TTAC's best and brightest were not slow off the mark on this one: GM's plan to put $50b into the hands of the United Auto Workers for a union-controlled health care superfund could lead to epic fraud, leaving union members without adequate coverage. The Director of the National Legal and Policy Center's Organized Labor Accountability Project and editor of Union Corruption Update sounds the alarm. "Union-controlled health and benefit plans often shortchange union members and retirees," Dr. Carl Horowitz warns. "Instead of getting the best deal for participants, these plans are often characterized by cozy, inside deals beneficial to the union bosses, and on occasion, organized crime. With the staggering size of this proposed health fund, the UAW bosses must be salivating." In case you didn't notice, Dr. Horowitz (who still has both legs intact) thinks Congress should hold hearings on the health care deal– or else. "Neither GM nor the UAW can be counted on to act in the best interests of workers. Putting the union in charge of this health fund creates a potentially huge conflict of interest for UAW leaders." 

[Interview w/Dr. Horowitz below.] 

In spite of UAW president Ron Gettelfinger's publicly stated confidence in his members' support for the new GM contract proposal, some of his union brothers and sisters aren't exactly happy with the health care component of the deal. The Soldiers of Solidarity (SoS) has been– and continues to be– opposed to the creation of a  union-controlled VEBA health care superfund. They claim VEBA stands for "Vandalizing Employee Benefits Again." In a statement on the SoS website that would bring tears (of joy) to Walter Reuther's eyes, three former UAW executive board members state "We believe it irresponsible by the parties to this negotiation to shift the burden of risk to the retired workers and their families and release General Motors from its commitment to the full and perpetual coverage of healthcare for the workers who built the wealth of the corporation in the first place." Not surprisingly, they're urging UAW members to vote against the new contract this weekend. If the signing bribes work members ratify the contract, the SoS' next move will most likely be a call for new union leadership.  

Detroit Free Press writers Katie Merx and Tim Higgns have reached new heights of hyperbole. After boldly proclaiming "A new U.S. auto industry emerges" because of the new UAW contract with GM, they tone down their rhetoric a bit– but not much. They speculate that the new agreement will make "GM more competitive against its foreign rivals." They also claim the contract has the "potential to shape a new Detroit auto industry that can compete on a more-level playing field with … foreign rivals not burdened by huge retiree legacy costs." But then they temper their enthusiasm by admitting "GM, Ford and Chrysler still face challenges to consistently develop vehicles that resonate with Americans, to slim down their dealer networks and to improve their image on quality." So what's it gonna be– a "more competitive" GM because they now have a "level playing field," or a return to business as usual before the ink is even dry on the contract? Watch this space (General Motors Death Watch 148 later today).

While the Canadian Auto Workers (CAW) haven't greeted the United Auto Workers (UAW) action against GM with a sympathy strike, their plants are just hours away from shut down. Speaking to CBCNews, CAW union president Buzz Hargrove asserts that "by the end of this week we could have anywhere between 80,000 and 100,000 people unemployed." Hargrove said a lack of parts will starve GM's Oshawa plants assembling Impalas, Grand Prix and LaCrosses/Allures by the end of the day shift today. The truck plant had enough parts on hand to keep running about three days. Needless to say, Buzz lays the blame for the UAW strike at GM management's feet. "GM is going to try to make the UAW members and their families and communities pay [for the] troubles they're experiencing because of imports and the transplant production that doesn't make the same commitment in terms of investment and jobs in Canada and the U.S." Based on what Buzz has heard from UAW president Gettelfinger, Hargrove predicts "this thing's going to drag on for a while." The CAW starts its own contract negotiations with GM next year. Depending.

On the same day that the United Auto Workers (UAW) decided to strike GM, the automaker has announced it's ramping-up its US to China exports by $800m. The Economic Times reports that Shanghai GM (GM's joint venture with China's SAIC Group) will import the Buick Enclave CUV for China's 400 Buick dealers. As concerns about Chinese outsourcing form no small part of the UAW's beef with The General, the timing of the announcement can be seen as a carrot or a palliative for union reps and members who consider job security Job One. Of course, the strike obviates Enclave export for the foreseeable future, and the union is keenly aware that GM imports billions of dollars worth of Chinese parts for their North American products, with the threat of fully-assembled cars from The Peoples Republic replacing NorAm products. Still, nice try.

The UAW could become a major player in the stock market. CNNMoney speculates if the union-administered VEBA health care superfund proposed by The Big 2.8 come to fruition, the UAW could have $60 to 70b to manage. The windfall would give the union "newfound clout to push its agenda" on Wall Street. To keep the VEBA healthy, the UAW would have to make investments which will return enough to cover whatever percentage of the total bill the money transferred from the automakers won't cover. AND they'll need to grow their nest egg to keep up with rapidly rising health care costs. So which stocks will they invest in? Will the UAW show solidarity with their active members and invest in GM, Ford and other unionized companies? Or will they do what's best for their retirees' health care fund and invest in healthy companies that actually turn a consistent profit, regardless of union affiliation?

The Detroit News reports that a "substantial signing bonus" could seal the deal on the new UAW contract with GM. The bribe bonus would be "something they could sell to members without making a long-term commitment that locks GM into something it can't afford down the road." The amount of the bonus hasn't been stipulated, but it's bound to be quite a chunk of change– especially piled on top of the billions GM will have to cough-up for the union-administered VEBA health care superfund that everyone but the retirees it'll cover seems to want. If the negotiating pattern follows past behavior, Ford and Chrysler will be expected to fork-out the same bribe pay out. Cerberus may be able to pull some cash for bonuses out of its deep pockets, but Ford isn't exactly flush. The UAW better finesse this one, lest they kill that proverbial goose.

The New York Times (NYT) is reporting that contract negotiations between the United Auto Workers (UAW) and GM "appeared on the verge of collapse Sunday night." On the other hand, "the tenor of negotiations can change rapidly" and "despite the deadlock, a walkout at G.M. did not seem likely." In other words, the NYT doesn't know jack. That said, Michelle Maynard's speculation "inside sources" seem spot-on about one of the major sticking points: "Mr. Gettelfinger also was pushing for G.M. to put more cash in the health care trust, called a voluntary employee benefit association, or VEBA." We concur with the concept: the UAW wants the health care superfund funded with as much cash as possible, GM doesn't have cash (and getting more would be ruinously expensive) and the union isn't exactly wild about taking most of their payoff in GM stock (despite the expected surge in GM's stock price once the deal goes down) because they're not convinced GM can stave off Chapter 11; leaving their members without health care. They'll eventually settle on a mix, and GM will [re] guarantee a certain number of union jobs. Hey, if you're gonna speculate…

Unlike enlightened TTAC readers, your average Wall Street type believes that The Big 2.8's survival recovery hinges on transferring their health care liabilities to a union-administered health care superfund (a.k.a. VEBA)– PROVIDED they pay somewhere around 60 to 70 cents per dollar of health care liability. BUT to do the deal, GM would have to find some $30b, Ford would need some $15b,and Chrysler around $7b. Guess what? They don't have that kind of money hanging around, and their current "distress" makes the cost of borrowing somewhere between "onerous" and "usurious." SO the automakers are looking at paying for the VEBA with a large percentage of their own stock– except for Chrysler who might want to pay cash on the installment plan instead. BUT the union doesn't like the idea of a health care fund paid for by stock or deferred payments all that much, because, well, what if the automaker goes belly-up? Only, again, Wall Street thinks they won't go bankrupt IF the carmakers create a health care VEBA. And THAT means if they do the deal the cost of borrowing to fund the deal would go down AND their stock would go up. And IF the union had agreed to take stock in lieu of cash money AND the stock goes up, the rise would cover the aforementioned discount on the full health care liability. That's IF the union cashes out at the top of the market and invests in something less volatile than their employers' stock. Like, I dunno, Toyota stock. Don't laugh. It could happen. Anyway, if you want to try that again, we recommend Kaisernetwork.org's summation.

As the UAW contract negotiations heat up, so does the rhetoric. The Detroit News quotes UAW vice-president Cal Rapson on retiree health care costs: "I can tell you one thing, we are determined not to put any more costs on retirees for their health care." The comment, made during a speech at the opening of a labor exhibit at the Sloan Museum, was just what the retirees in attendance wanted to hear. If the automakers are successful in negotiating a UAW-run VEBA superfund for retiree health care, Mr. Rapson may find out it's not that easy administering anyone's health care benefits, let alone those with the demographics of retired autoworkers. It'll be interesting to see how long the UAW keeps promising no out-of-pocket increases when they're the ones responsible for paying the bills.

Chrysler is about to follow Ford and GM's lead and perform an asset-selling cash grab. According to The Wall Street Journal, Chrysler would "like" to sell its Mopar unit, which makes high-performance and specialty parts, and Chrysler Transport, which manages supply deliveries to their plants. To that end, Chrysler's brought up the possibility in its current contract talks with the United Auto Workers (UAW). Needless to say, the UAW opposes the move, as it would involve the loss of some 1300 dues paying members jobs. The union can bitch all they want but "Boot'em Bob" Nardellli has already stated his new employer's firm intention to "monetize some assets." That's equity fund speak for "strip and flip." Is anyone– including the UAW– really that surprised?

It's a media truism: when the principles are tight-lipped about a big story, speculate away! Case in point: The UK's Observer quotes unnamed inside sources who say Ford and General Motors have threatened to "leave Detroit and take their car manufacturing operations overseas" if unions "don't agree to a massive pay cut for hourly paid workers." First, why would GM and Ford spend hundreds of millions on relocation expenses just to make a point to the UAW? Second, no one expects a massive pay cut for the union's hourly workers. Third, Ford and GM have already moved large chunks of their car manufacturing operations overseas. To suggest that Ford and GM could/would go nuclear– shutting down mission critical U.S. operations in response to union intransigence– is just plain silly (even for a New York City-based reporter). Building on this imaginary doomsday scenario, BloggingStocks goes one step further. They postulate that the UAW will strike if they can't get a sufficiently large union-controlled health care fund from GM and Ford (of Chrysler we hear nothing). Sorry guys, but it's the bus you don't see that kills you. 

It's been three weeks since The Big 2.8 automakers began negotiations with The United Auto Workers (UAW). So far, neither side has said word one about their progress, which Wall Street and other industry analysts [wrongly] consider the key to Detroit's future. According to the news hungry scribes at the International Herald Tribune, that's a good thing, not a bad thing. The Trib trotted out Global Insight auto industry analyst Aaron Bragman. "'Historically, both sides have aired grievances publicly when things were not going well. If things were going poorly you'd be hearing a lot of saber rattling." Apparently oblivious to the "Yeah, TOO quiet" school of thought, Bragman then shared a little inside information. "From what we hear, they're sitting down and they are making some serious propositions back and forth. We'll see what comes of it." David Cole, chairman of the Center for Automotive Research in Ann Arbor, agrees. "I think they're making pretty good progress, and I think there is a mutual understanding of what they have to do." For this they they get paid? 

General Motors has rejected a request by the Canadian Autoworkers Union (CAW) to force employees who don't drive a GM-manufactured vehicle to pay a $100 per year parking fee and park at the back of the lot at GM plants. Newsdurhamregion.com reports plant chairman Keith Osborne told GM president Arturo Elias "people need to understand there are economic consequences that accompany their choice of vehicle." Osborne says he wants to "send a message to our membership that it is important to support the industry." Opposing: Spokesman Stew Low. "It is our desire that consumers will choose GM vehicles because they are high quality, offer the safety features and value… they are looking for. While we appreciate the idea to promote GM cars and trucks, we have decided not to move forward with the idea the union presented as some of those non-GM vehicles may belong to visitors (or) suppliers." The CAW already restricts access to their own parking lots; vehicles not built by General Motors, Chrysler and Ford are banished  to Siberia the farthest corner of the parking lot.

When the going gets tough, the unions file lawsuits. Yesterday, seven unions including the UAW asked the National Labor Relations Board (NLRB) to order employers to bargain with them, even if they don't represent the majority of employees. The union claims the National Labor Relations Act requires this. Daniel Halem, a lawyer who represents many employers, disagrees. He told the New York Times that "Unions must have the support of a majority of employees. This concept is totally at odds with [the petition]." The unions know they won't have much of a chance of getting the Bush-appointed NLRB to side with them. However, they're banking "that there will be a Democratic president someday who will appoint a board that will look favorably upon their argument." Hope springs eternal, or are they setting themselves up for a fall?