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.