The union strike is a reply of the past.
The union wants cost of living raises, forgetting that GM paid the average worker a $14,000 profit sharing bonus last year.
Chrysler continues to search for a partner, and Ford bonds are now rated Ba1 (junk) after five of the best years the industry has seen in a long time.
The United Auto Workers had also created significant liabilities for the automakers. The union raised Detroit’s labor costs 50 percent to 80 percent above that of the transplant automakers, such as Toyota and Nissan. In 2006, General Motors paid its unionized workers $70.51 an hour in wages and benefits. Chrysler paid $75.86 an hour.[8] These costs put the Detroit automakers at a significant competitive disadvantage.
Detroit’s higher labor costs also included generous retirement and health care benefits. UAW employees at GM and Chrysler can collect pensions in their 50s.[9] The automakers also provided UAW retirees with full health coverage until they became eligible for Medicare. At that point UAW retirees collected generous additional health coverage from the automakers on top of Medicare. While the average Medicare recipient spends $4,200 a year out of pocket,[10] UAW retirees in 2011 had maximum out-of-pocket expenses of $285. [11]
To reduce the financial burden of these benefits, the Detroit automakers negotiated a Voluntary Employee Beneficiary Association (VEBA)[12] with the UAW in 2007. The VEBA—funded by the automakers and partially controlled by the UAW—assumed financial responsibility for retiree health benefits. When General Motors filed for bankruptcy in 2009 it owed $20.6 billion to the UAW Retiree Medical Benefits Trust.[13] Chrysler owed the VEBA $8 billion.[14] These obligations were unsecured.
By 2009, General Motors and Chrysler lacked the money to pay their creditors, including the UAW.
Buckle up, the Union is ready to put the auto makers into bankruptcy again.