United Auto Workers

America has a vibrant and successful auto industry — just largely outside of Detroit. For years, many foreign automakers’ American divisions have been successful at making cars profitably, while creating thousands of well-paying jobs. One reason for the foreign automakers’ success has been their ability to work without the burdensome work rules faced by the Big Three under their contracts with the United Auto Workers (UAW) union.

Apparently, UAW President Bob King doesn’t like that one bit. In fact, he seems to feel so strongly about it that he recently announced that for companies that resist its organizing efforts, the UAW “will launch a global campaign to brand that company a human-rights violator.” What might such a campaign entail?

One indication can be found in the Obama administration’s report to the bad joke known as the U.N. Human Rights Council — whose members include such human rights champions as China, Cuba, Libya, and Saudi Arabia. In the report, submitted in August 2010, the State Department strongly suggests that the degree to which the law facilitates unionization should be a human rights matter — and that the U.S. falls short in that area.

The UAW — or any other union, for that matter — likely would cite the State Department document in any complaint filed to the International Labor Organization, World Trade Organization, or any other international body — maybe even the ridiculous U.N. Human Rights Council. And King’s recent remarks indicate this is an option the UAW might well pursue.

King also recently acknowledged that the UAW is in trouble. Speaking to an audience of 1,000 union members at a Washington political action conference, he said, “If we don’t organize these transnationals, I don’t think there’s a long term future for the UAW — I really don’t.” With those kind of stakes, it would be surprising for the UAW not to take some drastic action.

The upshot of all this is that we could end up seeing the UAW ask international bodies composed of foreign governments — including some undemocratic ones — for help in unionizing American workers. Stranger things have happened.

For more on labor, see here and here.

Any General Motors bonds issued this year will be classified as junk by a key ratings agency.  Why?  There’s some risk GM will go bankrupt again, and it hasn’t really returned to profitability, the way it appeared to have. That’s because GM’s recent quarterly profit, which came after years of losses and tens of billions of dollars in taxpayer bailouts, was artificially created by the temporary deferral of billions of dollars in pension obligations that it owes to the United Auto Workers union.  Those unfunded pension obligations have risen by $6 billion since the end of 2009.  As Charles Lane of The Washington Post notes,

[A] little-noticed October 6 report from Fitch, the ratings agency, which highlighted the major unresolved issue of the bailout: pension obligations to its United Auto Workers employees. The union successfully resisted efforts to trim this long-term burden on the company through the bankruptcy process, and they continue to weigh heavily on the company’s future. Specifically, GM’s relatively robust free cash position – one of its major selling points in its pending IPO – is being artificially propped up by the fact that it is not yet legally required to make multi-billion-dollar payments into its ‘heavily underfunded’ U.S. pension funds. How underfunded are they? Well, the U.S. plans alone are $17 billion underfunded as of the end of 2009, Fitch says. When you include global operations, the total is $27 billion. . . GM’s pension obligations are actually $6 billion higher than they appeared at the end of 2009.

These obligations will likely have far more impact on GM’s financial future than the recent revelations that it lied about the Chevy Volt, which it was trumpeting in a “publicity stunt” to curry favor with politicians crusading against global warming.

Earlier, GM lied about whether it had paid back taxpayers for its bailout, which resulted in GM getting $50 billion in taxpayer money, and its finance arm GMAC getting another $17 billion.  (GM also received billions indirectly from taxpayers, through programs like the incredibly wasteful Cash for Clunkers, which cost  used-car and car-parts dealers billions.)

The Obama administration used the bailouts to keep the United Auto Workers’ massive compensation (worth up to $70 an hour), pension benefits, and rigid union work rules largely intact, while giving the UAW a big chunk of General Motors‘ stock, even though the UAW helped bankrupt the company.  The auto bailouts were so wasteful and so biased in favor of the UAW that they disturbed even the liberal Washington Post editorial board.

Another reason for treating GM bonds as junk is the way the Obama administration mistreated GM’s past bondholders.  It engineered the wiping out of General Motors’ bondholders, some of whom were non-union employees who had invested their life savings in the company, so that the GM stock that the Obama administration was giving the UAW would be worth more.

GM also faces increased regulatory burdens, such as CAFE rules ratcheted up in the name of global warming  (the initial tightening of those rules will wipe out at least 50,000 jobs in the auto industry), that will make it hard for it to expand its anemic 19 percent market share.  Other EPA global warming rules are expected to wipe out at least 800,000 American jobs and impose heavy costs on suppliers of materials used in manufacturing automobiles.  The EPA’s proposed ozone rules would wipe out 7.3 million jobs, according to one study.

Workers may get violent if their wages are cut. The United Auto Workers union (UAW) has a monopoly and was an anchor on the Big Three U.S. automakers. These two ideas were professed by two labor leaders at the recent Federalist Society Convention in Washington, D.C.

There may be violence, says Damon A. Silvers, Associate General Counsel for the AFL-CIO and Deputy Chair of the Congressional Oversight Panel for TARP. Silvers spoke on last Friday’s panel “Labor: Wall Street, Labor Unions, and the Obama Administration: A New Paradigm for Capitol and Labor?” Speaking to the panel, he claimed economic downturns which cause people to have their wages cut, can have devastating results.

Silvers pointed to wage cuts in Brazil and spoke of the violence which ensued. He argued that when people are starving they may get violent, that the have nots will take from the haves. Quickly cautioning that this could not happen in the United States, he smirked and added, “but it may.” Not so subtly, Silvers implied that if you cut union wages there may be violence.

Another gem from the convention came from Thursday’s lead discussion “Redistribution of Wealth.” One presenter, when asked what happened to the auto industry in regards to unions, stated, “Unions missed the most basic fundamental economic role they have to play, which is to take wages out of competition. What happened was when they had a monopoly or took wages out of competition for the Big Three people competed more inefficiently…When the transplants came…the union didn’t do its job, it was an anchor to the competitive field as opposed to a help.”

Which right leaning free-market intellectuals stated this fact? None other than any Andrew Stern, the president of the SEIU! That is correct, Andy Stern blamed the collapse of the Big Three in part to the union monopoly of the UAW and called it an anchor to competition.

More characteristically, Stern also spoke of redistribution of wealth saying, “I do no support, I condemn, the redistribution of wealth — that is to say, the redistribution of wealth upwards.”

Advocating the redistribution of wealth? Cautioning of violence if wages are cut? Is this really the message top officials in the two largest labor unions want to be sending? Both Stern and Silvers knew their audience did not agree with them – Stern was sweating during his presentation – but did make an effort to speak to the constitutionally minded lawyers association.

Unfortunately, while tempered, their message was a clear endorsement of class warfare. Espousing unions as the only way for workers to get ahead in America, they chastised the Reagan era and directly blamed the demise of unions for what they claimed were lower worker wages. They ignored facts of other presenters showing that most workers’ standard of living has actually gone up in the last 30 years.

Stern should be given credit for acknowledging that the UAW monopoly helped almost destroy the American auto industry. He must acknowledge that hard work, innovation, and ingenuity are the real engine of the American economy, not collective bargaining. The monopolistic nature of unions in many industries is a liability to both workers and unions. As Stern pointed out in the context of the failure of the U.S. auto industry, unions’ inflexibility can drag down companies and work as a hindrance, not a help.

Considering the enormous amounts of cash that the federal government has hurled at the auto industry since the start of the financial crisis, recipients of government largess in Detroit should at least have the common courtesy of telling taxpayers what they’re doing with their money. Unfortunately, United Auto Workers boss Ron Gettelfinger doesn’t seem to think that applies to him or his union. So kudos are in order to Rep. Jeb Hensarling for calling out Gettelfinger and the UAW on this:

The lone member of Congress on an oversight panel reviewing the use of the $700 billion Troubled Asset Relief Program criticized the decision of the United Auto Workers union not to testify at today’s hearing in Detroit on the auto industry bailout.

Rep. Jeb Hensarling, R-Texas, who is member of the Congressional Oversight Panel, said the UAW refused to testify at today’s hearing at Wayne State University.

The panel confirmed that it sought the testimony of the UAW. Alan Reuther, the UAW’s legislative director, didn’t immediately return a call seeking comment.

Hensarling said he was “disappointed” that UAW President Ron Gettelfinger did not accept invitation to testify.

“He was able to rearrange his schedule to come and ask for TARP money,” he noted.

[...]

“The UAW came before Congress and pleaded for billions of taxpayer assistance. Their ownership stakes in Chrysler and GM look suspicious at best and like sweetheart deals at worst. It’s outrageous they would benefit from the taxpayers’ money and then refuse to testify about it,” Hensarling said in a statement before the opening of today’s hearing.

It’s beyond outrageous; it’s disgraceful — especially in light of the preferential treatment the union has gotten from the government vis-a-vis other bondholders. Even more disgraceful is the fact that the White House and Congress are unlikely to do anything about it. At least now we know what the UAW thinks of the rest of us.

The federal government is spending more than $50 billion to bail out General Motors, with no end in sight. But the UAW union refused to sacrifice its privileged position to save the company, demanding excessive wages and benefits that are much higher than most Americans get. The Obama Administration caved in to its demands, saddling GM with high labor costs that may doom the company in the long run.

As the Washington Post notes today, the “concessions” that Obama obtained from the UAW were merely cosmetic: “Union concessions were ‘painful’ only by the peculiar standards of Big Three labor relations: At a time when some American workers are facing stiff pay cuts, UAW workers gave up their customary paid holiday on Easter Monday and their right to overtime pay after less than 40 hours per week. They still get health benefits that are far better than those received by many American families upon whose tax money GM jobs now depend. Ditto for UAW hourly wages . . . . Cumbersome UAW work rules have only been tweaked.” Earlier, the Post lamented the “preferential treatment of the autoworkers’ union at the expense” of other company stakeholders and creditors, noting that “the union can boast that it has been promised no loss in ‘base hourly pay, no reduction in . . . health care, and no reduction in pensions,’” even though excessive union wages and benefits helped sink the company. Small wonder that even the liberal Post, which backed Obama’s bailout of GM in March, now has soured on it.

If GM had rejected a federal bailout, and filed for bankruptcy in December, it would be recovering right now, since it could have used bankruptcy proceedings to tear up the collective bargaining agreements with the United Auto Workers that saddle it with excessive wages and benefits and rigid work rules, and it would also be benefiting from the fall in gas prices from $4 last year to $2.50 now. By avoiding a federal takeover, it would also have greater freedom to oppose costly regulations proposed by the Obama Administration, such as CAFE and global warming regulations, which will destroy tens of thousands of autoworker jobs).

The bailout is neither necessary nor likely to be successful in the long run. In its auto bailout in the 1970s, England did the same things that Obama is doing now, like propping up high union wages and promoting the production of little “green” cars consumers may not want. Its bailout failed miserably, destroying the British auto industry’s chance of survival.

Even more wasteful than the GM bailout is Obama’s wasteful $800 billion stimulus package, which has destroyed tens of thousands of jobs.

Even as it engages in costly, unauthorized auto bailouts that have no legal basis, the Administration is abdicating core federal responsibilities like enforcing the voting-rights laws. Political appointees in the Obama Justice Department recently blocked action against a racist, anti-semitic hate group (whose members included an Obama poll-watcher and city democratic official) that used nightsticks and racial epithets to drive white voters away from a polling place in Philadelphia last year. The Obama Justice Department has also rubberstamped unconstitutional legislation, failed to protect the voting rights of American servicemen, and been deafeningly silent about a liberal black political boss in Mississippi who prevented voters from casting ballots and engaged in vote fraud.

Even the liberal Washington Post, which endorsed Obama and has not backed a Republican for president since 1952, is getting fed up with the Obama Administration’s wasteful and politicized bailouts of General Motors and Chrysler. Today, it laments the
“imminent transformation of General Motors into a government-owned company, infused with upward of $50 billion in federal money.” “It doesn’t take much imagination to forecast the political pressures that will buffet the government-as-auto-executive. We’ve seen one effect already in the preferential treatment of the autoworkers’ union at the expense of private creditors. . . . the union can boast that it has been promised no loss in ‘base hourly pay, no reduction in . . . health care, and no reduction in pensions,’” even though excessive union wages and benefits helped sink the company. And politics will now divert the company’s attention away from making cars consumers actually want. “Influential members of Congress will insist on jobs in their districts; environmentalists will want electric cars; overseas sourcing will be frowned upon. How such decisions affect profits could become secondary.”

That’s what happened in Britain in the 1970s. The government took over and attempted to bail out the country’s auto industry, and ruined it in the process, destroying whatever chance it had left to survive. The British auto industry ended up being run mainly to benefit the unions, and produced politically-correct cars drivers didn’t want.

Earlier the Post argued that Obama “should stop bullying the company’s bondholders”: “While the Obama administration has been playing hardball with bondholders, it has been more than happy to play nice with the United Auto Workers. How else to explain why a retiree health-care fund controlled by the UAW is slated to get a 39 percent equity stake in GM for its remaining $10 billion in claims while bondholders are being pressured to take a 10 percent stake for their $27 billion?” “If this were a typical bankruptcy, the company would be allowed by law to tear up its UAW collective bargaining agreement and negotiate for drastically reduced wages and benefits. That’s not going happen. Phrased another way: The government won’t let that happen.” Instead, the government is moving towards “financial engineering that ignores basic principles of fairness and economic realities to further political goals.”

The automakers would have been better off simply filing for bankruptcy last fall rather than seeking a taxpayer-funded bailout. The bailouts have cost taxpayers tens of billions, but made it harder to fix the root causes of the crisis facing the Detroit automakers, such as excessive labor costs.

The federal government poured billions of dollars into Chrysler, which then went bankrupt and now is in the process of merging with Fiat. But Chrysler may never revive, thanks to absurdly generous compensation for the company’s union employees. The Obama Administration has refused to cut union wages substantially, though it had no compunction about ripping off the pension funds and other lenders who loaned money to Chrysler to try to keep it afloat. Even union members seem surprised by how little they were asked to sacrifice. (The Administration is also seeking to rip off GM bondholders to benefit the union).

Moderate Democrat Mickey Kaus, who reluctantly voted for Obama, notes that the federal bailout may yet fail because of Obama’s failure to reduce excessive labor costs:

“Before the deal, Chrysler’s UAW workers made $28 an hour. After the deal, they’ll make $28 an hour. They gave up a scheduled increase in wages, plus a couple of scheduled bonuses. That explains why Chrysler’s Belvidere, Illinois workers told TV station WIFR that ‘the plan is not nearly as drastic as they expected.’ …As for Chrysler’s ‘chance for long-term success,’ it appears vanishingly small. Italian manufacturer FIAT is supposed to save Chrysler with new products, but according to a recent Automotive News article, ‘four of the six new vehicles from Fiat will enter the small-car segment,’ which is highly competitive but ‘covers only 14 percent of the entire U.S. light-vehicle market.’ . . . Pathetically, Chrysler hopes that even if they don’t save the company the new small cars will ‘[b]urnish the environmental image of Chrysler brands,’ says Automotive News. Unfortunately, the pipeline for those brands’ other, larger, products–burnished or not–is pretty much empty. If Chrysler workers were paid, say, not $28 an hour instead of $24–still not bad–the firm might actually have a ‘chance for long term success’ through charging lower prices. But that wasn’t a sacrifice Obama was ready to ask (even if Belvidere workers were apparently willing).”

In addition to leaving General Motors and Chrysler saddled with excessive costs and union ownership, Obama harmed them by radically ratcheting up federal CAFE fuel-economy standards, which affect them more than their foreign competitors. 50,000 jobs could be lost. And his global-warming regulations will destroy countless jobs and cut “household purchasing power,” reducing auto sales and Chrysler’s chances of survival.

The federal government poured billions of dollars into Chrysler, which then went bankrupt and merged with Fiat. But Chrysler may never revive, thanks to absurdly generous compensation for the company’s union employees. The Obama Administration has refused to cut union wages substantially, though it had no compunction about ripping off the pension funds and other lenders who loaned money to Chrysler to try to keep it afloat. Even union members seem surprised by how little they were asked to sacrifice.

Moderate Democrat Mickey Kaus, who reluctantly voted for Obama, notes that the federal bailout may yet fail:

“Before the deal, Chrysler’s UAW workers made $28 an hour. After the deal, they’ll make $28 an hour. They gave up a scheduled increase in wages, plus a couple of scheduled bonuses. That explains why Chrysler’s Belvidere, Illinois workers told TV station WIFR that ‘the plan is not nearly as drastic as they expected.’ …

“As for Chrysler’s ‘chance for long-term success,’ it appears vanishingly small. Italian manufacturer FIAT is supposed to save Chrysler with new products, but according to a recent Automotive News article, ‘four of the six new vehicles from Fiat will enter the small-car segment,’ which is highly competitive but ‘covers only 14 percent of the entire U.S. light-vehicle market.’ ‘The volumes need to be big for Chrysler to survive,’ [market analyst Tracy Handler] said. ‘Will they be? I have doubts about that.’

“See also this BBC article (“it’s madness”). Pathetically, Chrysler hopes that even if they don’t save the company the new small cars will ‘[b]urnish the environmental image of Chrysler brands,” says Automotive News. Unfortunately, the pipeline for those brands’ other, larger, products–burnished or not–is pretty much empty.

“If Chrysler workers were paid, say, not $28 an hour instead of $24–still not bad–the firm might actually have a ‘chance for long term success’ through charging lower prices. But that wasn’t a sacrifice Obama was ready to ask (even if Belvidere workers were apparently willing).”

While saddling Chrysler with excessive compensation costs and union ownership, the Obama Administration has inflicted a body blow to its ability to sell its traditional lines of large vehicles by radically ratcheting up federal CAFE fuel-economy standards, which harm the Detroit automakers more than their foreign competitors. 50,000 jobs could be destroyed as a result. Meanwhile, the global-warming regulations backed by the Administration will destroy millions of jobs and “decrease average household purchasing power,” thus cutting auto sales and further hurting automakers like Chrysler.

One of Obama’s own advisers now says that “the barrage of tax increases proposed in President Barack Obama’s budget could, if enacted by Congress, kill any chance of an early and sustained recovery.” He compares Obama’s tax increases to those that deepened the Great Depression.

In the Depression, President Hoover imposed regressive excise taxes that burdened consumers. Obama is now doing the same thing through his proposed $2 trillion cap-and-trade carbon tax. Obama privately admitted to the San Francisco Chronicle (which didn’t report it) that under his “plan of a cap and trade system, electricity rates would necessarily skyrocket.” As Obama admitted, that cost would be directly passed “on to consumers” — just the way Herbert Hoover’s 1932 excise tax increase was. Although the tax’s supporters claim it will cut greenhouse gas emissions, it may perversely increase them and also result in dirtier air. It is also chock full of corporate welfare, regional favoritism, political pay-offs, and give-aways to special interests.

Obama accused critics of his decision to give control of Chrysler to the United Auto Workers Union of being “speculators.” But it turns out that many of them are pension funds representing the interests of retirees, who are being fleeced to enrich the politically better-connected UAW.

“Indiana Treasurer Richard Mourdock revealed this week that his state’s police and teacher pension funds have lost millions of dollars in the Chrysler ‘restructuring.’ Indiana’s State Police Fund and Major Moves Construction Fund, which finances roads and bridges, together lost more than $1 million. And the Teacher’s Retirement Fund ‘suffered, at a minimum, a loss of $4.6 million due to the action of the Federal government,’ reports Mr. Mourdock. Far from being speculators, these funds represent retired public employees, including cops and teachers. The funds paid a premium to buy ‘secured’ status, only to discover that they were politically outranked by the United Auto Workers in the White House hierarchy. ‘In the past, to be secured meant an investor was first in line in the event of a bankruptcy and ‘non-secured’ creditors would receive value after secured-creditors were paid,’ Mr. Mourdock says. ‘In the Chrysler bankruptcy, however, secured creditors received $.29 on the dollar even as non-secured creditors [the UAW] received higher values and ended up with a 55% ownership of the new company, which is fundamentally wrong and a dangerous precedent to the capital markets.’”

The government is now doing the same thing at General Motors, giving much of the company’s stock (plus $10 billion in taxpayer dollars) to the UAW while refusing to make good on GM bonds, which were purchased by some people to put their kids through college (and by some non-union employees to help fund their own retirement).

When public-employee pension funds suffer, as they did at Chrysler, taxpayers do, too. Public employee pensions are already underfunded by perhaps a trillion dollars, and taxpayers will likely end up being forced to pay for any additional shortfalls through increased taxes.

Jobs will disappear, too, as companies find it more difficult to raise money through bonds and loans. In response to Obama’s ripping off bondholders and lenders to enrich the UAW, hedge funds now say they may not lend to unionized companies, and Indiana’s treasurer says that he will not invest in manufacturing companies or insurers that are participating in the TARP program. Chrysler still faces a difficult future, burdened by excessive wages that even union members were surprised to see stay high.

Obama’s $800 billion stimulus package, which guts welfare reform and contains provisions that keep states from cutting the wages of overpaid public employees, is also harming the economy. The stimulus ignited trade wars with Mexico and Canada that destroyed over 40,000 jobs.

So reads the Washington Examiner’s editorial today about how Obama effectively gave ownership of Chrysler to the United Auto Workers Union (which spent millions electing Obama), rather than taxpayers (who have spent billions to bail out Chrysler) or the institutions that lent money to Chrysler based on the legal right and expectation that they would receive its assets before the UAW union would. Veteran political commentator Michael Barone also calls it “gangster government.” The UAW will also retain “lucrative” pension and health benefits, courtesy of the taxpayer.

The liberal USA Today put it more gently, but it, too, criticized the Obama Administration. Obama demonized the institutional creditors, like hedge funds, that helped Chrysler when it needed funds, and then were given the shaft in his sweetheart deal benefiting the UAW. He branded them as “speculators” when they objected to it, and then arranged a collusive sale of the company in all but name (giving up all its valuable assets) to circumvent their legal rights (a sale rubberstamped by a liberal bankruptcy judge). As a result of Obama’s attacks, these creditors have received death threats. Administration officials also threatened to smear the creditors in the press (which might violate the First Amendment).

But as USA Today notes, “those creditors have every right to balk. By doing so they are not only defending their own interests, they are standing up for the principles vital to functioning credit markets. Secured lenders get first dibs at recovering their losses if a company cannot meet its obligations. They will be less willing to lend if they fear they’ll be forced to surrender their position.”

While Chrysler’s lenders have lost almost all of their assets, the union has given up little. Indeed, USA Today notes, the UAW has “continued to press for retiree health benefits more generous than those available to taxpayers funding the bailout.” (Moderate Democrat Mickey Kaus describes UAW pension and health benefits under the deal as continuing to be “lucrative“).

As reporter and columnist Tim Carney notes, car czar (and Democratic fundraiser) Steven

“Rattner and Obama have decided that the United Auto Workers union should get 55 percent of Chrysler. At the same time, they’ve attacked many of Chrysler’s secured creditors — who, in a regular, nonpoliticized bankruptcy, would be repaid in full — for resisting this deal. In a federal complaint, these administration targets alleged: ‘The government exerted extreme pressure to coerce all of [Chrysler’s] constituencies into accepting a deal which is being done largely for the benefit of unsecured creditors at the expense of senior creditors.’

For the foreseeable future, Chrysler will be on the federal dole, both directly and indirectly. The Obama-Rattner plan puts UAW in charge of Chrysler, which is good news for the Democratic Party.

UAW’s political action committee spent $13.1 million last election cycle, a slow year for the union’s political arm. Of the PAC’s $2.3 million in direct contributions to candidates and candidate PACs, more than 99 percent went to Democrats. Of 42 Senate candidates to get UAW money, only one was Republican, and that was Arlen Specter.

The union’s PAC also reported $4.5 million in independent expenditures supporting Obama, plus an additional $423,000 opposing John McCain.

So, here’s the arrangement: You pay your taxes, the Obama administration funnels some of the money to Chrysler, whose profits enrich the UAW, which in turn funds Obama’s re-election.

Predictability, precedent and the rule of law have been replaced with the fiat of politicians. Chrysler could become a pass-through entity from taxpayers to the Democratic Party. And in charge of it all is a Democratic fundraiser. Boss Tweed would be proud.”

John McCain, by the way, opposed the auto bailout. I earlier explained why the auto bailout was illegal and economically destructive.

Today’s Wall Street Journal further drives home the difficult position in which the United Auto Workers, Chrysler, and General Motors are likely to find themselves as a result of the UAW becoming part owner of GM and majority shareholder of Chrysler. First, the lead editorial notes the political risks inherent in the arrangement:

Some Treasury officials have told the media that 50% government ownership is important to ensure that taxpayers get repaid for the $16.2 billion in Treasury loans. But this is false logic. Taxpayer-shareholders are likely to be far better off with a smaller stake in a truly private company that is better insulated from political meddling. Private owners are more likely than the Treasury or the unions to try to run the company for profit, and so increase its equity value over time. Treasury says it would be a hands-off owner, but that hardly seems plausible and in any case that would merely leave the UAW in control. At the next labor contract bargaining session, the union would sit on both sides of the table.

And former Journal Detroit correspondent Paul Ingrassia points out the conflicting incentives that the UAW will have to control after it assumes such a huge stake in the two troubled automakers (which Holman Jenkins also mentioned this week) — as well as the irony of it all.

Having burdened the Detroit companies for decades with restrictive work rules, enormous health-care obligations and generous retiree benefits, the United Auto Workers union will now end up controlling two of them. Specifically, the UAW will own 55% of Chrysler and 39% of General Motors, where only the government will have a larger ownership interest.

Assuming that negotiations over the next few days or weeks don’t change things, it’s hard to know whether this outcome is perversity or poetic justice. The UAW finally will end up having a direct stake in the survival and prosperity of General Motors and Chrysler — even though the union’s shares in the companies will be held by special trust funds instead of by the UAW itself.

Whether the union’s rank and file will recognize its interest in the companies and act accordingly is another matter. Consider that one of the terms of Chrysler’s pending deal with the union is that workers won’t receive overtime pay until they work more than 40 hours in any given week.

One might well ask: Wasn’t it always that way? Well, no. Often enough, the union negotiated production quotas in local plant contracts that workers could fill in five or six hours a day — after which any work they did qualified for overtime pay. Now you understand one key reason why Detroit has arrived at this unhappy juncture.

That two of the major protagonists in this sorry history — the UAW and the federal government — are gaining more power over GM and Chrysler gives little reason for optimism about the companies’ future. More political manipulation is the last thing troubled companies need, and the  new  ownership structures now being finalized for GM and Chrysler are unlikely to avoid it. By seeking private financing, Ford may be about to dodge a bullet.