Posted on 09/30/2007 3:15:10 PM PDT by DeaconBenjamin
The United Auto Workers union could become General Motors’ biggest shareholder under a deal to transfer the carmaker’s healthcare obligations to a huge union-managed trust.
The two sides agreed last week to set up the Voluntary Employees’ Beneficiary Association as part of a four-year labour contract. GM’s $29.9bn contribution to the Veba will include a $4.4bn note convertible into GM shares. GM’s market value of almost $21bn plus that of the bond, if converted at par, would give UAW a stake of about 17 per cent.
The convertible bond will give the union a direct interest in GM’s turnround and the potential to influence the carmaker’s future direction. GM and the UAW declined further comment.
GM shares have almost doubled from their low of $18.40 in late 2005, when the carmaker was struggling to avoid bankruptcy protection. Its biggest shareholder is State Street, the Boston-based financial services group, with a 13.1 per cent interest.
The Veba is expected to be formally set up in 2010. GM has also agreed to contribute up to an extra $1.6bn if healthcare costs accelerate more than expected in the next two decades.
GM’s goal in the contract talks was to close the cost gap with Asian rivals. Besides transferring more than $50bn in healthcare liabilities to the Veba, GM secured union agreement to a two-tier wage system, under which thousands of non-production workers can be hired at wages of between $14 and $16.23 an hour, little more than half the current rate.
In exchange, GM has provided greater job security for union members by assigning projects to 16 US plants. A facility in suburban Detroit has been earmarked to build the forthcoming Chevrolet Volt electric car.
The contract also reveals plans for a small, rear-wheel-drive vehicle, code-named Global Alpha, to start production in 2011. According to Automotive News, the car will be a luxury model and open a new market segment for GM. A pick-up Hummer is also planned.
The UAW’s 73,000 GM members are expected to ratify the contract by October 10. The union’s national council unanimously approved the deal on Friday. A small but vocal dissident group warned that “Veba gambles healthcare on stock markets”.
The union has said that it will use the GM deal as a “pattern” to negotiate contracts with Ford Motor and Chrysler. But these two companies may opt for different Veba-funding formulas.
[cue Ray Liotta]
“Now the guy’s got Paulie as a partner. Any problems, he goes to Paulie. Trouble with the bill? He can go to Paulie. Trouble with the cops, deliveries, Tommy, he can call Paulie. But now the guy’s gotta come up with Paulie’s money every week, no matter what. Business bad? **** you, pay me. Oh, you had a fire? **** you, pay me. Place got hit by lightning, huh? **** you, pay me.”
This will be interesting to see. With their fortunes more directly tied to the company’s performance, will they behave differently? We’ll see.
Multiply this by all other unions and the corporations they strongarm; apply it to all those employees and their families; and the retirees and spouses......and what do you call it....esp when you meld it (might as well, eh?) with Medicare and Medicaid.......
Excellent.
Two birds, one stone.
Anybody remember the last time some idiots put their paycheck and their retirement into the same basket?
Yep.
Enron.
I can’t wait until union heads explode when it becomes a cost vs benefits question.
This just in: The UAW has decided to picket itself.
Well with Union Employees working and retired benefits directly tied heavily to how GM as a whole does... they might just be able to turn the ship around....
Either that or the UAW will bleed them dry and leave them a burning carcas.
You sell the company to the employees when no one else is willing to buy it. Ask UAL folks about that gimmick.
The irony of UAW being the largest sharehold of GM is priceless.
More like a match made in Heck.
Asset strip it, steal the proceeds, then leave the remains to rot.
It looks similar to the United Airlines debacle of the 90s. With the UAW calling the shots, I expect a complete meltdown. The union mentality is monopolist and against risk-taking. The UAW will not be able to resolve conflicts between member demands and marketplace reality.
Earth to the rank-and-file...
Um...OK...what happens if GM goes bankrupt? I thought that the VEBA was vreated to insulate the union (and retirees) from that possibility.
They say that it’s not a good idea to own a lot of stock in your employer.
So it doesn’t surprise me that the UAW is doing just that.
“”I thought that the VEBA was vreated...””
Should read “I thought that the VEBA was created...”
“I can’t wait until union heads explode when it becomes a cost vs benefits question.”
This will be contingent upon the union leaders getting options. They will wind up taking out all the money, the union will get screwed and some RAT in the unions pocket will blame GM management for it and demand an investigation.
Meanwhile the union leaders and attorneys will all retire in the Carribean.
Nah.. the UAW still believes GM has zillions of dollars they need to share with the union. Next round of contract talks the UAW will go for all the marbles.
Then mafia/union bosses will get to fly in the GM corporate jets and all will get company cars. Mafia capos with demo's... who would have thought it?
Sort of like the mafia getting the presidency in Cuba and they are not 90 miles off shore.
ping
Free gaspeghtui dinner w/mayoral candidate 27 Sept from 1500-1900 & UAW Hall (2804 Lorjna Ave).
I guess I’m just plain wrong and what not, eh?
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