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UAW may be auto bailout's biggest loser

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Something has to give if Detroit is going to get Congress to loan it money. Some suppliers may have to take haircuts on their prices. Some debt-holders may have to convert their paper to equity or accept cents on a dollar for payouts.

But, the UAW may be the party that gets hammered the most. Labor costs are still the largest problem for The Big Three. It is not just daily wages. It is the tremendous health and pension benefits for current employees and retirees. It is the funding of the VEBAs created to move pension liabilities off the car company books into funds controlled by the UAW.

The Wall Street Journal reports "UAW officials, including its president Ron Gettelfinger, are said to understand that they are under pressure to deliver cost concessions." That may mean elimination of "job banks" which allow certain workers to be paid even when they are not working. Those are mostly people who can be recalled quickly if the car companies need to up production. The need for more people is unlikely to be necessary as sales keep falling.

The question becomes how often UAW management can go back to the rank-and-file and request they they take less. That is on top of the less they took less than two years ago when the union agreed to concessions to help keep The Big Three healthy. That certainly did not work out.

While the union's president may recommend that the cuts are necessary to keep Detroit open and keep some jobs intact, UAW workers may not feel that way. Their ultimate leverage is a strike. US auto companies can't to stay open for long if workers walk off the job. And, one thing the industry cannot handle is an inability to ship cars.

UAW members know they have power. Now, the question is whether they will use it.

Douglas A. McIntyre is an editor at 247wallst.com.

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Last updated: November 26, 2009: 01:34 AM

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