectation (which has to be a realistic goal), you get 25% of the booty above that line. No cap. Just like a good sales commission plan.
Could be tremendous for the workers and the company, but that’s not how a union works.
Guess what? You can blame who you want to blame, but bad labor deals are certainly a part of the reason why Detroit is looking more and more like Beirut (hold the jokes about the UAW and Hamas, because that’s not funny).
So, instead of bringing a plan like the one above that says “we’re going to help you rock the house over the next 5-10 years and we’ll get paid on results”, the UAW wanted their money upfront. They wanted to create the perfect society where their members received benefits no one else in America got.
As a result, the next time they ponder a slowdown and chest-thump about a strike, they’ll be negotiating against themselves. That’s a pretty interesting outcome…
Enjoy the responsibility, UAW. It ain’t as easy as you liked to indicate it was when you were on the other side of the table. Hope you stick around long enough to acknowledge that.
Another home run Chris!!
So I wonder what happens when the Unions have no one else to blame? The equity stock holders are being told they have to take 28 cents on the dollars they invested and the Unions are given a majority stock option for a 10% stake. The first time the workers don’t like their contracts, they are going to be setting up picket lines against their Union bosses? Welcome to the real world.
Poetic justice if there ever was a case. Great post.
Assembly employee: “Hey boss, turning these bolts is making me tired. Can I start taking two breaks per hour?”
Boss: “How about three? Take as many as you need!”
The problem with cancer is, eventually it kills its host.