Word: uaw
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What is left unsaid in the news from Ford is that it is academic whether aid for the car companies comes from their private debt holders or the government. The UAW will bend to another round of concessions. At the rate at which The Big Three probably lost money last month, the industry could need $50 billion or more in financial support between now and the end of this year. That assumes that car sales drop at a rate of only...
...already received. But both are missing two pieces they must have by March 31 to convince the government that they are viable: approval from bondholders to restructure their debt and approval from the United Auto Workers to restructure their health-care agreement. Complicating the problem, the bondholders and the UAW are keeping a close eye on each other to make sure that neither side gets a better deal...
Faced with giving up benefits, the UAW will conciliate but not placate management, which strikes some Americans as uncooperative. But its so-called legacy costs, won fairly at the bargaining table, have big emotional value for the UAW. It's what behavioral economists call the endowment effect, says Lipsky: the UAW values what it fought for - even maligned work rules - much more so than workers who never had the benefits. So they are not going to give up anything without a fight. In mid-February, the union actually stormed out of negotiations with GM over reducing the company's retiree...
...Roger Lowenstein describes in his book While America Aged, it was the remarkable UAW president Walter Reuther (1907-70) who won womb-to-tomb health-care coverage and retirement benefits for the rank and file. Reuther was an early advocate of universal health-care coverage, which was not going to fly in Washington. So he willingly traded small pay raises for deferred compensation in the form of pensions and retirement health care. The Big Three gladly signed on because the trade-off held down cash wages - and because they were lushly profitable companies, controlling 90% of the U.S. car market...
Reuther, who began to worry about rising health-care costs as far back as the 1950s, feared that the auto companies would one day not be able to meet their obligations. That that day is here is one reason the UAW made yet another concession. It reached an agreement with Ford to change the way the company contributes to the retiree health-care fund administered by the UAW. Instead of cash, Ford now has the option of issuing stock to fund up to 50% of the Voluntary Employee Beneficiary Association, or VEBA. It means that the health of UAW members...