Steve Rattner was President Barack Hussein “kill list” Obama’ car czar. He is now an economic analyst at MSNBC. In a 2011 speech to the Detroit Economic Club, Rattner said, regarding the government bail-out of General Motors (GM) in particular and the auto industry in general, “We should have asked the United Auto Workers (UAW) to do a bit more. We did not ask any UAW member to take a cut in their pay.”
Preferential treatment afforded the UAW union from Obama accounts for the American taxpayers’ entire losses from the auto industry bailout. There are, according to James Sherk and Todd Zywicki, three primary reasons for this situation. They created an economic windfall for the UAW.
- GM owed $20.6 billion and Chrysler owed $8 billion to the UAW Voluntary Employee Beneficiary Association (VEBA), created in 2007 to assume responsibility for the UAW’s retiree health benefits. Both were unsecured claims. One principle of bankruptcy law is that creditors with similar claims priority receive equal treatment, yet Obama gave the unsecured VEBA claims higher priority than those of other unsecured creditors, such as suppliers and unsecured bondholders. VEBA got 17.5 percent of “new” GM common stock and $9 billion in preferred stock and debt obligations. Meanwhile, GM owed other unsecured creditors $29.9 billion, and they received 10 percent of “new” GM common stock, with an option to buy 15 percent more, and no preferred stock.
Chrysler creditors received none of the $7 billion owed to them. Normally the UAW would also have also received nothing, but it got almost half of Chrysler stock (worth about $4.6 billion) and a promissory note worth another $4.6 billion that is earning 9 percent interest.
- Obama insulated the UAW, at taxpayer expense, from most of the sacrifices that unions normally make in bankruptcy. Bankrupt companies are usually allowed to renegotiate union contracts, but Obama decided not to do this with GM. The UAW made only modest concessions for their members, and no new contract was negotiated.
- GM assumed (without any legal obligation) the $1 billion pension obligation of Delphi, GM’s bankrupt subsidiary. Delphi’s UAW retirees continued to receive pensions, but nonunion Delphi retirees and retirees in other unions got nothing.
Bottom line: Obama gave over $26 billion of taxpayer money to the UAW, sustaining UAW members’ compensation, and sparing them most of the sacrifices made in a typical bankruptcy. Obama did not bail out the auto industry, he bailed out the UAW.
In August 2012, Obama said:
“When the American auto industry was on the brink of collapse. I said, let’s bet on America’s workers. And we got management and workers to come together, making cars better than ever, and now GM is number one again and the American auto industry has come roaring back.”
GM, with less than a 20 percent share of the US market, has been selling cars at deep discount (spelled loss) in the US, and is amassing huge losses in Europe. It is making money in China, where it is outsourcing operations and jobs. About outsourcing jobs, where is Obama on this one? We haven’t heard a peep from him.
Is this what Obama calls “roaring back?”
And now we hear that GM may go bankrupt again. If Obama wins re-election in November, we could be facing a second GM (read UAW) bailout in the next four years. The GM bailout didn’t solve the underlying problems that are plaguing GM: cars that can’t compete, pension and union problems, a falling market share, and falling profits. Throwing more taxpayer money at GM will not solve these problems. Rewarding the UAW that helped cause the problem in the first place will sure buy Obama the UAW vote.
Here is one more reason t defeat Obama in November.
But that’s just my opinion.
Please visit RWNO, my personal web site.