THE BIG THREE WAY (via Luciferous):

How Labor Could Fix Detroit: GM, Ford, and Chrysler could create a workers' health-care fund in a cost-saving move—and the UAW may well go along (David Welch, Business Week)

Detroit is at a crossroads. The Big Three carmakers and the United Auto Workers can bargain this summer for a new, four-year labor deal that gives the 100-year-old U.S. auto business a shot at being competitive, or they can walk away with an incremental deal that ensures years more of struggle until one of the companies goes under.

The word is that this time around, the UAW has some willingness to negotiate some real changes. [...]

Here's how it would work. GM, Ford, and Chrysler would each give the union billions in cash, stock, and convertible debt equal to 60% to 80% of total health-care liabilities. Depending on the deal, this could be either a one-time payment or amortized over time. Since the Big Three collectively have roughly $100 billion in health-care liabilities, they would collectively have to set up a fund with at least $60 billion.

In GM's case, the company would give the union at least $36 billion to start the fund, 60% of the $60 billion health-care liability.

The union must then manage the fund and invest the proceeds to offset health-care inflation and grow the assets so that workers and retirees have guaranteed medical benefits. But the UAW would evade the risk that its workers might lose medical benefits should one of the companies end up in bankruptcy court. [...]

The Big Three may also ask for a 401(k)-style retirement plan, called defined contribution, for new hires. The concept of new hires may seem like a joke in Detroit, but even after taking out 34,500 workers with buyouts, GM has another 16,000 who are eligible to retire. The company may be hiring as its older workforce continues to have more attrition. Says McAlinden: "If GM doesn't get a defined contribution plan, they won't hire new people and they will move production offshore."

HSAs and 401ks or bust. At which point the Democratic Party, which is basically an extension of Labor, would have a tough time arguing that defined contribution welfare programs are unacceptable.

Posted by Orrin Judd at June 7, 2007 7:44 PM