So asked Felix Salmon, blogging for Conde Nast’s Portfolio.com. At first glance it appears an interesting question. General Motors Corp. as part of its new contract with the United Auto Workers has committed to paying $30 billion into a union-managed trust that will fund retiree healthcare benefits, with plans to add $5 billion or more to the trust in the years to come.

It will be up to the UAW to invest that mountain of cash, and much of it is expected to go into equities in hopes that the union can grow a nest egg big enough to keep up with the ballooning costs of healthcare. General Motors today has a market capitalization of $20.6 billion, giving the union plenty of capital to buy out shareholders at a premium.

Salmon lists benefits to the union owning the company, including greatly reducing the risk of worker strikes and, he says, eliminating the conflict between shareholders wanting to maximize dividends and workers wanting to maximize earnings. But he fails to mention some of the risks involved in such a deal that makes a buyout highly unlikely.

For starters, are we so far removed from the Enron meltdown to have lost sight of the lesson learned by employees who invested all of their retirement savings with their employer, only to see their jobs, and their retirements, flushed away?

And as past employee-owned experiments such as United Airlines ill-fated ESOP in the mid-1990s have shown, management/worker priorities and business realities do not magically align just because workers own the company.

An employee-owned GM, which already faces a need to restructure its operations to better compete regardless of who owns its shares, would likely confront a similar dilemma to United's. Chances are that after an initial honeymoon period the union would have tough choices to make that would put worker priorities today (higher wages, more job security) at conflict with worker priorities for the future (a fully funded healthcare plan once retired). And unlike most negotiations, the UAW would have no management boogieman to point a finger at when it came time to negotiate.

Given the long downward cycle of the U.S. auto industry and the cutthroat competition that continues to eat away at GM from all over the globe, the UAW’s best bet to secure the retirements of its members would appear to be diversifying as far away as possible from the auto sector. To be fair, Salmon briefly suggests diversification probably would be a safer bet. — Lou Whiteman

See Salmon's post at Portfolio.com
See TheDeal.com story on GM's deal with the UAW