GM Pulls a Fast One

After digesting all of the articles written on the new agreement and listening to talking heads talking about the deal for the past 24 hours, I come away with the real impression that GM has pulled a fast one on the UAW. Healthcare has been a real albatross around GM's neck during the past decade and the UAW has steadfastly fought to maintain full benefits for its rank & file workers and retirees.

In a way, GM used a bit of reverse psychology and gave the union the right to manage its own healthcare costs for its members through a VEBA (voluntary employees' beneficiary association) that GM will contribute $0.70 on the dollar to cover these obligations. With spiraling healthcare costs, people living a lot longer and union membership shrinking, the UAW may have taken on this huge burden without thinking through the "real" long-term cost implications. Not to mention setting the Canadian Auto Workers (CAW) up for failure in next years negotiations. With Canada's national healthcare program, GM does not have the healthcare burden it did in the U.S. and the CAW has managed to negotiate higher wage levels due to this fact. Kiss those higher wages goodbye.

The UAW also agreed to a two-tier wage system that is sure to come back to haunt them in 5-10 years. With GM "strongly encouraging" older union members to retire, only to be replaced with cheaper alternatives, the UAW has retained control over these new hires albeit at 40-50% less wages that current members.

In effect the UAW has made its current members more secure (with small signing bonuses to boot) while sacrificing future member's earning power. Then again, they did save the mystical jobs-bank. Who said paying workers not to work was bad fiscal policy?