The UAW, both foreign and domestic

Bob King, President of the United Auto Workers, has announced a new strategy to increase members. On the “foreign” side he has decided that it is neigh onto time that Americans in this country making Nissans, or Hondas or Mercedes join the union.  Never mind that all attempts to unionize these workers in the past have failed (mostly because pay at these plants is on par with those of unionized plants), to Mr. King it will now be full steam ahead.

Early this year he sent a set of “rules” to each foreign manufacturer, and, if the company didn’t agree,

[t]he UAW, he said, would hold demonstrations at the corporate headquarters of these companies outside the U.S. as well as at their U.S. plants. In addition, it would picket their dealerships in the U.S. and abroad, and sports events globally that are sponsored by the car companies.

When that demand basically fell on deaf ears, Mr. King is now huddling with the UAW leadership to decide which foreign manufacturer should be the  “target” of his protests.  And, yes, it’s ok for the UAW to use that word because, well, they are a union.

So, it matters not to Mr. King that your spouse (who wouldn’t be unionized in any event), but happens to sell cars, for example, at your local Honda dealership will lose much needed income during these protests. It’s all about the union.

UAW President Bob King said he thought a target would have already emerged by now… 

We’ll keep you posted on that emerging target.

Moving on to the domestic front, it seems that US auto manufacturers have actually turned a profit this past fiscal year.  And, the big three’s union contracts expire this year. To that, Mr King says,

Where we’ve given concessions, we’re going to try to get as many of those back as we possibly can.
Would those be the same concessions that kept Ford afloat, made it somewhat easier for the American public to swallow the GM/Chrysler government bailouts, and, enabled those companies to actually turn a profit?

Here’s an idea, Mr. King…any profits made by GM and Chrysler must first be used to pay back the American taxpayer in full.  Then you can claw back whatever concessions you want.

UAW bans “foreign” cars from union property

It’s actually been a long-standing policy for many years, but United Auto Workers leadership have confirmed they will continue to enforce the policy and probably be even more aggressive. This is pure marketing genius I tell you, especially for an organization with a serious image problem.

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Another UAW bailout – $10 billion in reimbursements guaranteed

Coming on the heels of the auto makers “hinting” that they will not be able to repay the TARP bailout money they received, comes yet another union grab of taxpayer money. But, this time it’s only $10 billion dollars that we will never see again.

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Chrysler’s Creditors Cave

Last Friday, the small group of Chrysler’s secured creditors, who had thus far refused to buckle under to the pressure, decided to throw in the towel and withdraw their legal protest to the Obama administration’s plan to resuscitate the failed auto company.  In a move more symbolic than meaningful, the group has decided that although it will not support the President’s plan, it won’t raise any further legal objections.

Thomas Luria, lead counsel for the “dissident” creditors, put it this way:

Being such a small group trying to fight the force of the government made [the funds] very uncomfortable.  In the end, they just concluded that the political cost to their institutions was too high to bear.

The group became “small” months ago, and, it should come as no surprise why it did.

The White House’s success at dividing and conquering the creditors began even before the April 30 bankruptcy filing, when it persuaded four large banks acting as Chrysler’s top lenders to accept the deal. The White House used as a cudgel the more than $100 billion in bailout funding given to the banks since last fall, including JP Morgan, Citigroup, Goldman Sachs and Morgan Stanley.

So, in the end, Chicago style political muscle trumps both fairness and the law.

Going forward then, Chrysler will be sold to Fiat, although, given the circumstances, “sold” is a term only this administration could use with a straight face.  In reality, Fiat will be given up to a 35% interest in Chrysler in exchange for Fiat’s “automotive expertise”.  (That, too, is hard to say with a straight face.)  And, the UAW will own 55% of the new company.  The problem, of course, is when this new Chrysler emerges from bankruptcy it will find the same world as existed before bankruptcy.  Labor contracts will still make Chrysler vehicles uncompetitive with foreign manufacturers, folks that didn’t like Chrysler products before still won’t like them, and the plan to build “little green” cars will still be met with the same public disdain as it always has.

So, as taxpayers, brace yourself for a very long “ride” of government subsidy after government subsidy until the majority of some future Congress puts a stop to the madness.

The Looting of “General” Motors

Jim spoke on Thursday morning about the “deal” being offered to the bondholders of General Motors which, if accepted by them, will presumably keep GM out of bankruptcy. I say presumably because this “restructuring” has all of the earmarks of failure that are found in the Chrysler plan, but without the help of Fiat.  However, I digress.

On the chance you missed it, there was a wonderful opinion in the April 30, 2009 Wall Street Journal aptly titled, “Gettelfinger Motors“.  It is definitely worth the time it will take you to read it.  Here’s how the “equitable” restructuring of GM would work.

There are three groups of GM creditors that, as a matter of law, would be on similar footing in the Bankruptcy Court… the federal government, the UAW’s retiree health-care benefit trust, and the bondholders.  The federal government is owed $16.2 billion, the UAW benefit trust is owed $20 billion, and the bondholders are owed $27.2 billion.  One would assume that if the plan was to swap debt for equity in the “new” GM, that the debt/equity swap would be done fairly and proportionately.  But, I’m guessing by now, you know that isn’t the plan.

The federal government would receive 50% of the stock of the “new” GM, and $8.1 billion in debt.  The UAW retiree health-care benefit trust would receive 40% of the stock, and $10 billion in cash to be paid over time, and the bondholders, who are owed the lion’s share, would receive 10% of the stock and, well, nothing else.

But, here’s the best part.

GM CEO Fritz Henderson says Treasury insisted that bondholders receive, at most, 10% of the company. “We went to the maximum and offered 10%,” Mr. Henderson said. Mr. Rattner’s office did not return our calls, so we can’t say why Mr. Rattner [Obama’s car czar]wanted private risk capital cut out of the ownership of the new GM, but no one has contradicted Mr. Henderson. (emphasis supplied)

So, let me see if I have this right. The entity that is owed the least amount of money out of the three, not only receives the most equity, but also gets to direct how the pie will be divided.  I’m guessing that Richard Wagoner, the former CEO of GM, would never have stood for this.  Thus, he was “fired” by the Obama Administration.

However, more problematic is President Obama’s insistence that it is the bondholders who are the greedy ones.  Is anyone else tiring of hearing our President say one thing only to find out that the facts are quite different?