Monday, September 24, 2007

Auto Manufacturing

I don't think I've ever managed to find any sympathy for people affected by auto-sector restructuring, and not only because I am light-years away from being able to afford a car.

Regardless, I don't need to provide a conservative's view about the role for government in accomodating these things. No bailouts. The NDP, however, (Canada's socialists), are inclined to disagree. Though the Liberals do the same thing.

Anyway, let me be a cynic for a moment. From Forbes:
The two sides are considering a type of health care trust fund called a voluntary employee beneficiary association, or VEBA. Such a fund could save General Motors billions of dollars in retiree costs. In a VEBA, GM would provide the initial money to fund a trust. The UAW would assume responsibility for managing and investing the money, which would be used to pay for retired employees' health care costs.

Now, since I don't think this VEBA saves billions in administrative costs, synergies, etc, that implies UAW is willing to take the hit for said costs, since GM doesn't save these billions from nowhere.

Of course, that's a small price to pay for the added prestige/influence of having all that money under UAW's control. Besides, they can keep benefits even for a while by running down the plan/running up unfunded liabilities/I'm not an accountant. I doubt they will actually fund all those billions themselves. Of course, rapid growth of their membership would also do the trick, but that's fairly unrealistic, I should think.

But I do understand incentives. UAW's interests, by definition, are not precisely aligned with that of whom they represent, and it seems GM management is exploiting the difference.

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