On the front page of the business section of the Washington Post I read the following headline: UAW, Ford Cut Deal On Health Benefits. In short, the deal says the the union will accept stock in lieu of 50% of the $13.2 billion of what Ford is obligated for the health trust fund of retirees (GM owes $20 billion, Chrysler $10 billion). This is along the lines of what the administration has proposed.
Union workers will have to vote to accept this, but if the companies totally failed, they would have no guarantee that their heathcare would be maintained. There is an element of risk, given the current tenuous situation for continued operation of the auto companies, but this kind of actions would relieve a major pressure on cash flow for the company.
There is more in the article.
It lists those who will be advising Treasury Secretary Tim Geithner on a variety of economic and financial matters, including helping the auto industry survive. Steven Rattner, of private equity firm Quadrangle Group, who was considered a leading candidate when we were still considering the possibility of a "car czar," will apparently lead a panel that includes the following: Lisa Heinzerling of Georgetown law, who
was the lead author of a brief in Massachusetts v. EPA in 2007, in which the Supreme Court ruled that the EPA has the authority to regulate carbon-dioxide emissions.
Other designees include Diana Farrell, formerly of McKinsey & Co., now deputy director of the National Economic Council; economist and Geithner counselor Gene Sperling; Jared Bernstein, chief economist to Vice President Biden; Edward Montgomery, senior adviser at the Department of Labor; Austan Goolsbee, staff director and chief economist of the Economic Recovery Advisory Board; Dan Utech, senior adviser to the secretary of energy; Heather Zichal, deputy director of the White House Office of Energy and Climate Change; Joan DeBoer, chief of staff for the Department of Transportation; and Rick Wade, senior adviser at the Department of Commerce.
Remember that Bernstein (no relation of which I am aware) is the principal economic adviser to VP Biden, who has the responsibility for maintaining a healthy middle class (and total collapse of the auto industry would greatly undermine any other efforts).
Returning to the specifics of Ford. It is worth noting that unlike the other two of the big three Ford did not seek immediate bailout money from the Government last fall.
The agreement allows - does not require - Ford to use stock to meet its obligations to the retiree health fund. The government had urged GM and Chrysler to take a similar approach as part of the $17.4 billion in government loans already authorized. After all, health care - especially for retirees - is a major part of the non-competitive position US automakers have versus their foreign counterparts.
I wonder how many will attack this agreement as some kind of creeping socialism. It is not. It is not the government getting the stock. It invests the retirees (and thus by implication the current work force, who will become retirees) in the well-being of the company at the same time as it frees up significant cash for operations. Let me quote the final paragraph of the article, which is a quote from a Ford executive:
"We will consider each payment when it is due and use our discretion in determining whether cash or stock makes sense at the time, balancing our liquidity needs and preserving shareholder value," Joe Hinrichs, group vice president for global manufacturing and labor affairs at Ford, said in a statement.
liquidity needs - remember how much of the current economic crisis is because of a lack of liquidity, with banks unable to lend, consumers unable to borrow. For auto companies they have felt it on both ends, from their inability to finance operations to the inability of their customer pool to finance purchases.
We do have a crisis. We need to rethink how we do things economically, across the spectrum. A crisis presents opportunity. This is somewhat innovative thinking. It represents a shared sacrifice, which is the only kind of sacrifice that ultimately will be sustainable - and on that I hope executives on Wall Street and in banks are paying attention.
This action will not by itself save the auto industry, or even Ford as a corporation. To me, however, it does represent the kind of creative thinking we will need in our current crisis.
I do not know if this diary will draw any attention, but I thought the issue/story was worth the attempt. I would not be surprised to hear some mention of this by the President tonight as an illustration of how we must - and can - do things differently.
Peace.