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Obama Pays Back the UAW

Chrysler is no more. Obama will give the UAW 55% ownership stake in the company as well as seats on the board. From Bloomberg:

The United Auto Workers union's retiree health-care fund will own 55 percent of Chrysler LLC in exchange for cutting in half the automaker's $10.6 billion cash obligation to the trust, people familiar with the matter said.

Under the terms of the contract, the trust would get representation on the company's board of directors, said two people briefed on the deal, who asked not to be named because the matter is private.

The tentative agreement was approved unanimously by UAW leaders yesterday and will be sent to union locals for ratification, one of the people said. Chrysler, operating with $4 billion in U.S. loans, faces an April 30 deadline to restructure its costs or risk losing government support.

"With employees effectively sharing the risks, this could play to the advantage of the ailing company," said Howard Wheeldon, a senior strategist at BGC Partners LP in London. The UAW role, if confirmed, may be the only "feasible way of moving forward," he added.

Of course the deal was approved unanimously. However, in order for this deal to make the UAW any money, consumers will have to purchase Chrysler vehicles in large numbers, and I wonder if Americans will be willing to do so knowing that the UAW is being so richly rewarded for virtually killing the company to begin with.

Now we know what a GM deal might look like. If it also agrees to give the UAW a huge stake in that company in exchange for cuts in contracts, then that would be one awfully large payback from an American president to a constituency group. But this was what it was all about to begin with. Take over private companies and hand them over to Democratic constituency groups.

I remember Rush Limbaugh discussing this in the context of GM and it turns out he was spot on:

Now, folks, I made another prediction. Maybe Cookie will be able to find this in the show archives. But I made another prediction last year. I said, "I wouldn't be surprised if the end result of this is to end up making the United Auto Workers the essential owner of General Motors." Remember when I said that, Snerdley? That's the ultimate game, return the nation's wealth to its rightful, quote, unquote, rightful owners. So we'll see. This is just step one.

Obama told us he wanted to spread the wealth and he is coming through on his word. An American company has been seized and redistributed to the union. I never thought I'd see such a thing in America.


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Comments (33)

Dear Leader should enjoy, h... (Below threshold)
Joe:

Dear Leader should enjoy, he will only be able to destroy America for 4 years...

So if Chrysler or GM tank, ... (Below threshold)
GarandFan:

So if Chrysler or GM tank, what's the UAW going to do? Ask the feds for a 'bailout'?

The fact that a business ha... (Below threshold)
Dave W:

The fact that a business has to be viable seems to be lost in all the deal making here.

Any union and anyone who ha... (Below threshold)
WorldCitizen:

Any union and anyone who has every agreed to work for a union are trying to destroy capitalism in America. How can you trust anyone who subjugated their personal autonomy and negotiating power with a company to a slimy group of power hungry communists masquerading as union bosses?

All union members or former union members should be barred from political office. They can't be trusted.

in your collective rush to ... (Below threshold)

in your collective rush to condemn Obama, you're blaming him for things he didn't do (like personally order buzzing NYC yesterday) or for things that would have - and should have - happened even if someone else was President.

Of course, the UAW should end up with a huge chunk of GM and Chrysler. The union is the biggest single creditor and creditors typically end up with equity in bankrupt companies. And the only way outside of bankruptcy for GM to shed the UAW contract is with the UAW's permission... and as GM management didn't want to file bankruptcy, the UAW was in the catbird's seat as far as extracting equity in return for its concessions. So where is the payback?

As for whether consumers will buy GM and Chrysler cars, it has more to do with the quality and price of the cars (and any tax breaks they might get) and less to do whether consumers have a bias against buying cars from GM and Chrysler. Heck, we buy toys and clothes made in sweatshops overseas, why think that we're going to draw some moral line over the cars we buy?

I won't buy a union/governm... (Below threshold)
exceller:

I won't buy a union/government car, GM or Chrysler. i will pay more if necessary and buy foreign also, but NEVER will i reward this action with my dollars.

I think a lot of people who... (Below threshold)
Mac Lorry:

I think a lot of people who only buy domestic cars and trucks will be buying Fords. If so, maybe the U.S. can retain at least one domestic car company.

Propping up zombie companie... (Below threshold)
sam:

Propping up zombie companies such as GM and Chrysler is hurting Ford, not letting it grow and capture market share.

It won't matter if American... (Below threshold)
jvc:

It won't matter if Americans buy Chrysler or GM cars. With the gov't essentially owning both companies, they (the Obama gov't) will buy the cars, with taxpayer money, and hand them out to deserving people. This will be the 'mule' half of the '40 acres and a mule' reparations promise O made during the campaign.

Its odd that Fiat would agr... (Below threshold)
jpm100:

Its odd that Fiat would agree to such a deal. Pending more details I'd venture a guess that most of the Union's portion is essentially some kind of stock derivative and they they don't have a controlling interest of voting stock.

This was the avoid bankruptcy option for Chrysler. I don't think GM has closed off either option.

So, I guess we will see if ... (Below threshold)
DaveD:

So, I guess we will see if the unions can run a car company? What are they going to do if things don't go their way, hold a strike against themselves? They had vaudeville for entertainment during the economic hardship of the 30s. In today's economic trying times we have the Obama administration.

I'll bet both union/governm... (Below threshold)
Gmac:

I'll bet both union/government owned companies are bankrupt inside 2 years when they start trying to market 'environmentally friendly' cars that no one is going to buy even if they are the only thing on the market. That and even more incompetent leadership, if that's even possible.

So, the bond holders are on... (Below threshold)
RicardoVerde:

So, the bond holders are on the hook for nearly twice what the Feds have put up, but the gubmint gets about five times the shares? It's easy to be a lightworker when you use someone else's money.

Not the Chrysler deal, btw,... (Below threshold)
RicardoVerde:

Not the Chrysler deal, btw, but what I saw proposed for GM.

jpm100, According ... (Below threshold)

jpm100,

According to this article, here is how the GM deal will go down:

The GM bondholders own $27 billion and they're getting 10 percent of the common stock in an expected exchange. And the UAW owns $10 billion of the bonds and they're getting 40 percent of the stock.

"The workers control the means of production." Hmmm ... it seems I've heard that before, but I can't quite put my finger on the source...

Somewhere, Bill Ayers must be smiling. Obama's mentors tutored him in the superiority of a worker's state, centrally planned economies, and the redistribution of wealth. Now that he is president, he is turning what were once only the impossible dreams of starry-eyed Communist radicals into today's reality.

Of course, the UAW shoul... (Below threshold)
iwogisdead:

Of course, the UAW should end up with a huge chunk of GM and Chrysler. The union is the biggest single creditor and creditors typically end up with equity in bankrupt companies.
So, let the union force the company into bankruptcy and let the bankruptcy court sell the assets and distribute the money to the creditors. That's what the free market and bankruptcy law dictates.
Instead, we have government money (our money) going in to turn the corporation into some odd combination of nationalization and worker-owned business. Every government dollar is a payoff to the union. Don't you get that?
What happens when the "New GM" can't meet payroll next month? Well, there will be a capital call to the stockholders. The stockholders are us. In other words, more government money into this money pit. More payoff to the union.
Socialism does not work. Every time it's been tried, it has failed.
Here's a great idea!!! Let's try it again!!!

Oh boy - I can't wait to bu... (Below threshold)
Tim:

Oh boy - I can't wait to buy the first Chevy Trabant.

That's what the free mar... (Below threshold)

That's what the free market and bankruptcy law dictates.
Unless the parties agree ahead of time to work out a deal, which is what seems to have happened.
Every government dollar is a payoff to the union. Don't you get that?
I get it, I don't like the bailout dollars but that is a somewhat separate issue of the UAW ending up with equity. And on technical point, shareholders can't be forced to kick in more money; if companies need funds, they dilute existing equity by issuing new equity, not by getting money from existing shareholders (it is different in partnerships).

And a big key is how long we (the government) hold our equity. My dislike would be somewhat tempered if we put it up for sale right away. Of course, who would buy it given the lousy fundamentals?

jpm100,A... (Below threshold)
jpm100:

jpm100,

According to this article, here is how the GM deal will go down...

That is the avoid bankruptcy plan. In some ways its more sour than Chrysler's plan. A non-bankruptcy solution is less likely to be successful.

OK, Let's have some fun nam... (Below threshold)
Diane:

OK, Let's have some fun naming car designs for GM, like...

...instead of the GMC "Jimmy" we now have "THE HOFFA" (in honor of Teamsters UNION Jimmy Hoffa)
...The Chevrolet "Traverse" can now be called "THE TRAVESTY"
...to honor socialism, we could have a new design called "THE MARk"

What do you think?

Oops! The new design would... (Below threshold)
Diane:

Oops! The new design would be called THE MARX!

Finally!!! After all my pos... (Below threshold)
WorldCitizen:

Finally!!! After all my posts I get a positive rating! Whoo Hoo!! #4

Of course, my suggestion about barring union workers from political office would mean the commie loving Sarah Palin would have to go, but that's the breaks.

"We've gone through periods of our life here with paying out of pocket for health coverage until Todd and I both landed a couple of good union jobs."

http://www.politico.com/blogs/jonathanmartin/0908/Palin_credits_good_union_jobs_for_her_health_insurance.html

It should be noted that not... (Below threshold)

It should be noted that not all unions are like the UAW. Some members of other unions, like my husband, hold UAW members in complete contempt.

The problem is that the opinions of most unions do not come from the "rank and file" else they'd all be conservative.

I'll bet both unio... (Below threshold)
hcddbz:
I'll bet both union/government owned companies are bankrupt inside 2 years when they start trying to market 'environmentally friendly' cars that no one is going to buy even if they are the only thing on the market. That and even more incompetent leadership, if that's even possible

There is fatal flaw in your thinking. You assume that Americans will have free choice. Nope the one will ensure that through the new KGB aka IRS anyone not buying a Chrysler of GM Green Car will go bankrupt. He still has his World Poverty Bill and soon he will talk Gas to to 6-9 dollars, then he will attack Ford cars with a gas guzzler tax. The federal Government will mandate all purchase will be GM cars since the government owns a stake in it. Then UAW will negotiate the same for local and city governments. Then once Ford is boxed in enough the second wave will hit.
You will have one car company UAW motors.

Yes, hcddbz, and about that... (Below threshold)
Zelsdorf Ragshaft III:

Yes, hcddbz, and about that time American citizens, tired of the tyrany, take up arms and march on the Captial. Removing the scoundrels from the seat of power.

By then, Radshaft, there wi... (Below threshold)
epador:

By then, Radshaft, there will only be bare arms to bear. Good Luck. Hope we meet in the re-education camps.

This is the most bizarre pl... (Below threshold)
Eric:

This is the most bizarre plan I've ever heard of. The UAW will now have an ownership stake in two automakers. The conflicts of interest are incredible.

How do employment disputes get resolved? Who does the Union now represent? The employee or management? Isn't that a conflict of interest?

What does this mean for Ford and the other automakers that have UAW contracts? When Ford negotiates a UAW contract aren't they now negotiating with a competitor? Isn't that a conflict of interest?

That's the ultimat... (Below threshold)
_Mike_:
That's the ultimate game, return the nation's wealth to its rightful, quote, unquote, rightful owners. So we'll see. This is just step one.

For another example of how well this works, see Robert Mugabe's work in Zimbabwe.

War.I'm calling it... (Below threshold)
ttx:

War.

I'm calling it now; within my lifetime. This is not sustainable.

War.I'm cal... (Below threshold)
hyperbolist:

War.

I'm calling it now; within my lifetime. This is not sustainable.

Yes! Wingnut army! Wolverines!

If a dislike for the economic future of your country causes you to devolve to the sort of person who tries to solve his/her problems with firearms, then you need to grow up. I bet you haven't even thought about how difficult it will be to support the troops if the government orders them to crush any childishly violent anti-tax revolution that you so desperately want to be part of.

The consolation for Chrysle... (Below threshold)
jpm100:

The consolation for Chrysler is that the UAW will need to sell off shares eventually to fund the VEBA. For GM, with so much government ownership, a UAW sell off won't loosen their control.

Imho, this is not an experiment in worker ownership. This is a deliberate slow death. Obama knows it. The Democrats know it but can't say it out loud or oppose Obama publicly. Republicans know it but can't do anything and left them to Obama's whims in the first place.

"There is fatal flaw in you... (Below threshold)
John S:

"There is fatal flaw in your thinking. You assume that Americans will have free choice."

Another 15 months and many Americans will be really pissed. You'd be surprised how much voting out 300 incumbents in 2010 could change the complexion of Washington. That's change I could get behind.

Never buy American Cars aga... (Below threshold)
Jack Smith:

Never buy American Cars again.

GM owns 20 billion to UAW ( for what ) ?. Healthcare of retired workers ?.

How many americans get Healthcare in retirements.

So if they want to give 40 % of the company for this and 10 % to bond Holders who gave GM 27 billions . Doesn't make sense except the politics of Washington.

Give your protest. Dont buy GM or Chrysler Cars again.




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