GM Go Boom?

It sure looks that way:

"The UAW stopped negotiations with GM last night, a person familiar with the talks said. A delay in the talks could risk the automakers missing a Feb. 17 deadline to show progress in a government-ordered plan to cut labor and debt costs. It’s not clear what that would mean."

Oh I disagree – the meaning of that is crystal-clear.

Any questions?

I don’t know what Gettlefinger and his pals over at the UAW think they’re going to accomplish with this.  Let me point out a few things that the employees and union members that Gettlefinger allegedly works for don’t seem to understand:

• If the company and thus its pension fund "booms", the PBGC [Pension Benefit Guaranty Corporation] will be forced to step in and take it over.  The PBGC has maximum benefits that it pays out to retirees.  If you were getting more than that previously, too bad.  Have a banana.
• The VEBA [Voluntary Employee Beneficiary Association], if unable to be funded, is unable to be funded.  Pension funding under the PBGC does not include "all expenses paid" health insurance.  Welcome to Medicare my friends, when you are old enough to qualify.  Until then, good luck.
• The guarantees are much more limited than your Pension was, especially if you’re not already retired.  The cap is based on the law, not your contributions to date, and is invoked at the time the plan goes "boom".  If you’re under 45 you will get exactly nothing, with the MAXIMUM amount set by law, disregarding (for the most part) your contributions to the system.

Now I’m not at all certain that Gettlefinger’s "members" are aware of this, but they damn well ought to be.  And if you think that the government won’t force conversion to a Chapter 11 with the government providing DIP financing, you’re nuts.  They both can and likely will with catastrophic consequences, especially for employees with significant tenure who currently are on the job.

The problem is really quite simple – there’s not a prayer in hell that the automakers can go back to Congress for more money without satisfying the conditions in the previous tranche.  It simply isn’t going to happen, and attempting to go through Treasury, going around Congress, is unlikely to work very well either.

This game of chicken killed consideration of the bill the last time around and forced the Bush Administration to play ball with the TARP account, effectively kiting a check on it.  But that was with a President who was due to leave office within days along with a Treasury Secretary beating feet right behind him – not an Administration that is going to have to live with the consequences of a decision for three more years and change.

I am well-aware that President Obama is a strong friend of organized labor, and so are some Americans.  But very few are friends of the UAW outside of its membership, and that’s a problem – never mind the hubris of the last round of negotiations that got far too much press to remain buried.

The fuse appears to be lit, with Ford and the non-union Japanese automakers building cars in the South the only beneficiaries of this insanity.

As for Michigan, its far too late to say "welcome to Hell", as you’re already there – but this little game sure has the feel of someone cooking off a couple of nukes in the already-blistering-hot oven.