So now we can look at the UAW’s Strike and Defense Fund (Stikre Fund) and the UAW’s Strike Trust. But first, a little historical context.
The UAW’s strike with GM in 1970 was a significant event in the history of the UAW. Even though there aren’t likely [m]any active workers (or Int’l Reps) who were around then, the cultural effect remains. This strike of 400,000 UAW-GM workers which lasted 67 days, burnt through the UAW’s ~$120 million strike fund, even though strike benefits were only $30-$40 per week. About $160 million in strike benefits were paid out to workers, which the UAW financed by borrowing from other unions, and mortgaging the newly-built Black Lake to the Teamsters. The UAW laid off at least 125 International Representatives and 50 clerical and maintenance employees. This strike was clearly an existential threat to the UAW as an institution. If the UAW had folded and gave up on the strike before the demands were met, this could have emboldened other companies to fight harder with the UAW. On the other hand, if it had run out of money and not been able to operate before the strike demands were met, that would have been worse.
The Strike Fund, in a way, is sacred to unions, especially the UAW, given its centrality to winning contract gains. Although nowadays the Big 3 auto companies employ far fewer workers (GM has roughly 45,000 UAW workers now, about 1/10 the number in 1970), a major strike involving all workers at one of the Big 3 would really make things financially difficult for the UAW after about 2 months. Benefits are now $500/week, plus health benefits (over 10 times the strike benefits per worker in 1970). So in that respect, my hat is off to the folks who devised the plan for the 2023 Stand-Up strike. By striking selected plants, rather than whole companies, the UAW was able to largely preserve its Strike Fund and leave it ready for the next strike.
For years, the UAW, like most unions, has invested the money in their strike fund very conservatively with highly liquid investments—bonds. This way, the union stands ready to strike on a moment’s notice, and members will get the strike benefits promised to them.
Because the auto industry has union bargaining covering such large corporations, the UAW, more than most unions, should have a larger strike fund than most unions need. And the memory of 1970 is still imprinted in the culture of the UAW. So now the UAW does, indeed, have the largest strike fund of any US-based union. And it changed the way it structures the strike fund, as well as its investments.
Let’s recall from our previous Finances page (and Article 16 of the UAW Constitution)the discussion about dues and how they are allocated. And remember that the UAW operates on a modified cash basis. When the strike fund reaches $850 million, dues (for hourly, private sector workers) go from 2.5 hours to 2.0 hours. So there are a lot of members out there hoping to reach this trigger and get their dues reduced. But it isn’t really in the IEB’s interests, as the administrators of the institution, to see dues reduced. That will cause political pain when they need to be raised again, and at some level will marginally reduce income to the General Fund. The IEB can take up to $60 million from the Strike Fund to fund specific, target organizing campaigns, and other related adventures the IEB deems fit (Article 16, Section 11, subsection b). When the Strike Fund gets below $650 million, the 2.5 hours of dues automatically take effect again. Can you imagine the hassle of trying to get hundreds of locals to suddenly increase dues again? That would be both an administrative and political nightmare.
Let’s say there is a big strike, or series of strikes, that draws down the strike fund faster than dues replenishes it. When the strike fund gets below $500 million, the strike fund rebates to the locals and the International General Fund stop. There are a lot of locals that don’t have a lot of financial reserves, and there will be demands on the International to loan them money to continue. At the same time, the International would likely exert pressure trying to get some locals to merge. Again, a huge political and administrative nightmare. Safe to say, the IEB really doesn’t want this happen if it can possibly avoid it. As Vice President Chuck Browning said in the November 28, 2023 IEB meeting (page 125, Line 16):
“——you know, the rebates go away, right? The local unions get devastated, the International gets devastated.”
And I have in my notes from the same meeting, I think it was Chuck Browning who said it, it might have been the Chief Accountant Kim Geromin, but I didn’t attribute who said this quote in my notes so I can’t say for sure (page 124):
“If there’s something very large that happens in there that takes us even further below the 650, if we hit 550, we’re in deep doo-doo, as I tell my kids, because the rebates stop for us, and more importantly, for the local unions, and we’ve got a lot of locals that live off those rebates. So we want to avoid that at all costs.”
So, I think it safe to say that even though the strike fund may be somewhere around $800 million, it is unlikely to get below $500 million unless things are really, really bad. Which means, that bottom $500 might be able to be invested more aggressively, and a higher rate of return (on average over time) than bonds. This is because it is less likely that cash will be needed to fund strike benefits if a strike is dragging the strike fund too low, because the UAW will be avoiding large/long strikes that bring the strike fund below $500 million “at all costs” (see quote in above paragraph). And if that money is needed, there will likely be enough accumulated unrealized appreciation on investments to make up in the unlikely event that investments need to be sold at a loss to pay for strike benefits.
There is one other point that needs to be discussed before getting into the investments themselves: the Strike Trust. The Strike Trust is a trust that basically holds all of the UAW’s money. All the 11 funds that the Constitution mentions get pooled into the Strike Trust. But clearly the Strike and Defense Fund is the largest of the 11 funds, and by itself is far bigger than the other 10 funds combined. So the Strike Trust needs to have enough liquidity to pay the International’s bills, send rebates to locals, pay strike benefits, etc. As long as there are no big strikes then this liquidity can be managed fairly easily. But with a big strike, it needs to have enough liquidity to pay strike benefits. So the Strike Trust is managed by professional investors, Segal Advisors. In 2015, the target percentages for classes of investments were:
30% Equities [stocks] and Securities (21% domestic, 9% international)
53% Fixed income [bonds]
17% Alternative Investments [private equity]
In this structure, the alternative investments have a higher rate of return than fixed income or equities, but cannot be sold easily on the open market. But I suppose the thinking is that it is unlikely that money will be needed anyway, because it is so unlikely that a strike puts the strike fund below $500 anyway, because the rebates stop. And this way, the UAW gets a higher rate of return on that portion of the investments over time.
As the Stand-Up Strike in 2023 approached, the UAW had the equities all in Russell 3000 Index Funds. The Russell 3000 includes 3000 different stocks, and the index fund just buys, holds, and sells these stocks in the same ratio. This approach tends to outperform most money managers and at a much lower cost because there isn’t the need for the research team, etc., to manage the fund.
Of course we remember the UAW is on a modified cash basis rather than on the accrual method of accounting. This means that if the UAW buys $100 in Russell 3000 Equity Index Fund, and five years later, that investment is worth $130, the investment is still carried on the UAW’s books as $100. That is, until it is sold. Then the $100 is still in the Strike Trust, and $30 gets put wherever the IEB sees fit, most likely the General Fund. This is a sore spot politically with some members, who feel the unrealized gains should be on the books. That way, the Strike Fund will reach the $850 sooner and member dues be reduced. This is a political hot potato that nobody wants to touch. And this is probably one of the reasons (and there are several reasons, including that this is standard practice on a modified cash basis of accounting) why the Secretary-Treasurer historically does not regularly report this unrealized appreciation to members, or even to the IEB, because members who don’t understand how this all works will see it as being cheated by paying higher dues every month. The only place this is regularly reported is in International Trustee Reports, in the external auditor section, Note 4. Your Financial Secretary (or other local officer) should be able to download these from LUIS for you.
The next class of investment are bonds. Bonds are relatively safe investments and easily sold on the open market.
Over the last 15 years, according to Rich Ranallo of Segal Advisors (the investment manager of the Strike Trust), at the February 10, 2025 IEB meeting, the UAW has earned 6.5% return from the Strike Trust. According to him, prior to ten years ago, the UAW had a target return of 3%. But ten years ago, the Secretary-Treasurer [Dennis Williams? Gary Casteel?] wanted a higher return, about 5%-6%. And he told the investment manager the risk of a protracted strike was “fairly low”. So they moved some money from safer investments to riskier investments.
The latest information I have, is that the targets for investments are now (as of December 31, 2024):
5% US Equity
64% Fixed composite [bonds]
17% Alternatives [private equity]
14% Cash