As Michiganders get bombarded with political ads and stump speeches in advance of next week's Republican primary, GOP hopeful Mitt Romney has begun re-emphasizing his dislike of the United Auto Workers, and defending his opposition of the auto industry bailout by criticizing the White House for "giving the companies to the UAW."
On the face of Romney's rhetoric, he has a defensible position. But words matter, and he's hardly telling the whole story.
It is true that the Voluntary Employee Beneficiary Association (VEBA), otherwise known as the UAW healthcare trust, was given 17.5 percent of the equity in GM, and 46.7 percent of Chrysler in the bankruptcy campaign in exchange for the money owed the union for healthcare pay-outs for current and retired union members.
While the VEBA's Chrysler holdings are considerable, it's hard to argue that the union was "given" GM with a 17.5 percent stake.
Romney is also correct that GM and Chrysler were given several billions of dollars in government aid to stay afloat in late 2008 and early 2009, before the government's structured bankruptcy reorganization kicked in. Those billions given to the companies before the bankruptcy don't have to be paid back. And that is, understandably, a hard pill to swallow for many still struggling with their small businesses and retirement accounts.
Those billions were needed to keep the companies operating. But it is also true that months were lost before the bankruptcy proceedings could take place while Congress dithered and argued over the bailout issue and where the funding for a reorganization would come from. Republican senators especially fought the government-assisted plan tooth-and-nail. President Obama and the U.S. Treasury rightly tried to involve the Congress in the outcome, but they were resolute from the beginning that the auto companies would not fall to the auctioneer's gavels in an out-of-control bankruptcy proceeding. In the end, the bailout was funded through the Troubled Asset Relief Program funds previously approved by the Congress for bailing out banks and financial institutions.
Romney also says that bondholders got worse treatment than the UAW. Some certainly did.
In the agreement with bondholders before the bankruptcy, a majority of those holding $27 billion in GM bonds agreed to swap their debt for an equity stake in the company. Most of these bondholders were investment firms that had bought GM bonds for much less than their face value. Some bondholders, though, were individuals who bought GM bonds as part of their retirement portfolios. Those investors got hammered.
Nobody should expect those folks to vote for President Obama this November. But presidents often have to make decisions that are best for the many, even if the few get hurt in the process. And preserving General Motors and Chrysler (even with the latter now under the control of Fiat) and supplier companies dependent on them making cars was deemed in the best interest of the many.
The average bondholder reportedly netted out in the bankruptcy deal, getting about two shares of stock for every $1,000 in bond value. Bonds are supposed to be different than stock equity. A bond is a debt, and the principle at work in the bailout debate was whether the White House task force was muscling legitimate debt-holders to take a worse deal than they would have gotten in a non-government assisted bankruptcy.
The problem with that argument, however, remains that there was no capital available from any other source in early 2009 than that coming from the U.S. government. No banks or investors were stepping forward. Had GM and Chrysler headed to bankruptcy court without restructuring capital, the judge would have been compelled to start ordering the liquidation of the assets to pay the debt-holders. It's arguable that bondholders would have gotten a better deal under those circumstances. But I doubt it, which is why the institutional bondholders agreed to the deal in the end.
But back to the union. There is no question the UAW demanded and received sweet perquisites over the years in the way of health care benefits, work rules, the jobs bank, etc. that made the auto companies less competitive against Asian and European rivals. But the White House Task Force in its treatment of the VEBA -- even if it was politically driven -- has plenty of political and moral cover in choosing to shelter health care obligations of workers and retirees over the financial interests of bond investors.
There is a strong anti-union sentiment among Republicans, and Romney, Gingrich and Santorum have to stick to that talking point. And it's a bet that may be worth making in Michigan and Ohio, which have both seen a deep decline in union membership over the last 10 years and an exodus of union retirees.
But Michigan has an open primary, which means anyone can vote Republican, and there are signs that union members will drive many voters to the polls next week to cast votes for Rick Santorum and Ron Paul.
Santorum is widely seen as a weaker candidate to take on Obama in November, and, while also anti-union, has a much more detailed plan to rebuild manufacturing jobs than Romney does. Santorum's hyper-conservative social positions on abortion, and even contraception, don't play well with working-class Michiganders, but defeating Romney in his native state seems to be a bigger priority for Democrats and rank-and-file union members.
The union may not be as weak as Romney has been banking on. And its leaders and members don't much like the former Massachusetts governor claiming his love for Michigan and the auto industry as he runs around the state bashing the deal that saved their companies and their jobs.
Grand Blvd. is a weekly column about cars from David Kiley. For more of his writing, and everything about cars, head over to AOL Autos.
So, when conservatives cry that the companies were given to the unions, in reality it was the trust fund for the union that was involved (with an independent board of directors) and the deal was for the union to pay its own HC pay outs for its members in exchange for equity in potentially worthless companies.
......................And conservatives are calling this a sweetheart deal?........................For decades going back to the 1950s autoworkers agreed to LOWER wages in exchange for secure pension and HC benefits in retirement........................Now that that time has come, suddenly that responsibility is dumped back onto the worker.
http://www.nytimes.com/2008/12/20/business/20auto.html?pagewanted=all
Looks like 1% accomplished by Bush, 995 accomplished by President Obama. :)
But here is a look at how my native Michiganders think:
http://www.alaskadispatch.com/article/how-auto-bailout-might-bail-out-obama-michigan-election-year
With that in mind, looks like whichever Repub wins the Primary in Michigan, he's going to lose it in November. :)
Uh, that is pretty much the story from sea to shining sea, all across our purple mountain majesties that the Repubs are fighting so hard to destroy.
Republicans can't STAND it when something goes right for working people
A bit more about that here:
http://www.huffingtonpost.com/social/TommyMcCarthy/will-the-uaw-defeat-romne_b_1300014_137278036.html
Republicans love a simple good guy v bad guy message.
Examples:
Wussy Jimmy Carter wanted you to turn down your thermostat and ride a bicycle to work in the snow.....and let Iran push us around.....
Manly and heroic Ronald Reagan ...on his 1st DAY...simply ORDERED the Iranians to "knock it off" and send the hostages home in time for their parade (which they did). Later...he personally kicked over the Berlin wall and told the USSR to go pound sand...(at which point it collapsed and disappeared)
Note that both statements are WILDLY inaccurate.
Which matters not one whit in terms of what people believe.
Well....live by the simplified narrative....die by the simplified narrative.
After allowing their cronies at the banks to crash the economy so they could forclose on everyone...The Republicans shipped almost a trillion dollars in unmarked bills over to the bankers (stacked on pallets, I think)....so they could continue to light their cigars with hundreds.
Their "leader" (ha!) Romney wanted Detroit extinct and sold off for scrap ...and for the first time EVER...people believed he actually meant something he had said...since he was in the business of gutting and selling off things.
President Obama DIDN'T agree
The rest is history
Regards
TM
The Obama Auto Team - a shadow organization behind the public Auto Task Force - wrote the GM bankruptcy plan. The plan was to blackmail the bankruptcy judge into approving an illegal sub rosa sale of GM assets belonging to secured creditors to a government created entity called New General Motors by threatening to withhold all money from GM and put them out of business.
Most of the secured creditors who agreed to this plan were TARP banks. The TARP banks had been attempting to repay their Bush loans and get out from under the thumb of the Obama administration for months and Obama did not allow them to do so until a few days after the GM bankruptcy went through. Quid pro quo?
Under the plan, Obama appointed 11 of the 13 GM board members, had the companies build unprofitable electric cars and threw thousands out of work redesigning their dealership network.
The bankruptcy plan not only gave away 17% of taxpayer owned equity in the New GM to the UAW, but also illegally used tens of billions in TARP money to pay other GM retiree benefits through this year.
This is only the beginning of Obama's illegal nationalizations of GM and Chrysler. I dedicated a chapter to this unprecedented policy in my book Never Allow A Crisis To Go To Waste.
http://www.amazon.com/Never-Allow-Crisis-Waste-ebook/dp/B006N0X5LM/ref=tmm_kin_title_0?ie=UTF8&m=AG56TWVU5XWC2&qid=1324334526&sr=1-1
Everybody knows that approximately 1.2 million jobs would have been lost had Obama not stepped in and bailed out the Auto Industry and taken them through structured bankruptcy.
http://www.hightowerlowdown.org/node/1859
Growing benefits, hourly wages and pension funds made the Detroit UAW worker cost prohibitive. Management may have been lax and greedy but let there be no doubt that non-UAW plants in OH and TN are far more cost effective.
It is just a matter of record that the debt-holders, (GM bondholders) offered to exchange all their debt for equity, and were refused. Consequently, the judge would not have been compelled to liquidate GM assets prematurely at all.
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSGbKv4baG_g&refer=canada
Also GM had an oversubscribed IPO in 2010, which indicates that potential investors would have been available after a temporary period in bankruptcy.
I refuted Mr Kiley's contention that asset liquidation would have been required to pay the debt holders by pointing out that the substantial debtholders OFFERED TO EXCHANGE THEIR DEBT FOR EQUITY. Consequently there would have little debt on GM's balance sheet anyhow.
As Mr Kiley wrote:
"President Obama and the U.S. Treasury ... were resolute from the beginning that the auto companies would not fall to the auctioneer's gavels in an out-of-control bankruptcy proceeding." And out of control was defined as the UAW debt entering a normal bankruptcy process, or being treated equally with the GM bondholders.
FIrst, remember that GM owed more money to bondholders than to the UAW.
http://docs.motorsliquidationdocket.com/pdflib/01_50026.pdf Page 6
shows
$20.5 billion in debt to the UAW, and
$27.1 billion in general bondholder debt.
Second, notice that almost half (9 of 20 billion) of the UAW debt was preserved, whereas all of the bondholders debt was converted to equity.
Third, notice that the UAW ended up with a larger equity position in new GM (17.5% to 10%) than the GM bondholders.
The new VEBA to be established by the United Auto Workers received:
17.5% of the equity in the new GM (87,500,000 shares)
$2.5 billion of Debt owed to New VEBA
$6.5 billion of cumulative perpetual preferred stock with a 9% dividend.
Warrants for 15 million more shares at 126.92 per share.
OLD GM, (substantially the other bondholders) received
10% of the equity in the new GM (50,000,000 shares)
Warrants for 90 million more shares at 30, and 55 per share.
http://www.sec.gov/Archives/edgar/data/40730/000119312509124311/d8k.htm
Because you see them as chattel....to be exploited..for maximum profit.
You see it as the natural order of things that the vast majority be obliged to support a tiny minority in luxury.....and be satisfied with whatever pittance the ruling class chooses to give them....(after colluding with one another and corrupting the political process to ensure that amount is as small as possible.)
Yours is the voice of predatory supply-side Republicanism....THE primary engine of the destruction of the industrial base...and the American middle class
You my friend...are a bannana Republican
Congratulations
tm