The UAW: The Curse that Just Keeps on Giving

The company formally known as General Motors (informally known as Government Motors) is preparing for an initial public stock offering (IPO). However, it appears the attractiveness of the “new” GM continues to be scarred by an old curse, the United Auto Workers.

While many Americans have already sworn off the buying of GM-made vehicles, investing in General Motors, alongside the United Auto Workers may be too much risk for investors to tolerate.  This is especially the case as the auto industry gears up for negotiations next year.

The union is expected to ask that some of its givebacks be reversed during contract talks with the carmakers in 2011, when the contract signed in 2007 — and modified last year with more concessions as General Motors and Chrysler approached bankruptcy — expires.

But it gets even more complicated.

On Saturday, a large group of UAW members from Indiana, Ohio, and Michigan gathered picket signs and protested outside the headquarters of…the United Auto Workers.  The cause of their ire was the two-tier wage system that the UAW negotiated with the government.  According to some of the protesters, the UAW kept details of the deal secret from them until the last minute.

Saturday’s demonstration was organized by workers from the automaker’s big assembly plant in Orion, Michigan to protest the UAW’s decision to allow GM to assign workers with seniority of 10 years to a second-wage tier that would require them to take a 50 percent cut in pay.

“They didn’t tell us anything until the very last minute,” said Nick Waun, a member of UAW Local 5960.

He noted union officials had kept quiet about the potential for steep pay cuts for more than a year.


The UAW’s internal battle with its own members, who may push to end the concessions next year in negotiations, may put a damper on any possible enthusiasm investors may have toward investing in a business that is partially owned by the government, as well as the union.

GM and the UAW have a long history of conflict and the continuing signs of unrest could ultimately influence investor’s decision to buy the new GM stock, said Brad Coulter, an analyst with management consulting firm of O’Keege & Associates in Bloomfield Hills, Michigan.

He warned that while there’s been a change in management, GM has a history of destroying shareholder value, and the UAW has been a large reason for that destruction.

“The UAW has a long history of shareholders be damned and I’m not convinced the rank and file have bought into the new reality,” Coulter said.

Given the government’s demonstrated ability to manage the economy and their vast experience running private-sector businesses, it will be interesting to see how many investors jump on board with the GM’s IPO.


“I bring reason to your ears, and, in language as plain as ABC, hold up truth to your eyes.” Thomas Paine, December 23, 1776

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