April 23, 2009

Let Barack Put UAW in the Driver's Seat

Hatched by Dafydd

As part of the administration's plan to destroy Capitalism in order to save it, the feds have offered an extraordinary deal for Chrysler motors: They go into bankruptcy, driven there by unsustainable wages and benefits paid to members of the United Auto Workers union; but all those UAW-driven wages and benefits of employees and former employees are absolutely protected from any reduction by the bankruptcy court.

No, really:

The Treasury has an agreement in principle with the United Automobile Workers union, whose members’ pensions and retiree health care benefits would be protected as a condition of the bankruptcy filing, said [people with direct knowledge of the action], who asked for anonymity because they were not authorized to discuss the case.

Well, that certain makes sense (especially the anonymity part): I'm sure that after the old Chrysler was driven into the ground by risibly high payments to current and former workers, the new Chrysler will have no problem meeting those exact, same obligations. And why not? They're going to be heavily financed by the American and Canadian taxpayers.

No, really:

Under the most likely assumptions, Treasury will provide the financing that Chrysler needs to operate while under bankruptcy protection. The Canadian government is also expected to participate in backing the company.

The Globe and Mail of Toronto reported the Canadian government’s role on Thursday.

Last month, the Obama administration told Chrysler it would provide up to $6 billion in financing if Chrysler and Fiat could complete a deal by the end of this month. Fiat originally agreed to take 35 percent of Chrysler, but the stake was subsequently reduced to 20 percent. The administration said it would provide up to $6 billion in financing if the two companies agreed, on top of $4 billion in federal assistance that Chrysler has already received.

Oh, and those wicked creditors who viciously lent Chrysler money will finally get their comeuppance for such a dastardly deed:

The only major question that remains unresolved is what happens to Chrysler’s lenders, who hold $6.9 billion in company debt. The government’s most recent offer, presented Wednesday, would give the company’s lenders about 22 cents on the dollar, or $1.5 billion, and a 5 percent equity stake in a reorganized Chrysler.

However, the lenders chastised above do not include the UAW, which runs the Chrysler health-care trust that Chrysler Motors owes $10.6 billion; some creditors are more equal than others, and that debt will be paid in full: The auto-workers union will accept company stock in lieu of half the obligation, and the remainder will be guaranteed by the federal governments of the United States and Canada.

(Of course, the UAW will continue to administer that trust, since that is part of the benefits package that has been guaranteed -- in its entirety, it appears -- by the invisible foot of the Obama administration.)

Whew! Thank heavens the One We Have Been Waiting For has so quickly hit upon the most equitable and balanced solution to be applied to Chrysler, G.M. ("the terms of a Chrysler filing might offer a glimpse into the shape of G.M.’s own filing"), and indeed every huge corporation deemed too big to fail. Having resolved that thorny problem, the moving Obamacon moves on to more important tasks, including:

  • Cutting taxes for all Americans who pay no taxes (liberals and Obama cabinet members), while raising taxes on all Americans who do pay taxes (i.e., the rich, the GOP, and other Bush supporters);
  • Negotiating our surrender to al-Qaeda, after the disastrous defeat of George W. Bush's wars of aggression against humanity in Iraq, Afghanistan, Pakistan, and Minnesota;
  • Allying with Russia to protect it from further criminal attacks by Georgia, which rebellious province was egged on by George W. Bush, Dick Cheney, Blackwater, and Halliburton;
  • Apologizing to Iran for forcing it to house American criminals for 444 days in the late 70s, rightly jailed by the People's Republic of Mullahdom for spying on Iran during George H.W. Bush's tenure at the CIA;
  • Pleading with China, traditional financers of the United States, to once again begin sending us cash to nationalize more American industries, after George W. Bush's divisiveness caused the greatest country on Gaea's green globe to cut us off, cold duck;
  • Splitting Israel down the middle so that the West Bank and Gaza can be a "contiguous" Palestine -- which the Bush administration utterly failed to propose, despite world opinion;
  • And writing an entire book of reasons why everything bad that happens in the next eight years of the administration of Barack Obama -- already the greatest president in American history -- is in fact another horrific legacy of the failed administration of George W. Bush, the worst president of this or any other nation, in this or any other century, on this or any other planet.

Eight years: Long enough to change that pesky 22nd Amendment...

UPDATE (a few minutes later): Please read this related post, about the feds' unacknowledged conflict of interest -- they also own equity stakes in the very banks they are pressuring to renounce their claims on Chrysler in exchange for a warm, fuzzy feeling -- by Scott "Big Johnson" Trunk over at Power Line.

Hatched by Dafydd on this day, April 23, 2009, at the time of 2:19 PM

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The following hissed in response by: Geoman

Chrysler - one bit of advice

Declare bankruptcy. Now. Don't wait. Do it. That will ultimately be better for the company, and force Obama and the UAA to eat at least a bite of the crap sandwich they are currently trying to force down your throat.

The above hissed in response by: Geoman [TypeKey Profile Page] at April 23, 2009 4:02 PM

The following hissed in response by: Beldar

There might be such a "deal," but I'm not sure how or whether it would be enforced.

The federal government not infrequently takes the side of unions in bankruptcy, but it is not always successful. Bankruptcy laws provide different priority for different claimants, and employees -- either directly or through pension funds -- aren't at the top of that list.

Sometimes the government will try to side with unions to get them higher-priority claims. In the early 1990s, for example, when a bitter and violent strike by its drivers drove Greyhound Lines, Inc. into bankruptcy court, the NLRB supported the drivers' union's claims that Greyhound owed them over $200M as damages for alleged unfair labor practices; if the bankruptcy court had accepted that position, it would have made the union by far Greyhound's largest unsecured creditor, putting the union in a position to block any company-designed reorganization plan, and in all probability leading to a union-sponsored reorganization plan that would have busted the company up into regional components that were mostly owned by the union membership -- meaning no more national bus company. However, on Greyhound's motion, the bankruptcy court held expedited proceedings to determine -- through estimation -- the true value of the union's claims. After a two-day mini-trial, the bankruptcy judge ended up discounting the union's claims by about 85% -- down to $31.25M -- based on a finding that the union was unlikely to ultimately prevail on those claims. That left the union and the feds unable to block management's reorganization plan, which is why there still IS a national bus company today.

It's quite possible that the Obama administration could find a clever way to enforce such a pre-arranged side-deal, but I suspect it would need Congressional action to change the existing Bankruptcy Code, or else a set of judges willing to read it in ways contrary to its literal terms and the past precedent interpreting it. The traditional premise that bondholders and other creditors are, relative to other stakeholders, comparatively well protected in bankruptcy proceedings is the main reason why they've resisted rolling over already: If the law isn't changed or somehow avoided, they'd prefer even the scorched earth of a bankruptcy (with its enormous transaction costs) to the more thorough raping and pillaging they'd suffer at the hands of an out-of-bankruptcy "deal" with the unions and the Obama administration.

The above hissed in response by: Beldar [TypeKey Profile Page] at April 23, 2009 9:35 PM

The following hissed in response by: Beldar

I should add a couple of points, one by way of disclosure:

First: My take on the Greyhound precedent, in which the joint forces of the federal government and the union were soundly defeated, is doubtless colored by the fact that I was Greyhound's lead counsel in those expedited estimation proceedings and the two-day mini-trial.

Second: Precisely because the federal government sometimes loses when it has to play by the rules, I think it's entirely possible that the Obama Administration would indeed try to get Congress to change the Bankruptcy Code to create special rules -- more pro-union/pro-employee rules -- for either a Chrysler or GM bankruptcy. And the issues that are involved are sufficiently arcane, and sufficiently subject to being shrouded in pious rhetoric, that Congress would go along, pretty much on a party-line vote. That, of course, would be the single biggest pay-back from the Democratic Party to organized labor in American history. But I can easily imagine that actually happening.

The above hissed in response by: Beldar [TypeKey Profile Page] at April 23, 2009 9:45 PM

The following hissed in response by: LarryD

The bondholders should force Chrysler into bankruptcy immediately.

Though 22 cents on the dollar is better than what the Treasury was offering.

The above hissed in response by: LarryD [TypeKey Profile Page] at April 24, 2009 12:57 PM

The following hissed in response by: LarryD

The bondholders should force Chrysler into bankruptcy immediately.

The above hissed in response by: LarryD [TypeKey Profile Page] at April 24, 2009 1:02 PM

The following hissed in response by: scrapiron

Owned one non-Detroit made vehicle in my 68 years, will never buy another with the union label on it. Let them all die a slow painful death. No way anyone should feel sorry for todays union ahole's who lose their job.

The above hissed in response by: scrapiron [TypeKey Profile Page] at April 27, 2009 10:27 PM

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