Signature RM Blog

General Motors and UAW reached a tentative agreement this morning at 3:05 am. After losing nearly 13 BILLION dollars in the last 2 years on North American Unit (Canada, US, and Mexico), GM said enough. General Motors is shifting the retirees' health care benefits to a union controlled trust fund. Supposedly this will save GM 50 BILLION dollars. Then in fine print or a small footnote they report but cost GM 10 of BILLIONS of dollars in cash, stock and debt. Some how this is miraculously going to make GM more competitive with the non-union companies of Toyota and Honda, HOW? Is the UAW going to employ the old mafia tactics and start "knocking off" retirees? In this case it would help the bottom line!

The agreement is tentative because the members have to vote and approve (ratify) the new contract. The kicker is only active members get a say in this deal. Retired members or surviving spouses make up about 540,000, while only 173,000 are currently active. The current generation of employees is deciding what is best for the previous generation. Maybe we should have implemented this ideology in the past few presidential elections. Then we wouldn't have to worry about the elderly in Boca Raton, Florida and whether or not they understand the ballot. We might as well smash all the retirees' transistor radios and hand them an ipod, then tell them welcome to the NEW AGE.

Fortunately for me, Im not directly affected by these votes, if I were I would probably get caught up in the details. Seems to me that this is just a 50 billion dollar game of 3 card monty or the shell game. A big accounting shift from one place to another.

The 50 BILLION dollar question to me is: Will this enable GM to build quality automobiles at a profit because they don't have to worry about the retirees?

Ford and Chrysler hope so because their deals will soon follow in a similar manner.