A retiree healthcare deal astir in Detroit

For the Detroit automakers, the cost of retiree healthcare isn't the only problem, but it is a major one. The liability totals about $100 billion by some estimates, an amount more than double the stock-market value of the three firms.

Such a number is guesswork, because the future cost of healthcare and the longevity of retirees are uncertain. But the scale, coupled with uncertainty, weighs on the companies and their shareholders.

In announcing the deal to sell Chrysler on May 14, DaimlerChrysler chairman Dieter Zetsche breathed an audible sigh of relief in unloading this liability. It was "especially important," he said, that the retiree costs would be borne by the new Chrysler Corp., not shared with Daimler, which had managed Chrysler since a 1998 merger.

Now, tackling the liability will be crucial for the new owners, helping to determine whether their $7.4 billion investment to buy Chrysler succeeds or fails.

The finances and demographics at the Big Three are scary for workers and management alike.

Their pensions are generally well funded, but the healthcare is not, and the ranks of retirees already outnumber current workers.

Moreover, autoworkers stop young, based on a "30 and out" system in place since 1970, which allows full retirement benefits after 30 years on the job. Such bargaining victories by the UAW, starting in the years right after World War II, helped set a tone for an era in which factory jobs nationwide became tickets to middle class living and secure retirements.

Now UAW bargaining could again help set the tone, this time during an era when unions are struggling to maintain their place amid global competition and a less-friendly policy environment that took root in Washington since the 1980s.

"Corporations really do mimic what other corporations do," says Teresa Ghilarducci, a labor economist at Notre Dame University in Indiana, who serves as a trustee on a GM VEBA.

In that light, she says it's significant that the big three are not opting for bankruptcy as a route out of their current crisis.

The union workers of some airlines have lost their retiree health plans during bankruptcy proceedings (where those liabilities can be discarded).

For the automakers, bankruptcy is less of an option. Where consumers will buy a $400 plane ticket from a bankrupt company, a $25,000 car with years of use ahead is a different matter.

The Big Three also have a tradition of finding common ground, sometimes after hard battles, with the UAW.

Cerberus, the private equity buyer of Chrysler, is expected to push hard for concessions.

But it has made early overtures that its cost-cutting won't become an all-out war on union jobs and benefits.

"John Snow [the Cerberus chairman] is from Toledo. He probably has some credibility when he says he wants to work successfully with unions," says John Paul MacDuffie, a management expert at the University of Pennsylvania's Wharton School.

Mr. MacDuffie points to the success of Wilbur Ross, an investor who has revived battered American steel factories, as an example of how buyouts can involve both profitability and good labor relations.

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