The UAW is in talks with the big Detroit car companies about taking on the responsibility for retiree health-care benefits. The move would take billions of dollars of liabilities away from the Big Three.
GM (GM) and Ford (F) could use something along these lines to restructure their relationships with the large union at a time when they are fighting large loses and falling market share.
But, the deal seems like a bit of a shell game. The car companies would still have to fund the benefits by putting cash into the union’s bank accounts to cover the retirement costs of hundreds of thousands of workers.
The deal is good for the UAW. If Ford files for Chapter 11, the retirement benefits for the auto workers are safe over at the UAW headquarters, but Ford shareholders are short that cash.
The specter of a bankruptcy at a Detroit car maker may well be the only real leverage in upcoming negotiations with the UAW. The car companies should not give them a cent.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
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