Well, that was fast. Last week I wrote that the UAW would exhibit a streak of realism in its quadrennial contract negotiations with the Big Three this time, if for no other reason than it had no leverage (having lost its right to strike during the bailout), no leg to stand on (having brought the US automakers to the brink of bankruptcy) and was part-owner of at least two of the companies (having accepted company stock in lieu of cash for the health care trust fund for retirees). This week, the details of the contract that the UAW just negotiated with GM are seeping out and they prove that I couldn't have been more wrong.
The union asked for the moon—and pretty much got it.
The deal will give each of GM's 48,500 hourly workers: $5,000 bonuses just for signing the contract plus a profit-sharing payout of at least $3,500 for this year plus additional bonuses if GM meets its profit targets.
If this is not making you wish you were a senior GM worker, consider this: Workers will also get up to $2,000 for two hearing aids every three years and $200 for a first wig in the event of chemotherapy and "and up to $125 thereafter."
GM's rank-and-file workers are expected to ratify the contract although they are not ecstatic about it because, evidently, they still haven't gotten back everything they "sacrificed" during the bailout restructuring.
And what will GM get in exchange? It will no longer be on the hook to offer automatic cost-of-living adjustments, although it will have to give each worker $1,000 in "inflation protection" every year for the duration of the contract. In addition, it will be allowed to buyout older workers and replace up to 25 percent of them with cheaper newer workers, something that will allegedly allow it to lower its fixed labor costs. Oh, and that job bank that paid laid off workers 90 percent or so of their wages for not working, that's truly gone. GM doesn't have to reinstate that.
The deal is being hailed as a "win, win" for GM and the unions and the auto industry in general. There is more than a touch of hype in how much of victory the deal really is for GM, I suspect. After all, every dollar GM has to give in bonuses and hair prostheses to its workers is one dollar less it has for improving its product line and grabbing market share from the Hyundais and Kias of the world whose labor costs are still way lower than GM. Be that as it may, there is no doubt that there is one party for which this deal is definitely not a victory: Federal taxpayers.
They stand to lose $14 billion just on the principal if they manage to sell their outstanding stock in GM for $43 a share or so. But GM's stock price has fallen about 50 cents since yesterday and was hovering around $21.50 this afternoon after the details of the deal became available—all of which suggests that at least so far the market doesn't think much of GM's comeback strategy.
So don't count on any bonuses or returns on investments, fellow taxpayers, just grab your wallets and eat some cake.