Stupid Unions, Getting Their Contractually Obligated Retirement Health Care
We have another meme about the Obama Administration's Chrysler deal - they gave the union the farm.
Labor unions usually dread bankruptcy, and for good reason. Their pay, benefits and pensions typically suffer significant cuts, as airline and steel workers can attest.
But for the United Automobile Workers union, Chrysler’s Chapter 11 case, which began in New York on Friday, could turn out to be — if the company survives and thrives — the Cadillac of bankruptcies.
The U.A.W., for example, has received upfront protection from the Treasury Department for its pension plan and the fund that will take over responsibility for retiree medical benefits.
Moreover, that fund, called the voluntary employee beneficiary association, or VEBA, will control 55 percent of the equity in the new Chrysler once it emerges from bankruptcy, and hold a seat on the Chrysler board.
That's because they made a deal with Chrysler beforehand, as did practically everyone but the vulture funds. So this is not a traditional bankruptcy. Emptywheel cuts up this nonsense:
Now to be fair, there is a germ of truth in this article: the poor little hedge funds purportedly being strong-armed by the union do hold debt that takes precedence over the VEBA (retiree health care) fund. In relative terms, a tiny bit of it. But that's their problem, not that the evil union stole their money, but that the larger secured debt-holders have a big enough share of the debt to be able to make a deal without them; as masaccio explains, it's called cramdown, and it's not unusual. The key to Obama's deal is not any allegiance to the union--tens of thousands of jobs are going to be lost in this deal even in the best scenario, and current workers have already made huge sacrifices (see this article for a description of what the Chrysler deal really means for the union members themselves)--but instead due to his leverage over the big banks--JP Morgan Chase and Citi--that have been sucking at the federal teat for the last year, and to those banks' interest in getting the most money out of their investment in Chrysler. I guess those poor little hedge funds should have found stronger big players to associate with, because JP Morgan Chase and Citi's interests are not in the same place as the hedge funds (or weren't after Obama's team started negotiating in earnest). Furthermore, the shills for these poor little hedge funds unions pretend that, without the government intervention they decry, there would be anything left for them to take.
If you believe the unions unfairly got a better deal than those poor hedge funds, you believe that debtholders should be able to take down the economy for their own pleasure and reward. Maybe the bondholder community should take the message before the same thing happens to them on GM as well.