Grand Theft UAW: Chrysler & GM Bankruptcies
When President-elect Barack Obama met with then President George W. Bush at the White House last November they spoke of providing short term liquidity for the beleaguered auto industry. Conveying the hopes of Obama, John Podesta reported
“He’s hopeful the government will look for additional authority to deal with the short-term liquidity crisis … and get onto a program and a plan that would ensure that the auto industry can … continue as … independent companies …”
Could it be possible their examination of the problem or their foresight could be so superficial that they didn’t see the additional billions of tax payer dollars and eventual bankruptcy of Chrysler and GM little more than six months latter?
Chrysler was given a $4 billion loan while it developed a recovery plan which would subsequently be forgiven by generous tax payers. After the dust settled they would end up with 8 per cent of the restructured company. During negotiations we were continuously reminded of the sacrifices UAW members were enduring to make a deal work. In a normal bankruptcy their pensions would have taken a subordinate position to bond holders. With scant equity left in the deal their interests would have been wiped out. In the end, however, the Obama Treasury would see to it they ended up with a 55 percent equity in the deal in the new company in addition to a $4.6 billion promissory not to be paid over 15 years. Italy’s Fiat will receive a 20 percent stake and eventually take over management of the enterprise if it can wrench control from the Government.
While we won’t know exactly what the GM deal will look like until next week the sheer size of the company and the fact that the Government has already injected some $20 billion makes it an even grimmer picture for tax payers who, more likely than not, will be providing more money for the bottomless pit that will be dominated by Government oversight. As has been stated with the Chrysler deal, the Government intends to encourage more fuel efficient cars. We can be sure this will co-inside with higher energy prices that are sure to come with the Government’s green energy scheme that includes ignoring calls to develop domestic petroleum reserves.