The Chrysler Bailout
According to the New York Times the Chrysler bailout puts the UAW in the “front seat.” Who is kidding whom?
As illustrated in the above Wall Street Journal graphic, the UAW retiree health fund will own 55% of Chrysler stock. This sounds impressive until you know the real story. Several years ago Chrysler, in a cost cutting effort, negotiated an agreement with the UAW to free itself from paying for retiree health care. It agreed to put tens of billions of dollars into an independent fund which would be responsible for managing retiree health costs going forward.
That was the plan. But Chrysler hasn’t yet paid the money. The new arrangement has the firm providing the health plan with stock rather than the promised money. Retired workers aren’t happy. It is important to emphasize that it is the independent health fund (which is not managed by the UAW) that will own the stock, not the UAW.
Who is in the drivers seat becomes clear when one looks at the proposed board of directors for the new company. As the Wall Street Journal explains: “The U.S. government will name four Chrysler board members, Fiat will name three, the UAW one and the Canadian government one.” The UAW gets only one seat despite the fact that, as the above graphic also shows, it is the UAW that will be contributing the greatest amount of money (from wage, benefit, and pension concessions). Fiat, which is providing no money, will run the new company.