UAW as owners of Chrysler . . .

[Kevin1]

. . . . might not be such a good idea.
Comment by Gary Chaison, Prof. of Industrial Relations, Clark University
Can a labor union find a new life running an auto company? – 19 hours ago

With the recent settlement between the United Auto Workers and Chrysler, many are asking whether the union will become the new majority owner of the auto maker and how will this change the union and the company. Some background: the UAW and Chrysler entered into a VEBA (Voluntary Employee Beneficiary Association) arrangement with Chrysler as a major concession in the 2007 negotiations. Under this plan, roughly similar to the ones agreed to with GM and Ford that year, the company will offload its responsibility for administering the health care benefits plan of retirees to a trustees committee dominated by the union. Chrysler agreed to transfer $10-billion to the plan, but now finds, not surprisingly, that it can't afford it. So the UAW has agreed to accept company stock to pay for the VEBA--enough stock so that the union could control more than a majority of the shares in Chrysler. Will this make the UAW an auto maker or rich, or both?

No, and it's not that simple. The stocks will be transferred to the VEBA trustee committee, not to the union, and the union does not control the committee, it only influences it strongly. The committee will have fiduciary responsibility to invest the funds wisely to underwrite the benefits plan. And if the union had complete access to the stock, it would be a risky venture for it because the price of the stock could fluctuate wildly, particularly if Chrysler heads into bankruptcy, as many expect it will.

But even if the UAW somehow gained control of the company, this would probably be disastrous for the union. First, the union would immediately face severe conflicts of interests, having to lower labor costs as a good manager on the one hand and having to increase labor costs as a representative of the workers on the other hand. The UAW would find that as a majority owner of Chrysler it would have a hard time representing workers at GM and Ford (wouldn't it want those companies to do poorly so Chrysler could be more profitable?) and it would also have great difficulty trying to organize workers at the transplant auto makers (Honda, Toyota, Nissan, Daimler etc plants in the US) as well as the parts-makers because these workers might not trust the union to be a militant representative if it also had a interest in the profitability of Chrysler. And even the best case scenario for the union is not all that good. If the UAW had a huge amount of Chrysler stock and the company somehow prospered, the UAW will have 'an embarrassment of riches.' Unions are worker representatives, not companies--they are not supposed to make money. If the UAW had a budget surplus, the members would insist their dues to be lowered or would demand that their union provide more and better services. Union effectiveness is not measured by members in financial terms.

Owning a large share of the stock of Chrysler would just complicate life for UAW and it's already complicated enough. The best that the union could do is unload the stock as fast and painlessly as possible and stick to being a voice for auto workers when they need it the most.

[Gunsmith]

See I knew this was an easy problem with a simple fix..............