The UAW wants observers of its negotiations with the Big Three to understand that it will not just roll over and die. Fair enough. The union has a strike fund of $900 million, so its workers could stay out a long time.

Both the union and the car companies are facing the issue of what to do with about $65 billion in healthcare liabilities. The auto firms want the world to believe that they cannot operate with the obligation on their backs. They want to pay the UAW to take the obligation and handle the payment of workers. But, the car companies may not be able to come by the money to fund the new fund.

The Wall Street Journal has reported that poor Q2 results from the car companies may help their case with the UAW. That is unlikely. GM’s (GM) stock has doubled over the last 18 months based at least in part on investor expectations that the union will give back significant healthcare and pension costs.

The UAW will probably takeover the funding of healthcare operations, if the car companies will properly fund it. They will fight coming up with the entire amount.

But, if the union is smart, it will look to GM’s share price. So far this year, it has been built on the back of UAW concessions. And, that may be reason enough to strike.

If GM wants to see a peaceful end to the negotiations, one thing it could do is fund a  portion of the union health benefits fund with its own stock and warrants. It would save the company cash, and give the union some upside. GM has a market cap of $20 billion now. And, if it could announce to Wall St that it has a deal with the UAW, it might be able to spare $5 billion in shares in the place of cash.

Douglas A. McIntyre

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