"How the UAW got its Deal"

Forbes has this interesting article:

The bankruptcy of General Motors delivers an unwanted present to the roughly 472,000 retirees and dependents who once held some of the cushiest benefits in business.

When the automaker emerges from bankruptcy later this year, those retirees will be the proud owners of a shriveled health care package and a 17.5% stake in the new General Motors ( GM - news - people ), their compensation for giving up a perk once estimated to be worth more than $60 billion. . . . .

By 2005, the Big Three automakers were in deep financial distress, so the UAW and the automakers negotiated a VEBA package that would remove the retiree benefits from the balance sheet and place them in independently funded billion trusts. There was only one problem: The UAW doesn't legally represent retirees, who quit the union when they leave the assembly line.

To get around that, the union recruited two retirees to file a class-action lawsuit seeking to declare their benefits vested and unchangeable. The union also supplied them with an attorney, Pittsburgh lawyer William T. Payne, who would ultimately receive hundreds of thousands of dollars in court-ordered fees. Within weeks, Payne announced a settlement: The benefits were not vested, nor were they unchangeable. In fact the settlement closely resembled the package the UAW had already negotiated.

Some 1,200 retirees cried foul and sued to block the agreement, saying the UAW was more interested in saving jobs for its members than in preserving benefits for retirees.

"It creates a ridiculous conflict of interest," said Mark Baumkol, who represented the dissident retirees. "How can the union say to GM 'you better give us good wages or we'll strike,' if that causes a drop in the price of the stock that funds the VEBA?"

Baumkol would seem to have a good case. The Supreme Court considered a similar situation back in 1940 when Carl Hansberry challenged a deed restriction barring the sale of properties to "any person of the colored race." Hansberry, a black man and the father of author Lorraine Hansberry, had purchased his house in Washington Park only to be challenged by residents who said he'd violated the deed restriction. . . . .



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