Paul Ingrassia On UAW 30-and-Out Retirement

Paul Ingrassia, once of the Wall Street Journal, wrote a very impressive and insightful editorial yesterday entitled "GM's Plan: Subsidize Our 48-Year-Old Retirees."

As usual, with his comprehensive grasp of the American auto industry, Paul debunks the myth that only the UAW is responsible for the mess in which GM, Chrysler and Ford currently find themselves.

There is one line, however, early in his piece, that really says it all,

"That was a couple of years before Detroit agreed to let auto workers retire with full pensions and benefits after 30 years on the job, regardless of their age. In practice, that meant a worker could start at age 18, retire at 48, and spend more years collecting a pension and free health care than he or she actually spent working. It wasn't long before even union officials realized they had created a monster."

Paul blames both auto company executives and UAW chiefs for failing to address and fix this crippling feature of Big 3 employment.

No matter what else you read or hear about the need for a US auto maker bailout, or how badly their filing Chapter 11 bankruptcy might affect the US economy, reread that second sentence.

We are all now paying for a bunch of workers from the auto industry who managed to earn more in retirement than they actually did working.

There are many interesting and important details in Paul's editorial that explain how bad a deal we are all getting for taxpayer funding of GM and Chrysler. GM is waving a $100B price tag around as the cost of Chapter 11, but it's a phony number, because it represents pension guarantees and other obligations that would be trimmed in such a court-supervised reorganization.

Chrysler, as Paul points out, wants continued government funding, in lieu of money that Fiat and Cerebrus won't contribute. How's that for being left holding a very expensive bag?

In his final analysis, Paul concludes that all stakeholders, especially bondholders and the UAW, are unlikely to get serious about facing reality outside of Chapter 11.

For me, however, the most striking element of this whole sorry mess is to be reminded of the sacred, unique "30 and out" deal so many UAW workers managed to connive out of Detroit in the fat years.

Every time I think about that, I find myself not caring at all what larger economic damage could come of forcing GM and Chrysler to file Chapter 11.