• Sep 5, 2007

The Big Three automakers' massive pension liabilities are well known. To remove that burden, a fund called a VEBA -- voluntary employee beneficiary association -- has been mooted. Automakers would put an agreed upon sum into the VEBA, after which they would be free from further pension obligations. The UAW would be responsible for administering the fund. Goodyear used that exact setup last year to end a strike with the United Steel Workers.

Goodyear, though, put $1 billion cash into the fund. The automakers have suggested using cash and stock. It's been speculated that GM could need to throw $30 billion into a VEBA to be free and clear, and that's a burden that would be more easily handled with cash and stock. Goodyear's stock increased by 25% after the steel workers agreed to the VEBA, but there are no guarantees that that would happen again with GM, Ford, or Chrysler stock.

To get any of this to work, the UAW will have to agree to the VEBA at all, and then convince members to take the cash and stock option, which would require getting everyone to believe that the stock will appreciate quickly enough and steadily enough to keep pace with disbursements. It is the automakers, however, that are really under the gun. To avoid any chance of a strike, automakers need to come to an agreement with the UAW by September 14. That's the date the current agreement expires, and a strike could occur any time afterward.

[Source: Just Auto, sub req'd]



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      • 7 Years Ago
      Attention UAW you might want to vote yes on this one if you want to have a job to come back to.

      At least one where you don't have to ask "Want fries with that?".
        • 7 Years Ago
        ANYthing that allows them to retain their benefits and lifestyle should get a unanimous "yes" vote.
        • 7 Years Ago
        'At least one where you don't have to ask "Want fries with that?".'

        What, theyre going to give them liberal arts degrees?!

        *OUCH*
      ToMiTa
      • 7 Years Ago
      The incredibly shrinking UAW better be willing to play ball with this. Cars can be and are built internationally now.

      or else GM and the others might say "Adios USA"
        • 7 Years Ago
        @ToMiTa
        The UAW has never been known for their powers of observation or their willingness to work toward inovative solutions. They will continue plodding along, contributing nothing, yet expecting everything.

        JD
      • 7 Years Ago
      This probably won't even be much of an issue in a few years. I get the impression that Americans might finally be getting their collective heads out of their rumps and adopting a universal healthcare system. Well, eventually anyway. That doesn't really alleviate the pension system problem but that's probably not nearly as crippling as buying everything from $30 pills to $50,000 surgeries for thousands of retiree's.
        • 7 Years Ago
        Not if I have anything to say about it. I don't want to pay for you, nor do I want to pay for anyone else in this country. I earned my money, and my money should be spent on myself, my family, and those on which I choose to spend it. Socialist medicine (let's call it what it really is), doesn't work in Canada, nor does it work elsewhere, and it won't work here.

        Whatever happened to that American spirit, of people wanting to pull themselves up from their bootstraps and change their stars for themselves? Oh, that's right. FDR invented all these socialist ways for the government to pay for people's stupidity in spending and saving, and created safety nets to cover people's asses, should the market drop out. Guess what...NOT IN THE MANDATE OF THE FEDERAL GOVERNMENT!

        Hopefully a good federalist like Fred Thompson or Newt Gingrich will be elected in 2008, and will stop this socialist madness.
        • 7 Years Ago
        Say Joe, where do you think all the money for existing healthcare plans comes from? Companies buy it for their employee's then pass the cost on to you. You pay for it every time you buy a Big Mac or a car or a cell phone plan. The only difference is that in the U.S. we pay twice as much per capita then any other industrialized nation. Look it up. If you want to keep paying twice what everyone else does for worse care (look that up too) then go ahead but leave the rest of us out.
      • 7 Years Ago
      Did you hear that?

      That's the sound of the price of your new Camaro going up and your local dealer closing down.
      • 7 Years Ago
      Uh, Chrysler can't offer stock. They're a private company.
      • 7 Years Ago
      RE: "When the market falls out of the real estate business, you don't see realtors going on strike demanding that Century 21, Weichert and the like cover their losses"

      That's probably because Century 21 never agreed to cover their losses. The difference here is that GM fully agreed to cover worker and retiree healtchcare costs. The UAW is simply requesting that GM do what it said it would do, and they would be stupid not too.

      If you took a job at Century 21 and they agreed up front to cover any of your losses, how would you react when the market falls out of the real estate market and you ask them to stand behind their promise and they tell you to shove off?

      Or how about you take a new job and your company agrees to pay you $50,000 per year, then at the end of that year they come back and said "gee, I really can't afford to pay you, sorry about that little mix-up. We're still cool, right?", what would your reaction be? Be honest. I imagine your 1st call would be to your lawyer in preparation for a lawsuit, even if your boss said a lawsuit may put the company out of business.

      And yea, I get the whole "you're lucky to have a job" argument, I'm just trying to help you understand the position of the union rank and file. Everybody talks big about how they'd do this and they'd do that, but when push comes to shove most people would react just like the UAW members have.
        • 7 Years Ago
        HSM @ Sep 5th 2007 2:59PM wrote: "The difference here is that GM fully agreed to cover worker and retiree healtchcare costs. The UAW is simply requesting that GM do what it said it would do... I'm just trying to help you understand the position of the union rank and file."

        Yes, a lot of us understand the position of the union rank and file: "Get some while the getting is good." We further understand that GM was *forced* to agree to union demands in the past, or else face the consequences of costly strikes. See Myth Number 1 below.

        Top Twelve Myths of the UAW: A Reality Check by Big Rocket
        Updated on June 7, 2007

        1) UAW labor costs for the Big 3 are higher than the non-union labor costs for the transplants (Toyota et al building cars in America). But management at the Big 3 agreed to those labor contracts, so the higher cost of union labor is the fault of management.

        According to a NY Times article in 1997, the UAW held a month-long strike in Detroit that ended up costing Chrysler almost half a billion dollars. When the cost of not complying with UAW demands had the potential for such a high financial downside for the automaker, it was no longer collective bargaining. It became blackmail.

        http://query.nytimes.com/gst/fullpage.html?res=9A07E4DD1638F937A25756C0A961958260

        2) The UAW had not organized a strike against any of the Big 3 in recent memory. It has changed its old ways, and turned a new leaf.

        The UAW is just the same as it used to be. It had not organized a strike in recent memory only because: (a) even the threat of a costly strike made automakers cave in to union demands, negating the need for actual strikes; (b) it continues to enjoy the high levels of compensation packages obtained from previous strikes, and does not require new strikes to regain any lost ground; and (c) it is hard to squeeze more money out of the Big 3, given its current financial condition.

        3) The UAW has made concessions to the Big 3 in these current hard times. It has changed its old ways, and turned a new leaf.

        The UAW is just the same as it used to be, and continues to be a source of high labor costs. According to a NY Times article in 2006: "On average, U.A.W. members at G.M and Delphi cost the equivalent of $67 an hour, including pay of about $27 an hour plus pensions and health care expenses." According to a report on Autoblog / Detroit News in 2007, early UAW retirees "could get a $70,000 lump sum payment with lifetime health insurance… [or] a $100,000 lump sum with no health insurance", based on the retiree’s age. According to a CNN Money article in 2007: "...the gap between Japanese and American carmakers' profits average out to about $2900 per vehicle... A big reason is the cost of labor..."

        http://www.nytimes.com/2006/03/23/business/23auto.html?ex=1300770000&en=57ea081b0a798618&ei=5088&partner=rssnyt&emc=rss
        http://money.cnn.com/2007/01/26/news/companies/pluggedin_taylor_ford.fortune/index.htm?postversion=2007012611
        http://www.autoblog.com/2007/06/03/chrysler-buyouts-hitting-snags/

        4) The high cost of healthcare is not the fault of the UAW. It is the fault of the HMO and pharmaceutical companies.

        True. But by demanding a very high level of very expensive healthcare coverage, and by threatening to go on strike if said level of coverage is cut back, the UAW is responsible for inflicting great financial harm to the Big 3.

        5) The men and women who work for the UAW do back-breaking manual labor. It is only right that they are compensated highly for their hard work.

        In typical manufacturing plants for the Big 3, overhead cranes are used to lift heavy objects, and pneumatic wrenches are used to fasten the nuts and bolts. These are push-button equipment that require little to no physical effort to operate. The manufacturing plants are also air-conditioned during summer, and heated during winter. They are a far cry from the bleak sweatshops some imagine them to be.

        6) The UAW is being unfairly criticized for its compensation levels, when CEO's and upper management get away with millions in salaries, benefits, etc.

        The media scrutiny on excessive management compensation is just as heavy as it is for excessive union labor
        • 7 Years Ago
        They are excruciatingly long only because union supporters use the same old excruciating clichés over and over again, to justify an obsolete, self-serving empire. Much like you did, using the same old cliché: But GM "agreed" to it. Boohoo indeed, for the pitiful UAW workers getting their comeuppance. Their days of driving up prices for US-made goods are at an end.
        • 7 Years Ago
        Too bad none of these 12 excrutiatingly long "myths" addresses my analogy. Well, maybe the myth about poor pitiful GM being "forced" to provide healtchcare benefits. Boo hoo. Way to build that straw man though.
      • 7 Years Ago
      Knowing the stupidity and short-sightedness of UAW, they'll probably look at the recent upswing of GM and think "gee they're doing fine after all. Let's get more money out of them and strike again!" Hopefully GM and Ford can get the concessions they need to be more competitive against the Japanese offerings.

      I'm sure they're gauging the amount of push they have, given their increasingly diminished presence. I somehow doubt they'll let something as major as health care perks slide.
      • 7 Years Ago
      I'm still not clear how unions are able to survive today. They certainly served their purpose, but that purpose is gone. They should be required to operate like every other association - lobby. When the market falls out of the real estate business, you don't see realtors going on strike demanding that Century 21, Weichert and the like cover their losses

      I realize that this is not a perfect apples to apples example but it still works. You can't expect to maintain a certain lifestyle when your business tanks.
        • 7 Years Ago
        Your logic is inane. American workers, including yourself, are enjoying the benefits fought for by Labor Unions. Do you really think that your employers would give you any benefits at all if it wasn't for competing with Union companies for employees.
        Now the Labor Unions are there to Improve and Protect those hard fought benefits and wages. As for GM vs. the UAW, check to see the extensive wages and benefits that the top tier of GM Staff are receiving (including their Golden Parachutes)compared to what the car producing laborer receives.
        If you really think that the Unions time has passed, then you must also believe that the need for our countries Armed Forces has been over since we won WWII.
        I'm proud to be a Union member and will defend my Union like any smart American should. I know that GM (and all companies) would be more than happy to go back to the non-union days, and work their employees 60 - 80 hours a week with no benefits and poverty wages to keep them on the job.
        The UAW was there for their people when times were good, and they're still there to help substain the jobs and employees benefits through the lean times by working with the Corporations.
      • 7 Years Ago
      it's difficult for anyone to be convince in investing in their own future. Life insurance salesmen can verify that. Few people can save money, let alone turn their cash over to an institution. How many people on this blog has put money away for their next car?
      • 7 Years Ago
      So when the stock market goes in the crapper, the fund goes bankrupt and can't pay people's medical bills... I guess everyone can just plan and decided not to come down with cancer or get in a car wreck when the market sucks... oh wait...
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