Bailout Watch 392: The UAW Walks
If you recall, President Bush gave GM some money ($9.4b) and told them to come back later for more ($4b). The second tranche (as gourmands would say) depending on sorting out the United Auto Workers (UAW), convincing bondholders to swap debt for equity and rationalizing their brand portfolio. Anybody familiar with the UAW, rapacious capitalists (are there any other kind?) and General Motors knew that the chances of ANY of that happening were somewhere between none and the situation going in reverse. And so it hasn’t come to pass. After we learned that GM bondholders aren’t playing ball, Automotive News reports that the UAW has walked away from the ballpark. It seems the union isn’t happy with GM’s insistence that the union accept stock in lieu of cash for the GM-funded Mother of All Health Care Funds (a.k.a. VEBA). Did I say GM-funded? We’re on the hook now. Anyway, why would the UAW step up to the plate? The union would have to accept the idea that GM has a future when they, of all people, know it doesn’t.
The UAW is owed some $20 billion by GM, money pledged to a healthcare trust fund for retirees. It faces demands from the company that it surrender a claim on half of that amount in exchange for stock in a recapitalized GM.
But the union has balked at saddling retired workers with additional risk. GM’s bondholders, who are being asked to write off some $18 billion in debt in exchange for GM stock, have also held out for better terms, people briefed on the talks have said.
So now we’re left with GM’s “secret” admission that Congress faces a stark choice: continue to prop-up a failed enterprise with taxpayer money or throw GM into bankruptcy. Who knew?
As strange as this sounds, I bet they’ll give GM and Chrysler the money. It’s too early in the Obama Administration to piss on illusory rainbows, and there are plenty of people who remain in denial about the parlous state of the Big 2.8 and yes, the U.S. economy.
When the situation doesn’t get any better heading into winter of ’09, when the mood turns from hopeful to resigned, THEN Congress will pull the plug, as part of their new “get tough” gestalt.
More by Robert Farago
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ruckover, See paragraph 3 of my comment. In your area illegal immigration is not the cause. In the southern and border states (I live in one) it is very much a factor. I would suspect that a majority or significant minority of those poor women in Milwaukee are having out of wedlock births. If we could impress on our kids to stay in school and not have babies until they are married we could drastically cut down on infant mortality. I guess that smacks too much of morality to some.
Windswords says that the UAW will never accept universal care. False. Ron Gettelfinger has come out publicly in favor of a single-payor healthcare system. Rick Wagoner hasn't come right out and stated that he favors national health insurance, but he's hinted at it. As to rationing: every healthcare system has rationing. Reason: you spend none of your money on healthcare, you live for while then you die, whereas if you spend all of your money on healthcare, you live for awhile, then you die. The hard part is coming up with a balance, figuring how much to spend on healthcare and how much for everything else. With national health insurance, healthcare spending is a public policy choice not a matter of individual ability to pay. If you don't like the lines that they have in Canada, spend more money than the Canadians, and you won't have to wait as long. The US can spend a lot more money than Canada on its national health insurance and still be spending less than what it does right now.