Friday, September 28, 2007


According to a newsletter sent to UAW members and reprinted at (the website of the Detroit Free Press), the legal services benefit for UAW members will remain unchanged. The parties will work to improve representation relating to application for social security disability benefits.

The contract may have some impact in who is eligible for services. Benefits coverage for college-age children is limited to full-time students. Also, coverage for wards is limited to relatives of the UAW member.

Thursday, September 27, 2007

Steve's Not Here, Man

I picked the wrong time to go to a 2-day CLE. I was away from the computer all day today, and will not be in touch tomorrow. I know what everyone is anxious to hear is whether GM kept the legal services benefit in the tentative UAW contract. I don't think that question will be answered before Monday.

Wednesday, September 26, 2007

Merry Christmas - Strike is Over
Veba Veba - Andele Andele

GM and the UAW announced that they have come to a tentative agreement on a contract. The contract will be voted on by the UAW members this weekend.

The biggest feature of the contract is a VEBA trust fund for retiree medical care. Approximately $50 billion in benefits will be funded at the 70% level, or $37.5 billion. According to, GM has $18.5 billion set aside for retiree healthcare. Where the rest of the money will come from has not been announced. Ron Getelfinger states that the VEBA will be financially sound for at least 80 years.

GM will get the two-tier labor rates that they sought. Current hands will continue at their current pay rate. New hires will be paid approximately half as much, or $14.00 per hour. More than 4,000 "temporary" workers will become full-time UAW workers.

There is actually another tier for employees who are not actively engaged in the assembly of vehicles. No details were released about the wage rates for these workers.

"Uncle" Ron Getelfinger announced that he was happy with the job security provisions in the contract; however the specifics weren't released. Apparently there is a modified version of the infamous "jobs bank".

There is no news about whether legal services coverage was kept or dropped. Reading between the lines, it looks like its probable that the legal insurance was kept in the new deal. The theme of the contract is now COLA payraise for current workers in exchange for no increase in medical copayments, lower wages for new hires to help competitiveness, and a VEBA for balance sheet relief for GM and long-term security for the retirees.

Fret not for the workers who are not getting a pay raise. The contract includes a $4,000 signing bonus, and annual bonuses of either 3% or 4% for the other years of the contract.

It appears this contract has gone a long way towards closing the wage gap with the captive imports. There's some indication though that weakness at the Detroit 3 may result in a "race to the bottom" regarding wages. Honda just announced its wage scale at its new plant in Greensburg, Indiana. Workers there will start at $14.84 and go up to $18.55 within a two-year period. At the starting wage, a worker would make about $30,000 per year with a 40 hour week. Nissan and Toyota's current US plant pay base wages close to or even higher than the UAW base wage, but the fringe benefits are less. Hyundai's wage rates are apparently similar to what Honda is offering.


Detroit Free Press
Detroit News

Tuesday, September 25, 2007

Obama Supports the UAW

You would generally expect a presidential candidate to be wishy washy in commenting on something as controversial as the GM strike. To his credit: Senator Obama has taken a stand, and he's come out firmly in favor of the UAW. Here's what he had to say (as published in the Detroit Free Press.)

I stand with the 73,000 United Automobile Workers who are striking. ... The
demands the union is fighting for -- job security, the health benefits they were
promised -- are things that all workers should expect and that UAW members
deserve. General Motors owes it to the UAW to come back to the bargaining table
so that union members can go back to work.

-Senator Barack Obama

How Long can the Strike Last?

I've had several people email me and ask me how long the UAW-GM strike will last. I'm guessing it'll last a week. Here's what the Detroit Free Press says about how long it could last.

Analysts and labor experts said the automaker and the UAW could manage a short
labor stoppage without much trouble. GM has enough cash and inventory to manage
a strike of a few weeks to a couple of months. The UAW had more than $800
million in its strike fund as of November -- enough, in theory, to strike GM for
a year.
Here's what the same article has to say about the costs of a longer term strike:

Although both parties said they desire a prompt resolution of the issues,
analysts said they have a little time before the matter becomes truly
GM has 111 days of inventory to sustain dealers, according to
estimates by Lehman Brothers analyst Brian Johnson.
A short strike might cost
GM less than $1 billion, but a two-month strike easily could cost $15 billion,
he said.
"GM was facing the need, we believe, to cut production by about 15
days of production closure -- making a two-week strike actually, ironically, a
lower-cost way to adjust inventory," he said.

The union members will receive $200 per week in strike pay after 8 days. I haven't heard anything about whether there as even been any discussion on whether to continue legal services coverage in the new contract. It would be ironic if they had a long strike, ended up with lower pay and no UAW-LSP coverage to fight bill collectors for them and file their bankruptcies.

Monday, September 24, 2007


By 11:27 AM today, the news had broken that GM plants were going on strike across the country. Surprisingly, shortly thereafter, word came to me from two un-named sources that there was a tentative deal, and that there will be an announcement within an hour. That's not a strike, that's a long lunch. Minutes later, word came down that there will be a 12:15 news conference going over the REASONS for the strike and not to announce the strike's settlement.
2009 Ford Flex
Build Your Own

No word on when Ford's minivan-replacement, the Ford Flex will actually debut, but you can now see lots of pictures, and build your own on the Ford website here.

To me the Flex looks a lot like a LandRover LR3, which is part of the Ford Premium Automotive Group. Of course, if you paid $55,000 for a LandRover, you'd say: "Don't be ridiculous, the Flex has a Chrome 3 bar grill. The LandRover has a bodycolored 3 bar grill." My mistake.
11:00 AM - AND WE'RE Still Here

Is no news good news?
At Whom is the Strike Deadline Aimed?

All weekend, the news stories indicated that the UAW and GM were close to an agreement. Just in time for the Monday morning media, the UAW announced an 11:00 AM strike deadline. If the parties are close to an agreement, it seems to me that a strike would be more effective in selling the agreement to the UAW rank and file than it would be to sell it to GM. Here's my reasoning: Assuming that GM was close to accepting the UAW's terms anyway, GM can end a strike with just a little nudge. A short strike would not cost GM much. They have high inventories in most models. So high that incentives were just increased.

On the other hand, with concessions that have already been foreshadowed, the UAW can expect substantial resistance from the rank and file. It would help the odds of acceptance to remind the members how bad strike pay is, and how stressful strikes can be. Also, the UAW negotiators can show that they got that "last dollar" out of GM by demonstrating that it took a strike (or an imminent strike) to get a deal.

When a tentative deal is finally reached, it will be interesting to see how long the union gives the members to examine the deal before a ratification vote. You just know that this deal will be a bad mothe . . . (shut your mouth). It's a complicated deal, and no one understands it but its mother. In a rational market, the union would give the members time to examine the deal and debate its merits, a level of scrutiny that is warranted by the effect that the deal will have on the members' future. Of course, that's not going to happen, I bet that the members will be forced to vote on the deal with very little chance to examine the details. If the members are on strike, they will have even more pressure to take a deal laid on the table.

The bottom line: if there is a strike, don't panic. It's likely to be a "show" strike designed to coerce the members into accepting a contract. If it is anything else, it means that there wasn't a deal to be made, and we were probably screwed anyway.
Gettelfinger is Shocked, Yes, Shocked that it's come to this.

While it's true that since the contract expired Sept. 15 that UAW has only agreed to continue with the old agreement on a day-to-day basis, it came as a surprise when, at 1:30 this morning, the UAW released a memo setting a strike deadline for 11:00 this morning. Here is the complete text from the statement as printed at

For immediate release
Monday, September 24th, 1:40 AM
UAW shocked by GM’s failure to recognize worker contributions, Sets strike deadline for 11 am on Monday, September 24th.
The United Auto Workers announced today that due to the failure of General Motors to address job security and other mandatory issues of bargaining, the union has set a firm strike deadline for 11 am on Monday, September 24th.
"We’re shocked and disappointed that General Motors has failed to recognize and appreciate what our membership has contributed during the past four years," said UAW President Ron Gettelfinger. "Since 2003, our members have made extraordinary efforts every time the company came to us with a problem: the corporate restructuring, the attrition plan, the Delphi bankruptcy, the 2005 health care agreement. In every case, our members went the extra mile to find reasonable solutions."
"Throughout this time period," said Gettelfinger, "it has been the dedication of UAW members that has helped GM set new standards for safety, quality and productivity in their manufacturing facilities. And in this current round of bargaining, we did everything possible to negotiate a new contract, including an unprecedented agreement to stay at the bargaining table nine days past the expiration of the previous agreement."
"This is our reward," said UAW Vice President Cal Rapson, director of the union's GM Department. "A complete failure by GM to address the reasonable needs and concerns of our members. Instead, in 2007 company executives continued to award themselves bonuses while demanding that our members accept a reduced standard of living."
"The company’s disregard for our members has forced our bargaining committee to take this course of action," said Rapson. "Unless UAW members hear otherwise between now and the deadline, we will be on a national strike against GM at 11:00 am EDT on Monday, September 24th."
The UAW negotiating team will remain at the bargaining table, Rapson said, throughout the night and up until the 11:00 am deadline.

Saturday, September 22, 2007

GM/UAW Contract Update 9/22/2007
Is a Deal Close?

The news stories have been going back and forth, but today's story is that both sides have agreed on the funding of the VEBA retiree healthcare trust. Negotiations have moved to other subjects. According to the Detroit News, GM has agreed to fund the VEBA more than their 65% ceiling. (Bankrupt Dana Corp. funded their VEBA at 71%. The UAW was holding out for at least that much funding.) The Detroit News suggests that the new contract will include wage cuts of at least $5.00 per hour. Higher medical co-payments and perhaps more plant closings.
From the "You're doin' a heck of a job Mikey"
NHTSA Chief Can't Install Child Seat

As reported in the Kicking Tires blog, the head of the National Highway Traffic Safety Administration, Nicole Nason, recently disclosed that she took a three-day course in installing a child seat in July. Upon taking the class, she found out that .

I don't know what's the most screwed up thing here. (1) That a person who can't install a child seat would be appointed to head NHTSA; (2) That the head of the agency that regulates child seats wouldn't find out she didn't know beans about them until 16 months into the job; or (3) That anyone would take (or need) a three-day class in installing child safety seats.

Oh yes, this is the George W. Bush administration, where the quality needed to be the attorney general is to generally be an attorney; where the secretary of education gets slaughtered in Celebrity Jeopardy; where the head of FEMA is appointed without knowing anything about disaster management; and where your swears-like-a-sailor Vice-president can't tell a lawyer from a gamebird.

Friday, September 21, 2007

The Dollar's Looney Fall

According to, for the first time in 31 years, the U.S. dollar is worth less than the Canadian dollar, the Loonie. Each Euro is worth around 1.4 US dollars. So if it seems that you aren't making much more than you used to, don't worry, it's not worth as much anyway (????)

In theory, the weak dollar makes it cheaper to build cars in the US than in Canada, and definitely cheaper than in Europe. So, naturally, General Motors plans on importing the Saturn Astra from Belgium any day now. If terrorists keep blowing up stuff in Mexico, then maybe we'll have a better chance of keeping the car manufacturing plants in the USA.

Ironically, the fall of the dollar is tied to the reduction in short term interest rates by the Fed. The Fed reduced the rates due to problems in the mortgage industry and the credit crunch. The market reacted by raising long-term 30 year fixed interest rates. The Fed's short term rates have no direct effect on the LIBOR rate that is the benchmark for many/most variable rate mortgages. The LIBOR rate is still high, as high or higher than last year, so don't look for your variable rate mortgage to reset at a lower rate anytime soon.

What am I babbling about? Who knows? time to quit. It's Friday.
UAW/GM Contract Update 9/21/07

Contract talks went into the early morning hours today, and they are scheduled to resume later in the day. According to this morning's Detroit News, the two sides are Sagan numbers (billions and billions) apart in funding for the proposed retiree healthcare (VEBA) plan. The Detroit News also reports that the UAW rejected the VEBA as proposed by General Motors. The News reports that after the VEBA discussion was tabled, discussion shifted to an alternate proposal by GM to cut costs by reducing wages $5.00 per hour, increasing out-pocket healthcare costs, reducing vacation and other benefits. (Hmmm, do you suppose we might have a stake in there somewhere?) The alternate proposal also omits the future work guarantees sought by the union.

Thursday, September 20, 2007

Auto News: GM Proposing 401(k) for New Hires

Trade paper Automotive News ( - free registration required) says that GM has proposed replacing its traditional pension with a 401(k) plan for new hires. The article also says that GM is proposing putting a hold on cost of living raises to UAW members in order to pay for the retirees' VEBA that has been the focus for all of the current negotiations.

There is a blackout on news from the negotiations, and I have not seen the Autonews report confirmed. I'm not betting my paycheck on its accuracy.

Wednesday, September 19, 2007

Hillary Rides to the Rescue - of the Insurance Industry
Can Dennis Kusinich save the day?

This week Senator Hillary Clinton unveilled her health care plan. While up to now, her campaign rhetoric was based upon the fact that she learned her lessons and had the scars to prove it, her new plan doesn't look a lot different than the one that was shot down in flames in 1993. In her new plan, insurance is mainly provided by employers, and consumers must carry insurance or face penalties. If there's anything significant to take costs out of the system, I haven't seen it. If there's anything that reduces the burdens on struggling employers, I haven't seen it. If there's anything that equalizes the playing field betwen employers that cover retirees (GM, Ford, Chrysler) and those that don't (Toyota), I don't see it.

Senator Clinton's plan Looks a lot like Senator Obama's and John Edwards', especially Edwards'. While Rudy Giuliani accused Senator Clinton of advocating "socialized medicine." In fact it is the lack of a single (government) payor which is the key flaw in the Clinton plan. The Clinton plan looks like the Massachusets plan put into place by Governor Mitt Romney. Recent statistics show that Massachusets has the highest per capita health care costs in the country.

Even Michael Moore is not smitten by Clinton's plan. Moore advocates the single payor "Medicare for all" plan that is pending in the House as H.R. 676. It's also known as the "Conyer's bill", named after Michigan Representative John Conyers, and it has 78 cosponsors. Among the presidential candidates, only Dennis Kusinich has come out in favor of it.

The Detroit Three may need single payor insurance to survive in the long term. They need a system that takes the cost of health insurance off of the employers' backs. Only "fringe" candidate Kusinich supports this. Can Kusinich save the automakers? I'd like to support Kusinich, but I'm having a hard time getting past the whole hair thing.

If you want to sound off on the healthcare issue to your congressional representative, here's a link to all of teh e-mail addresses through the site.
GM-UAW Contract Talks News 9/19/2007

"Stalled." That's how today's Detroit News describes UAW/GM contract talks. The News reports that GM is unwilling to move from 65% funding of the proposed VEBA, the Voluntary Employees' Beneficiary Agreement. The VEBA is the proposed union-run trust for retiree healthcare, and it is the tail that's wagging the dog in the contract negotiations.

Each 5% change in VEBA funding of the $50 Billion retiree healthcare obligations amounts to $2.5 billion in cash. The range speculated in the press early in the negotiations was 60-70% funding, with 70% the most commonly-used figure in the sources that I read. To get you some idea of what $5 billion will buy you in the car industry. $2.5 billion will substantially overhaul an existing car model. $5 billion will pay for most of a ground-up redo.

The UAW is reluctant to sign onto a VEBA that doesn't plan for major increases in the future cost of health care. GM's main impetus in seeking the VEBA is avoiding being on the hook for future increases in the cost of health care.

Tuesday, September 18, 2007

GM/UAW Contract Update 9/18/07

According to the Detroit News, in a memo to local union officials, UAW President Ron Gettelfinger and Cal Rapson,the lead union negotiator for the UAW, reported that a they have made substantial progress in their contract talks with General Motors, but "major issues" remain unresolved. The officials broached the topic of setting a firm deadline for the conclusion of negotiations, but no firm deadline was set. Gettelfinger and Rapson warned local officials about the unreliability of leaked information concerning the progress of the negotiation, making reference to a blackout agreed to by the union and the manufacturer.

In a separate news story, the Detroit News speculates that the contract could contain a large signing bonus to seal the deal. Given the difficulties of the issues, the News speculates that the signing bonus may well exceed the $3,000 that was included in the last contract in 2003.

Friday, September 14, 2007

General Motors picked as Lead Company in Negotiations

According to the Detroit News, the UAW will let its locals know at 10:00 PM tonight whether it will strike General Motors. Yesterday, the union officially picked GM as its target for this year's contract negotiations. I think the odds of the UAW striking GM in the very short term are about the same as lightning striking, but anything is possible.
Don't ever take a day off . . .

I took the work day off today, and wouldn't you know, there was talk of a strike. I'll try to get caught up.

Thursday, September 13, 2007

Rebel Bombing Closes Many Mexican Auto Plants
GM, Ford, Chrysler, VW and Honda affected

A series of coordinated explosions severing oil and natural gas pipelines has idled much of the economy in central Mexico. General Motors, Ford, Chrysler, VW and (not stated in the article) Honda have had to temporarily shut down plants, generally for lack of natural gas. According to the Detroit Free Press, this bombing is the work of the Popular Revolutionary Army, a Maoist group which, unlike the Judean People's Front, is sometimes confused with the Judean Popular People's Front (splitters).

Tuesday, September 11, 2007

From the Cars We Can Drive to Work file:
2008 Mazda 6

The 2008 Mazda 6 made its debut at the Frankfurt Auto Show. In my opinion, from the pictures, it's one of the best looking midsized sedans out there. According to Mazda, the new generation 6 bucks the modern trend and is actually lighter than its predecessor. It gets correspondingly higher fuel economy and lower emissions despite an increase in power. The new 6 will get most of the upgrades slated for next-year's facelifted Ford Fusion, a more powerful engine, 6-speed transmission across the board and standard stability control.

Best of all, the Mazda 6 will apparently continue to be produced in the UAW-staffed Flat Rock, Michigan factory; and it will therefore qualify for us to drive it to work. Ironically we still won't be able to drive the 6's platform-mates, the Ford Fusion and Mercury Milan, because those vehicles are assembled in Mexico.

There's no word on when the car will be available. If it's truly a 2008 model, the answer should be "very soon". Some earlier spyshots indicated that the redesigned 6 would be designated a 2009 model.
UAW Contract Update
Friday Deadline Likely to Pass

The UAW contract with the formerly Big Three is likely to expire on Friday, September 15 without an agreement. Based on the lack of bombast from either side and a general agreement that some type of VEBA will be necessary to shift retiree health care to the union; I think it is likely that the negotiations will continue past the deadline, and the workers will agree to work without a contract. The alternatives are a strike by the union, or a lockout by management. Neither appears to be in either side's immediate best interests. Other issues on the table include changes to work rules according to the Detroit News.

I've had a couple of retirees complain to me about the UAW abandoning them with the VEBA. I honestly don't think that's accurate. (Though I didn't tell them that.) A VEBA helps the retirees in two ways: (1) it insures that they'll receive some health care over the long term, even if the company goes bankrupt; and (2) It increases the odds that their sons and daughters will stay employed. If the VEBA is only 70% funded as is expected, it will be interesting to see how the UAW administers it. Will the union keep benefits near the current level, drawing down the fund on an unsustainable level, or will the union impose immediate, deep benefit cuts? The union might be tempted to make only minor cuts and hope for a national health care plan to save the day.

Who Gets Hurt the Most with a VEBA?
GM Stockholders

The automakers want to pay for a substantial bit of the cost with equity. Given that the cost of a VEBA may exceed the current market capitalization of GM and Ford, if the VEBA is mostly paid for with stock, the retirees could end up with effective control of both automakers. I say retirees, but the plan manager would be the Union. Hmmm, who does GM management work for again? So if the Union's interest in compromising benefits with a VEBA is to insure benefits regardless of what happens to the automaker, how does funding it with equity make sense? Paying for a VEBA with equity seems like smoke and mirrors to me. I don't see how issuing shares to the VEBA makes sense from a union or management perspective. A VEBA could still be funded with equity if GM made a secondary offering of new shares to the public to pay for it, but that leaves current stockholders holding the bag.

There is an article on CNN Money that suggests that GM's stock price does not reflect the benefits of a VEBA. From an investor's point of view, I think that's exactly wrong. GM's stock price is too high especially because of the prospects of a VEBA. GM's big problem with retiree healthcare is that it is an off the balance sheet liability. Assets have not been reserved to fund it, unlike GM's pension liabilities which appear to be properly funded and reserved. General Motors' market capitalization, the total value of all its common stock is about $16 billion, not much bigger than the $12 billion market cap of Harley Davidson, and less than a tenth of Toyota's $211 billion market capitalization. Those analysts that suggest a VEBA will boost GM's share price fail to consider the effects of stock dilution. If GM has to fund a $50 billion VEBA with $20 billion in current assets and $30 billion in new shares, then current stockholders will only own a third as much of the company as they currently do. Moreover, it will be challenging to even fund $20 billion out of GM's assets without negatively affecting working capital, regardless of how the assets are currently shown on GM's books.

If the numbers above leave you scratching your head, it's probably because you're beginning to understand the dilemma that GM is in right now. All of the assets of the company are facing multiple claimants. In a way, GM can't offer equity to the retirees, because it effectively already pledged the company by underfunding the retiree healthcare in the first place. Perhaps GM's last hope will be if it can convince enough GM diehards to buy $50 billion in new stock to (partially) recapitalize the company, while, at the same time it dilutes the worth of its current shares (owned by some of these same loyalists) to a fraction of the current share price.

One couldn't blame a GM shareholder if he/she took the position: "Piss on the UAW, they've already got 90% of my money. Shut down the g-d factories and see how they like losing 90% of their money." Lucky for the Union that the cush jobs of GM managers and executives depend upon the doors staying open and factories running. A big tree takes a long time to die, and lots of creatures thrive in a dying tree.

Given how difficult the issues are, it wouldn't surprise me if the UAW goes many months before it actually strikes a deal. Look how long it took to resolve the Delphi mess. It might make sense to put off everything for a year and a half to see if we can get a political consensus on nationwide healthcare. If so, then the VEBA might not have to be funded at 70%, but rather at 30%. If GM can continue improving its finances in the meantime, maybe it has a chance.

Monday, September 10, 2007

Osama - Does he or doesn't he?
Should he or shouldn't he?

When the recent tape was released showing that it doesn't even take a hairdresser to know for sure that Osama dies his beard, the thought that immediately came to my mind is whether the Quoran allows or prohibits a good Muslim from dying his beard. Somebody at Slate magazine must have been thinking along the same lines because in a article by Michelle Tsai, the question is answered. Apparently, there is no rule prohibiting the dying of one's beard.

Tuesday, September 04, 2007

GM Sales UP 6% in August
Toyota's Down
Honda Sets Record

General Motors posted a 6% gain over last year's August sales. For GM, light truck sales increased 17.8%; while car sales declined 7.8%. Much of the sales increase can probably be attributed to GM's new crossovers.

Toyota's sales were down almost 3%. Toyota's pick-up sales were up, but SUV sales were down.
Honda experienced a record month with sales up almost 5%.


Dissention in the ranks of the UAW
VEBA is predictably contentious

While it seems a given that UAW officers will recommend a contract that includes a Voluntary Employee Benefits Agreement, "VEBA", that effectively puts retiree healthcare in the hands of the union, there is a vocal opposition within the union. I was forwarded a handout titled "Vandalize Employee Benefits Again" that attacks VEBAs. It appears that the handout came from Similar rhetoric is available at

I'm not taking sides in the UAW's internal politics. I'm merely pointing out that approval by the union doesn't guarantee ratification by the workers.
Ford Sales down 14% in August
Nissan's Sales up 6%

Ford was the first of the automakers to report August sales numbers. The results weren't good, with sales down 14% overall. Ford reported bright spots in its crossover and compact SUV categories.

Nissan reported its results hot on the heels of Ford. Nissan reported sales 6% better than the same period last year.

GM and Chrysler are expected to report sales below last year, I would suspect that GM will do somewhat better than Ford, and Chrysler could go either way.

Nissan's sales uptick shows that though the market may be down overall due to problems in the overall economy, such as a downturn in the housing market, automakers who are selling cars that customers want to buy are still doing well.