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UAW sends Girsky to GM's board

Posted by: David Welch on June 18, 2009

Judging from the mail I get, union ownership of General Motors stock may be the only thing most business readers dislike more than government ownership. The common refrain is that pricey union contracts helped get GM into this mess. Letting the United Auto Workers own part of the company will just bring the same largesse to labor back into the picture, the critics say.

Then again, maybe not. The situation is far from ideal, but the union has a level-headed representative on GM’s board. The UAW named former Wall Street analyst Stephen Girsky as a GM director. He will represent the interest of the union’s Voluntary Employee Benefits Trust, or VEBA, which will pay retiree medical benefits the same way a pension funds pays retirement benefits. By the way, the union won’t own 17.5% of GM (with warrants worth another 2.5%) the VEBA trust does. And Girsky will represent its interests.

All of this is important for two reasons. While Girsky has served as an advisor to the union for several years, and clearly has a soft spot for labor, he’s all too aware of GM’s problems. He was a tough critic of the company when he covered its stock for Morgan Stanley. Girsky also worked at the company as an advisor to former CEO Rick Wagoner, too. Don’t look for him to press CEO Fritz Henderson to give the UAW a contract that would erase some of the concessions that were made prior to bankruptcy.

And as I have said before, having GM stock in the VEBA trust is different than having it in the UAW’s hands. Those trustees have a responsibility to invest the assets, grow the value of the trust and pay medical benefits. Since GM stock is a big chunk of the fund’s assets, making the carmaker less profitable—thus dropping the value of the stock—would be foolish. Not only would the trustees be in breach of their fiduciary duty, they could eventually be in the position of cutting healthcare benefits for union members and retirees.

So there are check and balances in place. And a guy like Girsky is just the person to make sure everyone stays sane as the new GM rolls out.

Reader Comments

Paul (Vw)

June 18, 2009 11:28 PM

>>> And as I have said before, having GM stock in the VEBA trust is different than having it in the UAW’s hands. Those trustees have a responsibility to invest the assets, grow the value of the trust and pay medical benefits.

Fair enough, I hope this works...for everyone involved.

What commitment does VEBA have to hold onto GM stock for a minimum time period?

David Welch here: I don't believe there is a minimum time period, though it will be six to 18 months before GM stock will be publicly traded. The UAW wants out as quickly as possible, but can only exit when the price reaches a decent value.

Jeff DC

June 19, 2009 10:26 AM

Since when do secured bond holders take a back seat to the union?

Chrysler will be completely out of business by the end of 2010 and GM will head down the same road.

Some unions work, the UAW union doesn't. They leto let overseas makers stomp on the companies they work for and at the same time bled them dry themselves.

Now that the union trust owns a big part it will be funny to watch them bargain with themselves when both Chrysler and GM tank.

Next time they need to raise money there won't be any, if you can't trust a secured bond why would you buy any?


June 21, 2009 10:32 AM

Overseas assembly/production of GM Chevrolet, may possibly look for outsourcing products from China/Korea/India under Chevrolet and the country name. It appears now the franchises are all by themselves, for outsourcing GM products, manufacturing, deletion, addition, and thank you sir, have a nice day.
The consumers, in many overseas location in Asia, Middle East particularly for Chevrolet Korea products assembly in developing Asian countries. This is the time when the would be counterfeiters will have a field day. As they are still solvent, vis-a-vis Chevrolet is not solvent. What is the message of GM to the consumer, owners, to do. GM should preferably look with any international reputable institution with a clear record. Possibly a dialog thru the International Chamber of Commerce to the world community, the consumers.

Howard Spencer

June 21, 2009 12:22 PM

"Next time they need to raise money there won't be any, if you can't trust a secured bond why would you buy any?"

EXACTLY! I have never seen this obvious point made in print. Investor confidence in these firms has been utterly destroyed.

Paul (Vw)

June 22, 2009 9:30 AM

Jeff DC says:

>>> Since when do secured bond holders take a back seat to the union?

We have to accept the fact that as evidenced by the 2006 & 2008 elections, the people have chosen more government control. (Will they change their minds in 2010?)

A consequence of that is that law will not be universally applied. Instead, politicians will respond to powerful lobby groups and constituents.

Example 1: Chrysler creditors as Jeff DC mentions. A terrible side effect of this will be that investment in US will be stymied.

Example 2: (with regards to universal health care & unions) From the AP...

>>> Congressional aides say Democrats are eager to exempt union contracts from the proposed tax...In its most recent form, the proposal would impose a tax on plans in which the combined employer and employee premiums are above about $17,000.

James H.

June 23, 2009 7:52 AM

Sounds like an awesome proposal to me...if the UAW gets greedy again they'll just be hurting themselves. If they go on strike, or get too greedy, the stock value lowers...this means they will have lower benefits. If they want to do well they'll need to raise stock value by performing better and thinking twice before demanding more from GM. How is this bad?


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

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