Chrysler's Bankruptcy: Union-Management Relationships Unlikely to Change in Detroit

Second marriages are often described as the triumph of hope over experience. It’s already beginning to look as if the pundits optimism regarding the UAW’s majority ownership is likewise mostly hope.

Here from Clusterstock is Joe Weisenthall’s take:

“But a car company with significant UAW ownership is bound to be run much better than car companies under the previous scenario because the Union, finally, will have a stake in the companies success. They’ve never had that before. Previously, their relationship was, frankly, parasitical. The union had no real reason to see the car companies succeed. They just wanted their wages maintained, their pension fully funded and their healthcare.”

But you can’t be a parasitical on yourself. That’s impossible. The only way the union’s equity stakes in the car companies will be worth something is if the car companies make it. And if the car companies flail, they won’t really have anyone else to blame.

I don’t mean to pick on Joe. There were plenty of other sentiments along this line. Here and here are links to a couple of other opinions.

It seems as if Ron Gettelfinger, the head of the UAW, views things a bit differently. According to the WSJ he told Fox News that things aren’t really going to change all that much:

“The United Auto Workers president is seeking to distance his union from direct responsibility for the future of Chrysler LLC, noting 55% of the auto maker will be owned by a retiree health care trust fund and not the union itself.

“It’s this independent trust that will own these shares,” UAW President Ron Gettelfinger said on the Fox Business Network Friday morning. Mr. Gettelfinger’s office did not immediately respond to interview requests.

The trust–known as a Voluntary Employee Beneficiary Association, or VEBA–is supposed to take ownership of 55% of Chrysler as part of a government-brokered cost-cutting plan that union workers ratified earlier this week. Chrysler filed for federal bankruptcy protection Thursday.

Mr. Gettelfinger also implied in the Fox interview that the UAW would be able to act independently, even strike if necessary, despite the fact that the union would own a critical piece of the company through the VEBA trust.

“The VEBA is controlled by the outside independent directors who have been appointed by a judge to serve on that,” he said. “We have less UAW representation on the VEBA. And as far as the board seat that the VEBA is going to get [on the Chrysler board] with the approval of the UAW, the voting will be done by independent directors….So, I don’t see that conflict of interest issue.”

Mr. Gettelfinger added that “we have issues and occasionally we’ll have a strike but we settle 98% of our agreements without any kind of an altercation with the employer. It’s in our best interests. It’s in their best interests.”

That doesn’t sound to me like a guy who believes that somehow a magical alignment of worker, management and owner interests has occurred. It’s worth noting that around 30% of Chrysler UAW members voted against the plan. I’m sure that wasn’t lost on Mr. Gettelfinger. He knows well that minority can turn into a majority in the blink of an eye, particularly so if Chrysler doesn’t prosper and all that stock turns into just so much paper.

The average worker is justifiably concerned with how much money is going into his pocket and what kind of benefits he can wring out of his employer. The prospect that sometime down the road a slug of stock might materially benefit him is a view that is treated with a high degree of skepticism.

Don’t expect union-management relationships to change all that much in Detroit.

Comments

[werawc:]

I have wondered what the UAW really is. It is not really auto workers representing themselves. Is it a corporation, LLC, Non-profit organisation? Does it have a perpetual no-compete contract to represent auto-workers? Who is on the union board, who elects them? Who sets the rates of what the UAW is paid to represent the real auto workers? How many employees does the UAW have?. What are their salaries? Do they get laid off in proportion with the auto workers that get laid off? Why do auto workers even need this costly third party negotiator? All of my life I worked somewhere where the pay and conditions met with my approval, and if they did not, I worked somewhere else. Sometimes that meant retraining, learning new skills, or even moving. I have never understood the need for unions, I dont get it.

May 03 01:39 PM

[ThomasC:]

This is the foundation of your argument..?
" The union had no real reason to see the car companies succeed. They just wanted their wages maintained, their pension fully funded and their healthcare.”
To this i say my friend you are a moron. Why would i want the company i worked for for 33 yrs to fail ? Union wages and compnsation make up 10 % of their total cost. When they were making billions of dollars for years, it was not my decision on how to blow the money or what prouducts to come out with. All we did was put together what they give us together. Have your ever worked a line? Try it and then tell me what your worth to them. And this is the best you can come up with. No my friend and i use that loosely, you are the parasite here. Get a real job that you know even a tad about . Then again you are probably a non union worker eh..?

May 03 01:44 PM

[HersheyBar:]

Notice that it is the union companies that are hurting. Non union companies like IBM are doing pretty well in todays environment.

You cannot base retirement on forecasted sales, but what YOU have put into the pot already.

I look forward to all the UAW workers taking a reduced retirement, like many of us non-union workers already have.

Role # 1 for investors ... do not invest ( or loan $$) to any company with a large union presence -- guaranteed to loose.

Hershey in overtaxed NY

May 03 02:03 PM

[niteshift:]

406163. you do not have any reason to talk on something youdon't know about. the retirement of a U.A.W.does go down. see when a U.A.W. member starts getting S.S. the company pays them less. lets say they were getting 2500 a month. then S.S. kicks in and they get 1500 a month no the company only pays 1000 a month. so now the company keeps the 1500 that they had paid to U.A.W. member. so now the companydoes with it what ever the want. they sure did not pay there bills. so now why or you on the worker again?

May 03 06:08 PM

[303820:]

Non union companies like IBM are not employing many American workers...for the past 30 years our country has been busy busting unions, lowering wages, and selling our jobs to the lowest foreign bidder. how do you think we got in to this mess?your wall mart non union wages are not going to get us out of this!!!!!!!!


On May 03 02:03 PM User 406163 wrote:

> Notice that it is the union companies that are hurting. Non union
> companies like IBM are doing pretty well in todays environment.<br/>
>
> You cannot base retirement on forecasted sales, but what YOU have
> put into the pot already.
>
> I look forward to all the UAW workers taking a reduced retirement,
> like many of us non-union workers already have.
>
> Role # 1 for investors ... do not invest ( or loan $$) to any company
> with a large union presence -- guaranteed to loose.
>
> Hershey in overtaxed NY
>

May 03 09:58 PM

[User 406715:]

It seems the auto executives AND the union employees have sucked all they could from GM & Chrysler. What is left is the bones for the investors. Now the execs can go suck another compay and the union employees can go to the unemployment line. The long service people can look to retirement years with no pensions or healthcare. Seems the harse results of economics have come to rooster. Now we can look to Ohio and Kentucky where efficient management and Non-Union employees produce a quality product we actually can justify spending our $ on. The employees have good jobs and healthcare and retirement and management has the same. Stockholders have a good investment. Seems to me the world is working as it should.

May 03 11:30 PM

[303820:]

Your non union Ohio and Kentucky foreign auto transplants pay 30% of their employees $12hr with no benefits...they're called
"contract workers" same goes for some management employees!
The 70% of permanent workers have limited health care and NO pension program...401k is not a pension benefit!
Like I sayed before...THEY'RE SLASHING OUR THROATS AND WE SAY "THAN-YOU!!!!!!!!!

WELCOME TO THE UNITED STATE OF ASIA!


On May 03 11:30 PM User 406715 wrote:

> It seems the auto executives AND the union employees have sucked
> all they could from GM &amp; Chrysler. What is left is the bones
> for the investors. Now the execs can go suck another compay and the
> union employees can go to the unemployment line. The long service
> people can look to retirement years with no pensions or healthcare.
> Seems the harse results of economics have come to rooster. Now we
> can look to Ohio and Kentucky where efficient management and Non-Union
> employees produce a quality product we actually can justify spending
> our $ on. The employees have good jobs and healthcare and retirement
> and management has the same. Stockholders have a good investment.
> Seems to me the world is working as it should.

May 04 04:52 PM

[Miken:]

The UAW is not a concern of mine. They won't have control on the Chrysler (or maybe GM) BOD. Gettelfinger is correct in saying that the stock is not owned by the UAW, it is owned by the UAW VEBA. Maybe a small but important distinction. The VEBA will be run by a board consisting of 5 UAW appointed members, and 6 independent directors appointed by the courts. The Chairman is going to be Robert Naftaly, former CEO of BCBS PPO.

The concern to me is the government's shares and representation on the Chrysler/GM boards, especially GM. Imagine a scenario where GM wants to make a sizeable investment overseas, after all GM is a multi national company. The fact is that the growth in the auto world is in the Asia Pacific rim, and if you want to be a serious car company, you have to be there. How will a bunch of political hacks loyal to someone other than profit motivation react. Will they see the value of the investment, or will they follow a politically correct path?

Also, will the government hacks exert enough pressure on product development to polarize the portfolio to all smaller/hybrid cars. If a car company had that portfolio in periods of $2 gas like the present, the data shows that they will not sell cars. Prius sales are down over 50% currently.

I also believe they would under estimate the American consumer in that the vast majority of consumers know that hybrids have prohibitively long payback periods.

Like I say, it's not the UAW, it's the U.S. Government to be concerned about.

May 04 07:42 PM

[Miken:]

Succeeding is different than existing. I have 40+ years being involved in these matters so I think I have a right to express my opinion without being questioned by you.

No, the UAW did not want the company to fail. On the other hand, they didn't want them to succeed either. The UAW prefers that the company be essentially a breakeven arrangement where all profits are funneled back to the membership which puts the company in a precarious position when the economy tanks, and here we are.

A successful company has adequate cash and liquid assets on hand to whether these times, unfortunately, those assets became a target of the UAW leadership. The UAW is paying for this miscalculation. I do believe that the UAW had a legitimate purpose for many years gaining decent wages and benefits. The problem was that when they achieved these goals, they didn't change their mission and continued to fight for the same goals pricing themselves out of the market in the process. No vision.


On May 03 01:44 PM Thomas C wrote:

> This is the foundation of your argument..?
> " The union had no real reason to see the car companies succeed.
> They just wanted their wages maintained, their pension fully funded
> and their healthcare.”
> To this i say my friend you are a moron. Why would i want the company
> i worked for for 33 yrs to fail ? Union wages and compnsation make
> up 10 % of their total cost. When they were making billions of dollars
> for years, it was not my decision on how to blow the money or what
> prouducts to come out with. All we did was put together what they
> give us together. Have your ever worked a line? Try it and then tell
> me what your worth to them. And this is the best you can come up
> with. No my friend and i use that loosely, you are the parasite here.
> Get a real job that you know even a tad about . Then again you are
> probably a non union worker eh..?

May 04 07:53 PM