Mickey Kaus raises an issue I hadn't thought of with the structure of the auto bailouts: the unions now have a conflict of interest. Thanks to the government-sponsored reorganization, the unions now own a sizeable chunk of GM, and I believe an actual majority stake in Chrysler. This gives them an incentive to cut those companies special deals, while holding Ford to a tougher contract--which is apparently what they're doing.
It seem to me that this is a clear and insurmountable conflict of interest. Should the UAW be compelled to relinquish its stake in the automakers, or stop representing Ford workers? I'd say they should. Not that this has a snowball's chance in hell of actually happening.
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Maybe Reid will work to apply anti-trust against them.
Well, it won't happen via legislation, but a lawsuit might actually have merit...if Ford were willing to do that.
More than one person predicted this, by the way.
Employees of United Airlines owned their company and that certainly didn't stop management from flying the company into the ground. You can blame those greedy employees all you want but when a company declares bankruptcy it is because of the decisions management made.
Have you read Card & Krueger? Raising the minimum wage actually boosts employment.
Hold on, I think I may have gotten my talking point index cards screwed up.
You are missing the novel point and confusing it with a conventional one. It is not that the union owns its company. It is that the company owners of Chrysler represent the union of Ford. A union works because fundamentally it wants the employer its workers to be successful. A union owning shares in a company while representing its employees often leads to less shenanigans.
However a union who owns the competition of the the employer of its workers is scary. Imagine you owned a store and your competition also happens to be your landlord. Your prices get to good and what happens? Your locks mysteriously break and you are shut down.
When a union has an actual motivation to harm the employer, and not just to get the best for its employees, then it is dangerous, not just for the employer but for its members as well
I'm not sure I understand Mr. Noble's point, or does that only apply to minority ownership? How can a union own a majority share of a company and not become management? Aren't the UAW now the management of Chrysler and GM with a very tight grip on the employees? They'll never strike against themselves when they can simply fire the CEO. It seems exactly like the last scene in Animal Farm where the pigs become the humans.
And I was so looking forward to watching the UAW negotiate with itself. At first, I thought there was a certain genius to this - how can they stick it to the company when they _are_ the owners?
Jonathan,
Steven agrees with you. His point is more that the UAW has control of the employees of Chrysler and GM, as well as Ford. However, as majority shareholders in Chrysler and GM, they benefit if Chrysler and GM outperform Ford, which they are in a unique position of ensuring by nature of their representation and control of its employees.
As an oversimplified example, it would be like 2 hardware stores opening across the street from one another. One is owned by the Smiths, the other by the Macks. The employees for both stores are the Michaels. The Smiths retire, and will the store to the Michaels. Now the Michaels are the employees for both stores, but own only one of them, creating an inherent conflict of interest that appears to be manifesting in the tougher deals to which Megan links at the end of the second paragraph.
Yep, the UAW owns 67.69% of Chrysler.
By the way, there is a secondary reason for the UAW to desire to hurt Ford. If Ford goes bankrupt soon, the bailout pattern for GM and Chrysler would likely be repeated. Which means the UAW would be rewarded by being given a large ownership stake in Ford.
Lunatic, that comment made my stomach drop.
2012:
"Everyone has the right to a car. From this day forward, everyone will have a car.
"Let me be clear: no longer will we tolerate the irresponsible behavior of begging rides from friends or employing an immoral carbon-spewing taxi service. Every American will be required to buy a car, either privately or through the new public option."
Isn't it lovely?
Even if we assumed the Obama Administration has thought of this, and to try to discourage it told the UAW that they'd be treated just like any other unsecured creditor in a Ford bankruptcy, would it be politically possible for the Administration to hold to that line in the actual event?
It just occured to you? It occured to me five minutes after UAW took possession.
Ford should definitely insist they can't negiotiate with people who have a conflict of interest.
Yeah, but if they did insist on that, what next? Just say "It's been fun!" and close the doors? Management can't eject a union, and the union sure as hell isn't going to recuse themselves. What's their game plan if they're going to declare that?
So... the government forces the sale of the company to the unions, and the unions squeeze the competition.
This is not what a free market looks like.
No doubt our Nobel Laureate-In-Chief will explain this is just good healthy competition, a la the public option.
Shouldn't there be a Prize in Economics coming soon for this revolution of capitalism? I mean it hasn't worked yet, so that makes the timing just about right...
Megan, you have an excellent point about the UAW's conflict of interest. However, the UAW faces a far larger conflict of interest. The majority of the UAW's membership is retirees, not workers. The workers and retirees have very different interests. If GM or Chrysler fail, the workers lose their jobs. The retirees get their retirement benefits guaranteed by the Pension Benefit Guarantee Corporation. The only way the retirees lose is if the maximum payout is less than what they recieve under the current system.
I think it would have been in the UAW workers best interests for GM and Chrysler to give the assets for UAW retirees pensions to the PBGC and let them pay the retirees. Then the assets of GM and Chrysler should have been given to the secured creditors by the bankruptcy court. This would give the companies that emerged from bankruptcy the best chance for survival. Survival of the companies is of course in the best interests of the UAW workers.
As it is now, GM and Chrysler will probably need perpetual bailouts, just so that the retired UAW members can postpone having their benefits reduced to the PBGC maximum benefits.