Autoline on Autoblog with John McElroy

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John McElroy is host of the TV program “Autoline Detroit“. Every week he’ll bring his unique insights as an auto industry insider to Autoblog readers.

THE MONEYED TYCOONS OF THE UAW
By John McElroy

I gotta believe Karl Marx is spinning in his grave. Can you imagine the captains of capitalism handing tens of billions of dollars over to labor? For free? It’s enough to make a Communist lose all hope for class warfare!

Yet, as part of a deal to get rid of all their health care bills for retired hourly workers, Detroit automakers are going to make the UAW richer than it ever dreamed possible. They’re creating a VEBA, or Voluntary Employee Beneficiaries Agreement, which is a gigantic fund that will be used to pay all those health care bills.

The payoff for the car companies is that they can take all those future obligations off their books. That will immediately reduce their debts, improve their credit ratings and let them borrow at lower interest rates. It will also save the automakers billions every year, allowing them to drop some of it to the bottom line, and a lot more of it into developing new cars and trucks-something that Detroit desperately needs to do.

But before they get there they’ll have to hand over something like $60 billion to the United Auto Workers union. And that’s where it gets interesting.

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