Word: uaw
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Dates: during 2000-2009
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...Meanwhile, the work necessary for averting a GM bankruptcy remains undone. Although the automaker is reportedly making progress on negotiations with the United Auto Workers (UAW), open issues remain, and GM even got into a public spat with the UAW over importing cars from China and Mexico. The union is now demanding more assurances as to what cars GM plans to build in the U.S. in the future. (See portraits of autoworkers...
...admit to itself that the millions of manufacturing jobs with high hourly wages, lifetime benefits, and a pension will not be part of the economy in the future. That is true. The U.S. manufacturing base cannot be competitive if it keeps the legacy benefits that unions like the UAW negotiated for their members in the years that Walter Reuther ran the union...
...Much has been made of the fact that, as things are currently being planned by the Administration, the government will become the largest shareholder in GM and the UAW will be the largest shareholder in Chrysler. Why would taxpayers want to have a controlling interest in a large auto company along with the portfolio of investments that their elected officials have purchased for them at a number of big banks? The issue is a red herring. In the case of Chrysler and GM, federal money is going into the companies and has to be paid back if the restructuring...
Next, look at GM's offer. The unsecured bondholders are owed $27 billion by GM, and they are being asked to trade that IOU for a 10% equity stake. The UAW's VEBA trust, on the other hand, is trading in a $10.2 billion IOU and getting a 39% equity stake. If these were poker chips, you could say the croupier has arbitrarily decided to value bondholders' chips at 37 cents apiece and the UAW's VEBA chips at $3.90 each...
...might argue that given GM's troubled state, the market value of the bonds is not $27 billion but more like $3 billion. But if you accept that troubled-debtor logic, then it's only fair to apply the same logic to the money owed by Chrysler to the UAW's VEBA - so its chips should be marked down as well. (In fact, by law the VEBA's IOU is junior to the bondholders' IOU.) Thus, the VEBA's IOU should not translate into a 39% equity stake but a small sliver of that. (Read about Detroit's attempts...