The UAW as a Car Company Owner
If General Motors (GM) and Chrysler somehow survive the current crisis, the United Auto Workers will end up with huge equity stakes in both companies under new restructuring plans. Is this good news for UAW President Ron Gettelfinger and his union?
Maybe not. First, these equity stakes come at a huge cost in terms of lost jobs and benefit concessions. The UAW Voluntary Employee Beneficiary Assn. (VEBA) trust, which manages the health-care coverage of workers and retirees, is owed $9 billion by Chrysler and some $20 billion by GM. The UAW has agreed to take stock in exchange for half those future obligations.
The union via the VEBA trust may end up owning 55% of Chrysler's shares and 39% of GM. (Late on Apr. 29, Chrysler and the Treasury Dept. were in talks with lenders to create, possibly via a bankruptcy filing, a new ownership structure with the UAW and Italy's Fiat as key shareholders.)
The UAW's dual role as union and investor would be tricky. "The next time the UAW goes to organize a Honda (HMC) plant, they will be viewed as a major stakeholder in one of [Honda's]competitors," says Gary N. Chaison, professor of industrial relations at Clark University in Worcester, Mass.
Also, unfairly or not, other industries the UAW hopes to recruit may blame the union for Detroit's downfall, a perception that could hurt its attempts to organize casino workers in Atlantic City and elsewhere. "Perhaps the most unfortunate outcome is the false impression made with the public that somehow the union brought the companies down," says Ken Lewenza, president of the Canadian Auto Workers, which is unaffiliated with the UAW.
Finally, the union's own financial future will be tied to the stock performance of GM and Chrysler. A production shutdown brought about by a strike to get better benefits at either of the car companies will slam the share price—and by extension hit the wealth of the VEBA trust fund, which the UAW uses to fund the health-care costs of retirees. The upshot? This new era is "going to be like playing Texas hold em [poker], but with a lot of new rules at the table," says Mike O'Rourke, president of UAW Local 1853 in Spring Hill, Tenn.
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