02/24/2012 03:40 pm ET Updated Apr 25, 2012

Will The UAW Defeat Romney?

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.