September 29, 2007
DEFINE THE CONTRIBUTION AND THE BENEFIT CAN BE MASSIVE:
The UAW's Awakening: A union shows a new awareness of global competition. (Opinion Journal, September 29, 2007)
This week's deal between General Motors and the United Auto Workers is being hailed as a new era for Detroit, and for once that advertising may be justified. The UAW in particular made historic concessions that show a new awareness of global competition. What's less encouraging is how much this reality-based compromise still contrasts with the policies that unions and their political friends are promoting in the unreal world of Washington, D.C. [...]In what seems to be the most creative stroke, GM will pay some $35 billion toward a new health-care trust fund to be administered by the union. That's a big initial cash flow, but it means the company can divest itself of some $50 billion in long-term liabilities, which would only have grown as health-care costs rose and retirees lived longer. Investors loved it, driving up GM stock by around 7% for the week.
The UAW now gains ownership of its members' health-care resources, in effect becoming a financial manager of a giant Health Savings Account for auto workers.
Indeed, you have to wonder if EJ Dionne even understood that he was praising the Ownership Society yesterday
Posted by Orrin Judd at September 29, 2007 7:17 AM
This is a win-win. The union members have the money so even if GM someday goes bankrupt, they are protected. And, since it is their money, they may use it more wisely -- a la Orrin's analogy to an HSA. However, it would not have been possible absent intense competition. The union wakes up and smells the coffee--20 years after they should have done so.
GM wins because it gets rid of a long-term liability and can compete more effectively. GM also is waking up to competition, albeit 20 years after it should have awakened to it.
Posted by: Kurt Brouwer at September 29, 2007 3:08 PM