I still think Wagoner should turn over GM to Gettelfinger. In less than 6 months, you will see the average salary plummet to a reasonable level.

The Big Three automakers' troubles are wreaking havoc on state and local budgets far beyond the Rust Belt. And a collapse of even one of Detroit's car manufacturers would hit governments while they are down.

States and cities around the nation are already slashing budgets and services as the deepening economic downturn shrinks their coffers. To close their budget gaps, governments are cutting public health programs, reducing aid to public school and universities, and laying off workers.

Problems in the auto industry are only exacerbating this turmoil. Not only have nearly 800,000 people lost car-related jobs this year, accounting for 40% of the increase in unemployment, but auto sales are at a 26-year low and at least 660 dealerships have closed their doors.....

Battered Detroit automakers have a chance to compete better against foreign-brand rivals under a four-year contract between General Motors (GM) and the United Auto Workers that got a tentative OK Wednesday.

The agreement, which ended a 41-hour strike against GM, shifts $51 billion in potential healthcare liability off GM's balance sheet, puts new workers on a lower pay scale, freezes wages but guarantees bonuses, promises to keep investing in U.S. production and limits how long idled workers get nearly full pay in a so-called jobs bank.

IMPACT: Union set to assume $51 billion responsibility
REACTION: Workers give mixed responses to announcement
STATEMENTS: From GM and the UAW

"A landmark deal," says David Cole, chairman of the Center for Automotive Research. "It represents a new business model between labor and management."

Ford Motor and Chrysler said they were reviewing the settlement and wouldn't comment on how hard it would be to meet the same terms. Both said they were happy to see the strike settled. It was the first nationwide UAW strike since a 1976 action against Ford.
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Union members have acknowledged they must make concessions to ensure the survival of Detroit automakers, who reported combined losses of $16.1 billion last year. Instead of taking their usual combative approach, UAW leaders "truly recognize that they have a dog in this fight, and that's historic," says Van Conway, auto consultant at Conway, Mackenzie and Dunleavy.

UAW President Ron Gettelfinger says the union will use the customary pattern bargaining, meaning it will ask Ford and Chrysler to accept substantially the same deal.

They'll agree, says Tom Mobley, professor at Farmer School of Business at Miami (Ohio) University. "All three of them have been involved in buyouts and trying to get (retiree) healthcare off the books."

Ford and Chrysler have relatively fewer retirees than GM, so won't benefit as much from shifting responsibility for retiree healthcare to an independent entity partly directed by the UAW.

But both benefit from cuts in the jobs bank and a two-tier system that has a lower pay scale for new workers than current employees.

"GM succeeded in closing a good portion of the employment-cost gap against the Japanese 3 building cars in the U.S.," says David Healy, analyst at Burnham Securities, referring to Toyota, Honda and Nissan.

Investors liked the deal and the optimism spilled onto Ford. GM shares closed Wednesday at $37.64, up 9.4%. Ford was $8.88, up 6.5%. Chrysler is privately owned.

Analysts expect GM to contribute to the new funding entity about 70% of the $51 billion it potentially owes for retiree healthcare, or about $36 billion. That improves GM's credit rating because it means GM is less likely to go broke. A better credit rating means GM pays lower interest rates when it issues bonds, cutting borrowing costs.

GM doesn't have that much cash and might have to issue bonds to help raise enough, Healy cautions, partly eroding the savings.

GM and Chrysler Will Get $13.4 Billion in U.S. Loans

Dec. 19 (Bloomberg) -- General Motors Corp. and Chrysler LLC will get $13.4 billion in initial government loans to keep operating in exchange for a restructuring under a rescue plan announced by President George W. Bush.

A bankruptcy is unlikely to work for the automakers at this time and can’t be allowed, Bush said at the White House.

“These are not ordinary circumstances,” Bush said. “In the midst of a financial crisis and a recession, allowing the U.S. auto industry to collapse is not a responsible course of action.”

The money will be drawn from the Troubled Asset Relief Program and the automakers will get an additional $4 billion from the fund in February for a total of $17.4 billion in assistance, according to a statement from the Bush administration. The funds would allow GM and Chrysler to keep operating until March.

Winning the assistance is a reprieve for GM, the biggest U.S. automaker, and No. 3 Chrysler after they said they would run out of operating funds as soon as this month. Bush is stepping in after Senate Republicans’ refusal last week to take up a House-approved rescue raised the prospect of a company failure costing millions of jobs.

GM is reeling from almost $73 billion in losses since 2004 and a 22 percent slump in U.S. sales this year, while the drop at Auburn Hills, Michigan-based Chrysler is 28 percent, the steepest among the major automakers.

Deadline

Under the terms of the plan, if the companies can’t demonstrate financial viability by March 31 the loans will be called and the money must be returned, the statement said. The government’s debt would have priority over any other debts.

In exchange for the money, the automakers must provide warrants for non-voting stock, accept limits on executive pay, give the government access to financial records and not issue dividends until the debt is repaid. The government will have the authority to block transactions larger than $100 million.

The automakers much cut their debt by two thirds in an equity exchange, make half of the payments to a union retirement fund in equity, eliminate a program that pays union workers when they don’t have work and have union costs and rules competitive with foreign automakers by Dec. 31, 2009. The requirements could be modified by negotiations with the union and debt holders.

Books Examined

Government officials will examine all financial statements and records of the car companies.

The package is intended for GM and Chrysler initially; Ford Motor Co. has said it can continue operations under current circumstances.

GM soared 15 percent to $4.22 at 9:04 a.m. before regular New York Stock Exchange composite trading, while Ford gained 11 percent to $3.15.

GM’s 8.375 percent bonds due in July 2033 rose 3 cents to 18.6 cents on the dollar, yielding 45 percent, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority.

Ford’s 7.45 percent bonds due in July 2031 gained 2 cents to 27 cents on the dollar, yielding 27.8 percent, Trace data showed.

The Bush administration agreed Dec. 12 to consider options, including use of the TARP, after Senate Republicans turned aside the House-backed plan. The Republicans sought more specific automaker conditions, such as pay in line with foreign manufacturers’ operations in the U.S.

United Auto Workers leaders agreed this month to suspend a program that pays laid-off employees after their jobs end, and to postpone automakers’ contributions to new union-run trusts that will take on responsibility for retirees’ medical care.

The dispute in Congress reflected the tension between Republicans from Southern states that have plants owned by Asian and European automakers, and the UAW, which primarily supports Democrats in political campaigns. The next Congress will have a bigger Democratic majority.

The United Auto Workers may be out of the hole now that President Bush has approved a $17 billion bailout of the U.S. auto industry, but the union isn't out of the bunker just yet.

Even as the industry struggles with massive losses, the UAW brass continue to own and operate a $33 million lakeside retreat in Michigan, complete with a $6.4 million designer golf course. And it's costing them millions each year.

• Click here to see photos of the UAW's $33 million retreat.

The UAW, known more for its strikes than its slices, hosts seminars and junkets at the Walter and May Reuther Family Education Center in Onaway, Mich., which is nestled on "1,000 heavily forested acres" on Michigan's Black Lake, according to its Web site.

But the Black Lake club and retreat, which are among the union's biggest fixed assets, have lost $23 million in the past five years alone, a heavy albatross around the union's neck as it tries to manage a multibillion-dollar pension plan crisis.

Critics call it a resort for union leaders that wastes money from union dues.

"It's their members' money that they're spending on this thing," said Justin Wilson, managing director of the Center for Union Facts, a union watchdog group. "The union has bigger issues at hand than managing a golf course."

Managing the course may become a burden for the union. The UAW covers costs for the Reuther Center from the interest it earns on its strike fund, according to tax documents, but massive losses in the past five years have forced the union to make heavy loans to keep the center afloat. Critics call it a poor investment for a group with over $1.25 billion in assets.

"Unions certainly have had real estate investments in the past, but investments are supposed to make money, not bleed money," said Wilson.

The UAW did not return calls from FOXNews.com, and a spokesman could not be reached for comment.

The Reuther Center is open 11 months of the year to offer courses on leadership, political action, civil rights and other topics; it hosts nearly 10,000 visitors annually. The UAW says it sends workers there to "learn, experience unionism (and) commit to labor's cause," according to their Web site.

The center was purchased in 1967 and underwent massive renovations in the '90s under the careful watch of former UAW president Steve Yokich. "Today's Black Lake might not exist if not for Steve Yokich," said union member Bob Reidt, whom Yokich appointed as Black Lake's director. "Yokich is responsible for rebuilding Black Lake."

The UAW erected a monument to its longtime president Walter Reuther — the center's namesake — which bears an inscription of his words: "There is no greater calling than to serve your brother. There is no greater satisfaction than to have done it well."

But Reuther, who died in a plane crash en route to the center in 1970, never knew the satisfaction of Black Lake's "well-groomed fairways," a course that Michigan Golf Magazine called a "stunning visual marvel."

Union members can play golf at discounted rates on one of the country's top 100 courses, designed in 2000 by famed course architect Rees Jones at a cost of $6 million.

The center has a storied history. Reuther had his ashes scattered at the site, and Lucille Ball and Desi Arnaz honeymooned there in 1940, well before it was bought by the UAW.

"It's funny that they call it an education center — it's a resort," said Wilson. "If I was a union member, I would prefer that they rented out a room at the Ramada Inn."

Billionaire Kirk Kerkorian, the 41st richest person in the world, has sold off his last shares in Ford Motor Company. Kerkorian had purchased roughly 6% of Ford since April, at a cost of $1 billion.

By October, Kerkorian had taken a 67% loss on the investment. He began selling his shares that month.

Kerkorian has had a tumultuous history with Detroit over the years, including a failed hostile takeover of Chrysler in 1995. His move on Chrysler was backed by former Chrysler Chairman and CEO Lee Iacocca. The 91-year-old Californian also tried to force GM into a merger with Renault and Nissan in 2006. At the time, Kerkorian owned nearly 10% of GM, but sold off the bulk of his shares when GM signaled their unwillingness to join the Renault/Nissan partnership.

Kerkorian built up his fortune through investment in the development of a small airline through the 1950s, and the purchase of land in Las Vegas over the '60s. Through his companies he started the International Hotel, now the Las Vegas Hilton, and the Flamingo Hotel. He later purchased film studio MGM, and created the original MGM Grand Hotel and Casino. He sold off those hotels, and formed MGM Mirage, which now owns six major properties in Vegas alone.

He had been a fan of Ford CEO Alan Mulally, and believed the executive had Ford on the right path. However, rising gas prices and the increasingly dismal U.S. economy meant a change of plan at Ford. Shares in MGM Mirage were also diminishing, as Kerkorian's stake in the entertainment company was part of the collataral on his Ford purchase.

Kerkorian's Tracinda Corporation began selling the first batch of Ford shares on October 21. In an October statement the company said, "in light of current economic and market conditions, it sees unique value in the gaming and hospitality and oil and gas industries and has, therefore, decided to reallocate its resources and to focus on those industries."