Word: uaw
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...carmaker's management is struggling to assemble a rescue package that in addition to any UAW givebacks will have to include closing more plants and getting big help from Italian carmaker Fiat, which would contribute its own small-car designs and technology. Failure would saddle major banks with $7 billion in new losses, leave Chrysler's former owner, Daimler AG on the hook for more than $1 billion in additional pension costs and wipe out the health care for thousands of Chrysler retirees...
Creditors are not the government's biggest problem with GM, although they would like the public to think debt is the headache everyone should focus on. A bankruptcy judge could force a large cut in health and retirement benefits for UAW members. That would be on top of what is likely to be another round of lay-offs. With the national unemployment rate moving up as fast as it is and large numbers of pensions facing funding problems, the federal government may not want to be forced to support current and retired GM workers. Someone will have...
...more large retailers could face problems not unlike those being faced by GM. The largest retailers have two advantages over car companies. For the most part, they do not have crushing debt loads. Secondly, they do not have the legacy labor costs that are a result of UAW negotiations with The Big Three, although some have pension plans that are not completely funded...
...hard truths to the union. On that score, Obama's toughness has gained him some street cred in business circles - even drawing faint praise from a Wall Street Journal editorial. The task force has made it clear that GM can't afford the renegotiated wage-and-benefits package the UAW agreed to in 2007. Even using GM's best-case scenario, the company projected a negative net cash flow of $14.5 billion over the next six years. Most of that deficit can be accounted for in retiree health and pension benefits - which means that one way or another, the hundreds...
...Understandably, neither the union nor the bondholders are happy about the task force's approach. The UAW feels particularly aggrieved because it has agreed to an unending series of givebacks over the past 20 years. Even before this latest crisis, the UAW had assented to the 2007 contract, which would have put Detroit's labor cost per car within a couple of hundred dollars of Toyota's and the other transplants'. That isn't enough, in the view of the task force, because consumers are willing to pay more for the foreign badges, and the Detroit Three need to earn...