UAW Objects to GM, Chrysler Plan as Deadline Nears

Bloomberg reports that the United Auto Workers union is objecting to proposals from GM and Chrysler to modify a retiree health-care fund as required by the U.S. so the automakers can keep the $17.4 billion bail-out. The UAW stopped negotiations with GM yesterday. However, Chrysler still is talking to the UAW, though the talks haven’t been substantive.

I don't know what Ron Gettlefinger and the UAW think they're going to accomplish with this tactic. Maybe they believe that President Obama is in their "hip-pocket," and his administration will never allow the auto industry to fail. Time will tell.

Let me point out a few things that the auto employees and union members don't seem to understand (Denninger):

1. If GM and thus its pension fund goes "belly-up," the Pension Benefit Guaranty Corporation (PBGC) will be forced to step in and take it over. PERIOD The PBGC has maximum benefits that it pays out to retirees. (PERIOD) If a retiree is getting more than what the PBGC allows, too bad. (PERIOD) How does a 50% to 75% reduction in one's promised pension benefits sound and complete elimination of all post-retirement or post-layoff private health insurance, leaving one with nothing until you can qualify for Medicare?
2. If the Voluntary Employees Beneficiary Association Plan (VEBA) is unable to be funded, too bad. Pension funding under the PBGC does not include "all expenses paid" health insurance. Once again, welcome to Medicare, when you are old enough to qualify. Until then, you fund it yourself.
3. The PBGC guarantees are much more limited than your GM/UAW pension, especially if you're not already retired. The cap is based on the law, not your contributions to date, and is invoked at the time the plan goes "belly-up". If you're under 55, you will get exactly nothing, with the maximum amount set by law, disregarding (for the most part) your contributions to the system.

I am not sure that the rank-and-file members fully comprehend or understand the above three points. And if you think that the government won't force Chapter 11 with the government providing Debtor-In-Possession Financing (DIP), you better think again.

I am aware that President Obama is a strong friend of organized labor, and so are some Americans. But very few are friends of the UAW outside of its membership, and that is a serious problem for the UAW.
Resources: Bloomberg News and Karl Denninger at the Market Ticker