Software Nerd

Sunday, September 30, 2007

Auto Unions: A loss or a win

There's a wolf under that bonnet: I suppose I should gloat that the UAW pretend strike only lasted two days. Unfortunately, these guys are pretty slippery. From a few interview comments, it sounds like the UAW might try to spin this defeat into a victory, with the following message: "we are a less militant, more cooperative union... and that's a good thing".

The UAW has failed to unionize the US-based Japanese factories. Those workers have seen what has happened to Detroit. They know that the UAW is bad for them. Unions are pushing to do away with secret ballots, in the hope of using intimidation. While they're still trying that "stick" approach, they now want to spin their GM defeat into a "carrot".

Health Care Fund: GM will put money and some of its stock into a fund. The fund will take on all future health-care cost. Moving the money from one legal entity to another cannot increase it. Why did GM want to pay it out now? Because chances were that the liability would keep increasing. In a sense, the workers get less this way; but, GM going belly up would have been far worse. The fund puts a firm number on the liability, caps it, and cuts it off from GM.

Here's another twist: A while back, Wagoner, GM's CEO, suggested that the government should pick up part of the tab. Ten years from now, if there isn't a National Health Service, and if the fund is falling short, it will be a 100,000 person union asking the government for help.

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5 Comments:

  • SN, great post. Auto unions are killing the Big Three slowly and since the opportunity cost of the fact that it costs Detroit significantly more to make a car is hard to fight for, my bet is it will continue to happen. Also a note on the pension thing. 2hrs north, my company Dow Chemical, restructured its pension and health care benefits over a decade ago, foreseeing the coming healthcare liability. IT is good that GM has taken action, but it would have cost them so much less if they had done it sooner.

    Best,
    Kendall

    By Blogger Kendall J, at 5:44 PM  

  • Interesting. I didn't know DOW did some restructuring. Did it do this with Union blessing, and in a way that caps DOW's max. potential liability?

    The GM pensions are still with the company, but they're well-funded. With health-care, the big problem is the ever-increasing apparent-cost.

    It'll be interesting to see how GM does, now that they cannot blame the unions for every problem they face. My guess is that Wagoner is a good guy, and that they will do reasonably well.

    By Blogger softwareNerd, at 5:07 AM  

  • They did cap their liability, transitioning new employees onto a completely new pension and retiree healthcare system, while continuing the old one for old employees. The union here is not nearly as powerful as the UAW and took the changes.

    By Blogger Kendall J, at 6:36 PM  

  • nice news

    thanks

    mahesh
    (www.thinkingstreet.com)

    By Blogger mahesh, at 7:59 AM  

  • Your readers may want to look at Jerry Flint's latest column in Forbes ... titled Quackery. They'll have to sign up for read it at the link below, but it'll be free.

    http://members.forbes.com/forbes/2007/1015/042a.html

    By Blogger Christopher, at 11:17 AM  

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