Union wins, investors lose in bailouts

8:06 am May 27, 2009, by jwooten

One of the problems with the on-going negotiations involving the automobile companies, government and the union that helped destroy General Motors and Chrysler is that, when it’s all over, the union ends up in the driver’s seat.

The United Auto Workers, an extension of the Democratic Party, will wind up with a controlling stake in Chrysler. General Motors bankruptcy filing is imminent and expectations are that the UAW will wind up with as much as 20 percent of the surviving company in exchange for wiping out $10 billion of the $20 billion that GM owes the union’s health care trust. Bond-holders, meanwhile, are being asked to swap the $27 billion they’re owed for 10 percent of the company. The government would get 50 percent for wiping out half of the $19.4 billion GM has gotten in bail-out money. Shareholders would be left with 1 percent.

Bond-holders understandably balk, pushing GM to bankruptcy. In the future, investors should and will be extraordinarily leery of investing in struggling businesses in competitive industries. Government is, in effect, confiscating investors’ money and transferring it to the union and to government. In the case of Chrysler, it confiscated money from teachers and policemen in Indiana and transferred it to the UAW.

Lawyers for the Indiana pension funds argued in court Tuesday that their rights were being trampled by the federal government in the Chrysler bankruptcy. The pension funds paid about 43 cents on the dollar when they bought Chrysler’s senior secured debt last August. The government offered holders of $6.9 billion in senior secured debt 29 cents on the dollar, while giving creditors with a lesser claim — the UAW — bigger payouts. The UAW, which is at least equally responsible for the auto industry’s plight, will end up with a 55 percent ownership stake.

The federal judge in Manhattan on Tuesday rejected the pension funds’ effort to delay today’s bankruptcy court hearing on Chrysler’s proposed sale. Pension fund lawyers had argued that the federal government doesn’t have authority to provide Chrysler money for a sale, a point that the judge said could be argued after the bankruptcy court acts. Chrysler filed for bankruptcy on April 30 and a sale is expected to close by June 15.

120 comments Add your comment

Ray

May 27th, 2009
8:24 am

Those blasted workers! They ought be grateful we don’t count them as three-fifths of a person anymore!

Things always go south when people forget that some were born to serve!

Copyleft

May 27th, 2009
8:27 am

Jim, I realize this runs counter to everything the supply-siders chant at their weekly worship services, but…

Maybe the workers matter MORE than the investors do, hmmm? Maybe the idiotic supply-side, laissez-faire mentality is OVER because it was a proven failure. And maybe the new administration is focusing its attention where it belongs: on the working class, not the wealthy.

Rush Leader of the GOP

May 27th, 2009
8:46 am

Conservative radio host Rush Limbaugh blasted President Barack Obama on Tuesday for picking a “reverse racist” and “hack” in Judge Sonia Sotomayor for the Supreme Court.

“Here you have a racist — you might want to soften that, and you might want to say a reverse racist,” Limbaugh said of Sotomayor on his show, alluding to the New York federal appeals court judge’s past statement that a “wise Latina woman with the richness of her experience would more often than not reach a better conclusion than a white male who hasn’t lived that life.”

Liberals, “of course, say that minorities cannot be racists because they don’t have the power to implement their racism,” Limbaugh said according to a transcript on his website. “Well, those days are gone, because reverse racists certainly do have the power. … Obama is the greatest living example of a reverse racist, and now he’s appointed one.”

Asked about Sotomayor’s remark Tuesday, White House press secretary Robert Gibbs said that “if you look at the context of the longer speech that she makes, I think what she says is very much common sense in terms of different experiences, different people.”

Limbaugh used the line to accuse Sotomayor of being a “party hack,” though the radio host conceded that she will likely be confirmed.

“The odds that she could be stopped are long,” Limbaugh said, before turning fire on moderate Republicans who he thinks will be “completely useless” in opposing Obama’s pick.

“When the rubber hits the road, such as in this nomination, where are these moderate Republican groups on the nomination? Where are the moderate senators? Where is Colin Powell? Where is Tom Ridge?” Limbaugh asked.

“I’m the one doing the heavy lifting. Colin Powell panders to moderate Republicans,” he said. “If the moderates in the Republican Party offer no way to address this danger, then they are useless.”

Ga Values

May 27th, 2009
8:57 am

I am not pro union in fact I made my living buying & putting companies into bankrupcy. Your headline should read Workers, taxpayers, bondholders and stockholders lose, lawyers win. Our current bankrupcy law is a way that much of the cost, pension guarentees & unemployment , are shifted to the taxpayer to the benefit of the vulture investor. Personally I would like to see the law changed so that secured creditors are seperated by their investment value. For example a bond hlder that bought $1,000,000.00 face value for $1,000,000.00 should be treated differently than a vulture investor who bought the same face for only $1,000.00. This won’t happen but I can tell you that there are going to be fortunes made by Lawyers in this mess. I have seen estimates that the total GM legal cost will be over $100,000,000.00 most of it coming out of the taxpayer’s pocket.

Peter

May 27th, 2009
9:13 am

Jim where do you get off with this comment………”The United Auto Workers, an extension of the Democratic Party”………

Today you showed you are a HACK……..a sad old worn Out REPUBLICAN….just like your party of thieves, that ripped off the country for WAR ! Cost Plus contracts you never said a thing about.

HA HA HA……… HA HA HA………..as your party become less relevant, you cry more and more !

Too bad Bush didn’t force the auto makers to create better cars through tougher emissions, and how about the tax credit for buying a huge SUV ?…..but hey you would say let the markets work it out, and of course the Bush family oil business was MORE important than America………. Now you are CRYING like a baby !

HA HA HA…….. HA HA HA…….HACK !

Is America better after 8 years of BUSH ?………answer NO……..are the American People better off with Republican’s in the White House ?……. answer NO……..

Go cry to mama Jim !!!!!!!!

Davo

May 27th, 2009
9:14 am

I get it JW….your anti-union. That’s fine…however I’m not much concerned with your average Joe getting ahead in his union job whereas you think that it is the root of the problem. But hey; if you want to try to stir up votes for the GOP by turning whats left of the middle class on each other… more power to you. The sooner we throw the last shovel of dirt on the republican party the better. Get some Libertarians in office folks.

May 27th, 2009
9:19 am

Copyleft wrote-
“And maybe the new administration is focusing its attention where it belongs: on the working class, not the wealthy.”

The working class better hold on to their wallets since the fed is focusing on them.

Redneck Convert

May 27th, 2009
9:21 am

Well, it figures Free Innerprize would get the shaft. The poor guy with only a few million bucks loaned to the co. gets next to nothing, while the UnPatriotic Unions make out like bandits. These union thugs caused all the problems and now they’re going to own a big chunk of the co. Meanwhile, the guys that loaned all the money to keep the co. above water will probly have to buy a real small yacht or cut back in other ways. It just ain’t fair.

Have a good day everybody.

Churchill's MOM

May 27th, 2009
9:25 am

Your link from the home page is screwed up AGAIN..time to retire.