This is the day current and retired UAW members at General Motors have been fearing. In stark terms union members are finding out just how much their benefits, their jobs, and what they've come to expect will be changing as GM restructures either in or out of bankruptcy.
Tuesday in Detroit local leaders of the UAW were briefed on the new modified contract the union leadership has negotiated with GM and the Treasury department.
Amidst the details about how things will change with the rank and file (everything from suspending cost of living adjustments to shortened break times), there was an ominous warning about how dire the situation is for General Motors.
The agreement says, "In order to avoid a liquidation, the government will be providing massive additional financial support to assist GM in completing its restructuring."
Since the government has already loaned $19.4 Billion to GM, critics will scream out, "See, I told you this nothing but a money pit!" In truth, we've known for months that either in a Chapter 11 restructuring or through an out of court restructuring, the government would be on the hook for billions more.
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Some have speculated it could be another $30 billion. Nobody knows for sure what the ultimate price tag will be. We do know the federal government is adamant tax payers will get their money back.
As for the UAW, its stake in GM is going to be far smaller than originally portrayed by the company. Last month the company said the union could take up to a 39 percent stake in GM in exchange for $10 Billion owed to the union for its VEBA fund.
The VEBA is the UAW-run fund that will pay for health care benefits of retired union members. Turns out, GM and the Treasury Department are offering the union a 17.5 percent stake, plus warrants for another 2.5 percent of GM.
Union members will also see a new offer on June 9th to take a one time buyout to quit (between $45,000 and $115,000 depending on how long at the company) or retire (between $20,000 and $45,000 depending on their position). The bottom line: Thousands of UAW members are about to see their jobs disappear and their benefits cut.
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