UAW Goes From Rivetheads to Owners in Detroit

Posted by: David Kiley on April 27, 2009

In cutting major concession deals with General Motors and Chrysler this week, the United Auto Workers are walking a whole new line as it goes from being just a labor union to owners of the companies its members work for.

A deal struck with General Motors exchanges debt owed to the union for 39% of the troubled automaker. A separate deal with Chrysler will give the 74-year old labor organization 55% of the privately held Chrysler.

In both companies, the union will have board representatives. It will, as such, have a say in hiring the next CEOs of the automakers, product decisions and compensation. GM Fred “Fritz” Henderson and whoever the incoming CEO of Chrysler will be if the company is saved from liquidation, will be effectively working for the union membership.

As the union has been a frequent critic of the disparity between compensation for C-suite managers and factory floor workers, it will be interesting to see what levels of compensation the union board members vote for.

The union will in fact own more of GM and Chrysler than the Ford family owns of Ford Motor Co. It will own larger stakes in GM and Chrysler than billionaire financier Kirk Kerkorian was able to accumulate in his runs at both companies in the last 12 years.

Union members can pretty much burn those picket signs they threaten to drag out every few years when contracts get re-negotiated. Threatening a strike at a GM or Chrysler facility, or even a parts plant that supplies one of the automakers, would be shooting themselves in both feet as long as they hold such large stakes in the companies.

Ford remains the only U.S. automaker that has neither taken U.S. Treasury loans, nor had to give the union equity in the company; though that could change by year-end because of an agreement struck with the union last month that gives the automaker the option of paying billions in future health-care obligations to the union in Ford stock instead of cash.

According to the agreement struck with Chrysler, which is expected to be ratified by members this week, Chrysler will issue a $4.59 billion note to a health-care trust fund that the union will manage for retired workers. Chrysler will pay $300 million in cash into the trust fund in 2010 and 2011, and increasing amounts up to $823 million in the years 2019 to 2023.

Daimler AG, which still retains 19.9% of Chrysler, left over from its purchase of Chrysler in 1998, agreed Monday to give up that equity and pay up to $600 million into the automaker’s pension fund.

In order to satisfy the White House’s conditions for getting an additional $6 billion in loans, on top of the $4.5 billion it has already received, Chrysler still has to strike a substantial deal with banks and private equity funds holding $6.9 billion in debt secured by Chrysler’s hard assets like its Jeep business, real estate, factories, etc.

Those negotiations have made little progress, and banks have objected to the UAW getting so much equity in the company. The White House wants the banks to accept no more than $1.5 billion, and 5%-10% equity in the company.

In the Chrysler deal, the union is losing cost-of-living adjustments to pay, and accepting stiffer limits on over-time pay and a reduction in paid holidays. For all practical purposes, union pay and benefits are practically the same now as non-union workers employed by Toyota and Honda in the U.S.

As union members, such cuts and concessions are painful. But to owners of the companies now, it makes Chrysler, and GM, more globally competitive as long as they stay in business.

Follow “David Kiley” on Twitter

Reader Comments

Steve

April 28, 2009 3:11 AM

Now, they are owner, will they still go on strike as they used to? :)

Snoz

April 28, 2009 6:22 AM

Socialist Labor Union, UAW, will now try to operate GM for a profit. UAW will succeed only if it can defy the law of gravity. Unless it has supernatural power, UAW will fail either as a labor union or as a business venture. The UAW can not serve two masters at the same time: Karl Marx and Adam Smith. In the final analysis, UAW is throwing precious union money after bad. UAW's investing substantially all of its membership's retirement and health funds into GM is a gamble akin to buying a lotto ticket or a spin on a roulette wheel. Like the wise person said a doctor who treats himself has a fool as his patient or a lawyer who represents himself has a fool as his client, the UAW that manages GM has a fool as his business partner. With socialism ideology as reason for its existence, UAW can not be competitive against imports or even a domestic auto maker in the long run. Like the Fiat before Italy became a member of EU, GM under UAW will stagnate and die under the demands of labor interest. The several UAW's seats on GM's board will guarantee GM's final burial and UAW would have burnt its money on a lousy crap shoot.

Sally in Chicago

April 28, 2009 6:29 AM

This will surely kill both auto companies. Bye bye.

Paul (Vw)

April 28, 2009 7:07 AM

>>> Union members can pretty much burn those picket signs they threaten to drag out every few years when contracts get re-negotiated. Threatening a strike at a GM or Chrysler facility, or even a parts plant that supplies one of the automakers, would be shooting themselves in both feet as long as they hold such large stakes in the companies.

Labor is management now. Management is labor. This should provide us with some real entertainment...if not cars we actually want to buy.

Hugo van Randwyck

April 28, 2009 7:32 AM

It sounds like GM and Chrysler are moving from being a free enterprise business, to being a co-operative business. They tried this in the Soviet Union. Employees in Chrysler and GM, had the opportunity, for years, to buy shares in the companies, yet did they? on this scale? Good luck to them. If the wage/salary levels are of the same level as competitors, then they may have a chance. Maybe FIATs management skills can help the Chrysler turnaround. I'm surprised the UAW is getting so much, for all the decades of unrealistic demands, that helped cause the current problems. Ford could communicate directly with employees and ask in a postal ballot, if they want to have a separate Ford Union, or no union at all.

Mike in FL

April 28, 2009 8:49 AM

Sometimes it is better to start over with something new. Putting 27 Billion in one failed enterprise (GM) and a few billion more into another failed enterprise is wasted money. The amazing new auto company you could start with 1/2 this $$ would be world-class. Putting new tires on a beat old car and you still have a beat old car. Sad waste of everyone's money and the the US competitiveness in the world. Capitalism to succeed requires bad businesses to fail. These companies are insolvent and the UAW and the creditors should get ZERO. The opportunities being squandered with this bailout have destroyed the US auto industry.

Jeff B

April 28, 2009 8:54 AM

I see this as an excellent outcome -- union ownership of GM & Chrysler. Now the UAW will truly understand that noncompetitive wage, benefit, and work rules truly hurt them as much as the industry. Hopefully they will see this before it is too late. I'd guess GM will survive in some form or other. They are finally figuring out how ot make some decent vehicles. I give Chrysler a zero chance of lasting another 5 yrs unless our corrupted legislators keep voting to prop them up with tax dollars.

Bruce

April 28, 2009 9:17 AM

Yea, great deal,you 61% of shit

David

April 28, 2009 9:26 AM

Worked so well for United

Chris

April 28, 2009 9:27 AM

It will be interesting to see how long before both companies fail under UAW's power. Don't worry though, us taxpayers will pay the bill, they will get richer out of our money, and than they'll realize that they don't know how to run the business, just like the banks did. I really don't know how the government can see this as a positive, it's the unions that brought the US car industry to fail and now they will have over 50% stake in GM and Chrysler, what a joke.

Gary Harris

April 28, 2009 9:58 AM

Are we getting some glimpses of stick and carrot capitalism exposing its real nature when the goat nips at the carrot? We are seeing retirement programs and insurance companies that don't have enough carrots? Is Social Security not far behind? Is socialism the next stage of the world economic evolution? Stay tuned.

Matt

April 28, 2009 10:00 AM

Feels like the 80s all over again. Where is Gordon Gecko? Maybe KKR could structure a LBO?

Either way this is a bad plan. Employee Ownership requires steadfast stewardship, which neither GM, Chrysler, Fiat or the UAW have been able to execute - ever.

Look back at the 80s, how many companies that went down the employee owned path are still around today?

Richard

April 28, 2009 10:21 AM

Interesting development.

Probably will be very good for the car companies and the union. The union bosses know that if they don't run the car companies well, they won't be able to pay pensions going forward, so will have a huge incentive for the long term success of the business.

Adam Smith will easily win out over Karl Marx.

kingface

April 28, 2009 10:52 AM

nobody should be a donkey to anybody, it's not a matter of all fingers are not equall. it's only the knife that can tell how it peel the yam.

Otis

April 28, 2009 10:55 AM

Daimler, VW and BMW have labor representatives on their boards and are doing OK, so what is wrong with that?

Ownership is another issue and it will finally, let labor focus on the share price on a daily basis instead of their labor contracts.

What labor ownership will do is to reduce the perks of management meaning putting an end to waste and instead focus on production and car design.

Jacob

April 28, 2009 11:08 AM

I am completely in favor of giving workers ownership in these companies (stock, profit sharing, etc.). However, I am completely against giving unions control of the companies. To me, the unions and the employees who are forced to join the unions are two different entities. How does everyone else feel about the union/worker relationship?

c.l.shannon

April 28, 2009 11:37 AM

oh boy, the uaw gets a sweetheart deal on a jeep-liberty kind of disaster - all pretty and shiny on the outside and hard plastic and breakdowns on the inside. maybe they'll be as entertained as the poor consumers who bought those dogs for their hard-earned money and suffered through that ownership experience. maybe they'll look forward to selling the dog as soon as possible too! only problem is that everybody and their brother knows its a smelly dog on wheels.

Milton

April 28, 2009 11:51 AM

GM and Chrysler will be majority owned by the government and the UAW. The UAW is a dedicated partisan socialist organization that has been trying to destroy the "Big 3" from within for decades. The government is essentially at least 1.3 Trillion $$ into it's own bankruptcy. If this is the best plan available, better to have GM and Chrysler go bankrupt now, and stop delaying the inevitable.

Luis Moreno

April 28, 2009 12:03 PM

I can see that workers required representation, and I am for the workers, the American Workers. But absolutly needing Union representation in every single corporation in America. If you think about it the Unions never look for the best intrest of the workers but for the best intrest of themself. I strongly believe that we are loosing 2 out of our big 3 in part because of Union out rage demands. Yes I am glad Big 3 workers are getting paid unthinkable amount of money! But look at us know, after we couldn't afford buying American cars... Yes Management is not excempt of fault, so are engineers, etc, etc. Of course Corporatins are going to outsourse in other contries where labor is a fraction and most of all more relative for the job. Anyways UAW have at it and I hope you learn now that you will be playing from the other side of the court. You where there represent workers, keeping management on their toes, did you?

George

April 28, 2009 12:04 PM

@ Snoz,I wonder who will bailout/support all the employees who get laid off after their labor union runs their company into the ground. I have the rest of my money on us the tax payer...again. Now either way I am assured to have no money when this is all said and done.

dw

April 28, 2009 12:10 PM

so much hate of fellow Americans, you would think that their livelihoods depended on these companies failing wouldn't you? Not sure that we can't find successful versions of companies that have done this successfully. and we can certainly find 1000s of companies that have failed with their preferred corporate organization can't we?

Brar

April 28, 2009 12:21 PM

Does this deal means ... UAW is finally eliminated? Like many of you pointed, rooting for labor while fighting for profits are two diametrically opposite goals. But this expereience will also expose UAW to tough real world. And if management under UAW governance, somehow makes these two companies profitable, it will be big black spot on Wall Street. It's getting more interesting for Detroit here-onwards!! My best wishes.

sam

April 28, 2009 1:03 PM

To all those that say that a union men and women cannot run a company successfully do not need to look any further than UPS. Almost all employees in management at one point carried a Teamsters union card because they either drove or loaded trucks for UPS. There is an idea of enlightened self interest involved here... can the UAW as potential owners of two automotive companies do what right for the company and themselves at the same time. We shall see but my guess is that they are gonna do what they gotta do.

Randy

April 28, 2009 9:14 PM

I'm amazed at the hatred for autoworkers.
I can tell you one thing, not one out of ten would last a week working on an assembly line. You act like autoworkers & the union were terrorists. We are fellow Americans working hard as middle class, trying to pay our bills, send our kids to college. I won't be reading comments here again so you need not reply with all your mean hatefull spirited remarks.

ps

April 30, 2009 1:12 AM

Randy... betcha you're still gonna look. The problem is the image based on a few bad apples. Also remember your Union provides bennies most can only dream about. And then those that don't have a great job (which entails lots of hard work I'm sure)see the government prop you up while your honcho appears to not want to give in? No offense, but what do you expect? The UAW image was never great during good times. think about that image now, especially when the cuts hit the young as opposed to the seasoned veterans in the factory. I want my bennies, let the youngins suffer. that's the image now. sorry, but it's true.

George PS

April 30, 2009 2:07 AM

The UAW's having major stakes in GM and Chrysler means those auto makers will continue to receive US government handouts as long as Democrats stay in power in the form of loans as well as legislation that would favor domestic car makers--the sort of thing that French government has been doing to keep the like of Renault and Peugeot in business while keeping them unattractive to any car buyer but the French in order to save the Republic from having to cerebrate a second Bastille Day.

Welcome to Chrysleur and General Moteurs.

Tom

April 30, 2009 3:38 AM

Randy, what comment here has implied that anyone hates the autoworkers? The UAW represents the autoworkers but isn't THE autoworkers, and with the UAW being the majority owners of the company that employs its members, it can be argued that the UAW can't even represent the autoworkers anymore, not fairly anyhow. Criticism of the UAW is not criticism of the autoworkers, and its definitely not hatred for them. Suggest you chill out a little.

Ray

April 30, 2009 12:11 PM

The UAW is not socialist.It has spent the last 30 years betraying auto workers. The UAW's final act, before bankruptcy has been to accept shares in exchange for hard earned pensions & medical insurance.
Lest we forget,it was not workers that created the global financial crisis; but the guys on wall street that you all worship.If you think the UAW is socialist
(they are not)your eyes will be opened.

Sterling

April 30, 2009 6:24 PM

Sorry that Randy did a drive by here...he won't get the feedback. I don't doubt that autoworkers are hard-working Americans, but they should know that the UAW sees them as nothing more than useful idiots. Now that the parasite has finally killed the host, the UAW will have to choose sides, profits as a shareholder (new model) or graft as a tax on labor (old model). New model means eliminating jobs and lowering labor costs (not to mention building a desirable product)...bad news for auto workers who will soon learn just where they stand with the UAW. Alternatively, the more likely course is the UAW attempting to simply nationalize the auto industry and feed off a new host...the US Government.

Chris L

May 1, 2009 6:12 PM

As a UAW member, I feel that many people automatically assume that I agree with everything the union does. I do not always feel the UAW makes the right decisions. Having said that, I feel that I must remind people of the the sacrifices union workers have made throughout history to afford ALL workers, union or not, benefits such as the 40 hour work week, overtime pay,holiday pay, and employer paid health care just to name a few. Maybe union workers aren't overpaid, maybe others should be paid more. Just remember, Labor costs at the big three are NOT what the automakers would want you to believe.

RP

May 5, 2009 1:24 PM

I once visited a Chevy plant as a vendor supplying CNC machine tools. At each machine was a tool&die make sitting in a chair reading a book. When a simple valve needed a 1/4 turn, you had to wait for a hydralic person to come, but that person could not plug in the machine, that was electrical. This was all because of union rules. Obviously cars would be more afforable if these rules did not exist. UAW management created and supported this type of inefficiency. It is a terrible day when this same mentality directs the business, through its ownership, at a high level.

tom

May 6, 2009 11:20 AM

Please remember it was not the union or employees who created these problems. when Chrysler was taken over by Daimler , we had money in the bank about 12 million. Daimler took that money to Germany and charged Chrysler with my things for its German business. Our government let this happen and gave Daimer very big deductions on paying taxes and pensions which they didnt pay enough into. Please dont forget that insted of building cars that got 40 miles to the gallon, MANAGEMENT decided to build more SUV models which is a big reason for this failure. They also got very big bonuses for making these mistakes. It was not the workers. Its gready Management and bad decissions. We gave many concessions to make things work. We built better quality Mini-vans in Fenton, Mo, than in Canada but because theres national health care in Canada, its cheaper to make them there. Many things contributed to these company failures, to blame the workers who did so much to make it work is foolish and wrong. Put the blame where it belongs, fraud and undeserved tax breaks, greed and very poor management. I watched as management wasted millions of dollars in materials and labor due to poor design. Older experienced managers were passed up for promotion for younger college degreed managers who had no automotive experience. They tried to make each other look bad so they would look good. It was a fatal result. I did not agree with alot of what my union did, but I did build a quality van and always tried to make sure everything was the best. Thanks for blaming everything on the worker without knowing all the facts. I was there for 25 years, I have witnessed these things.

ps

May 7, 2009 12:03 PM

Tom, to a certain degree you are correct. The guys on the floor work hard. Manageenmt totally boned it. BUT, what about union leadership? Union leadership in denial was a big part of this. Where were they to read the handwriting on the wall and communicate what was going on, painful as it was and is. Image-wise, Union leadership is as tone deaf as management. Your leadership did you and your coworkers any service in their gamesmanship. I hope you recogize that part as well. Good luck and I hope you get through this.

MarkG

May 11, 2009 10:41 PM

Although there is a lot of talk again about socialism, many of your are totally ignorant about what that is. Unions are a threat to socialism because they offer an alternative to socialism, so communist and socialist countries usually don't have real unions. One of the reasons that the company is going down is because of cheap labor in China, where all workers are in a state union, but it has no power. A real union has been organizing in China and the government is really against it. So if you want a place where they don't like unions, why don't you go to China?

Glenn Harrington

May 12, 2009 12:15 AM


The issue here is more than the Union scale of salery and benefits. The issue is the big 3 intentionally making a car with poor machine work, that leaks like a stuck pig. Self destructive transmissions that sometimes need to be replaced multiple times in the life of the car, and electronics so unreliable that Thomas Edison would cry!
The Japs- IE- Toyota, Honda and to a lesser extent Nissan, worried more about how the quality reputation would affect their name, than the bottom line.Who say the Union and Management can't work together? They were partners in crime with the dismantling of these once great companies, and justified it by hiding behind the American flag! Take note- Not buying an American made piece of crap is my right as an American- It is called free enterprise. An American company can rise from the ashes, only if they pay more than lip service to quality, and get people to buy their product because it is the BEST!
Sorry if this concept offended some of you- Fidel is waiting!

Bud

May 25, 2009 9:24 AM

The only way this will work is if the UAW is required to hold their shares for 5 to 7 years the same way an employee would be required to do in any buyout of their company. My guess is they will be selling their "ownership" as quickly as possible since their objective is cash now!

Post a comment

 

About

Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

BW Mall - Sponsored Links

Buy a link now!