At Chrysler:
The agreement with the union essentially relieves Chrysler of a portion of the $10 billion it owes to the union’s retiree health fund. In exchange for giving up its claims to some of that $10 billion, the union is getting the significant equity stake in the company.
Gary Chaison, professor of industrial relations at Clark University in Worcester, Mass., said that if the union winds up with a majority stake in its employer, that “puts the UAW in a strange position.”
“If it takes company stock as a part owner in the company, it would be bargaining against itself,” he said. “It can never act as adversarial in that relationship. Also it’s in a position that to make the company more stable, it has to reduce health-care benefits of its own retirees.”
“A strange position.” No kidding.
What I don’t understand is why Fiat would want a 35% stake in a company that is owned by the UAW.
[Update a few minutes later]
It seems to me that shareholders of GM, Chrysler, Bank of America and many other companies that have been screwed over by the government have massive grounds for lawsuits. The tricky part, of course, and particularly with this particular government, is getting permission from it to sue it.
Employee owned companies (United Airlines) are not all that unique. I don’t remember any truly excelling however.
It seems to me that shareholders of GM, Chrysler, Bank of America and many other companies that have been screwed over by the government have massive grounds for lawsuits.
How so? Without the government those companies would be bankrupt, and the shareholders would have nothing.
Ah, but the BOND holders would have had more.
Nonetheless, this is a convenient way to
1. Pay off union bosses.
2. Suck at the public teat forever.
This is not the change I was hoping for!
Truth be told, I wasn’t hoping for change in the first place.
This isn’t an employee-owned company — it’s a union-owned company.
Without the government those companies would be bankrupt, and the shareholders would have nothing.
Shareholders don’t always get “nothing” in a bankruptcy — it depends on the nature of the restructuring. And why would B of A have gone bankrupt without the government?
Now I know how frustrated Germans of a certain age must feel when confronted with rebellious youth in Nazi drag. “What the heck did we forget to tell you about Nazis? Do you not realize how insane it is to march down this path?”
Now we are led by an historically ignorant “community organizer” who is purposefully dissolving the infrastructure of capitalism. What did his teachers at Columbia and Harvard (or, for that matter, Punahou) forget to tell him about Communism?
BBB
Shareholders don’t always get “nothing” in a bankruptcy — it depends on the nature of the restructuring.
In recent months the stock prices of GM, Chrysler and BofA have closely tracked the likelihood of government assistance. The market clearly thinks that those shares would be near worthless without the the government stepping in. For the shareholders to sue the government for propping up the value of their investments would be perverse.
I am surprised that the unions are willing to take half of GM in exchange for a $20B pension obligation; they must think they’ll never see that $20B in any case.
“Do you not realize how insane it is to march down this path?”
I’m as much of a Punahou-basher as anyone (I voted for Obama despite his Buff-and-Blue colors), but come on. The Bolsheviks and Nazis did not nationalize failing companies in order to preserve jobs and the stability of the economy; they nationalized profitable key industries in order to consolidate power. I’ll get worried when Obama nationalizes GE, Comcast, Microsoft, Merck and Fedex. I’m not holding my breath.
p.s. I happen to know that a Punahou history teacher’s brother dated Angela Davis. It’s the link that explains everything! Except for the fact that the teacher started at Punahou years after Obama graduated….
Bank creditors approved the deal but hedge fund creditors did not? I wonder if Treasury is using TARP-fueled threats to get its way again…
Ah well, this isn’t the worst that would have happened. At least now the UAW “owns” the problem. They can’t blame management any more, which was their stick to beat the battle drums with for the last 50 years.
What Fiat did to deserve a 35% stake in Chrysler eludes me however.
Everything that Obama has done since he was elected has had the effect of consolidating power in the White House. I’ll stop being concerned when it’s all given back.
Well, the automobile industry was profitable until the Democratic Congress passed new CAFE standards that, many on the right said at the time would, bankrupt the car companies. Once passed, 2008 and 2009 models stopped selling. Now as 2010 models start to come out, there is a chance, but before that chance is fully realized, Obama acted quickly.
Alas, Ford resisted the fatal error, and also has the first 2010 model with real promise.
Detroit was okay until gas hit 5 bucks and HELOCs died.
The Bolsheviks and Nazis did not nationalize failing companies in order to preserve jobs and the stability of the economy; they nationalized profitable key industries in order to consolidate power.
OTOH, that’s the sort of rationalizations that the Bolsheviks and Nazis used for consolidating power. Having said that, while this is a power grab (no matter the motives), it’s not in the tradition of old-fashioned totalitarian power grabs. As I see it, the leadership comes from all over the Democrat party and isn’t some elite cadre. If Obama wanted to take over, Hitler-style, he’d have to remove from power all these people (Biden, Clinton, Gates, etc).
Off topic, Karl, but what do you plan to do with martiansunset.com?
Everything that Obama has done since he was elected has had the effect of consolidating power in the White House. I’ll stop being concerned when it’s all given back.
Does he also have to give back the power Bush accumulated?
So, the UAW becomes what they always claimed GM’s owners and management wanted: a company union. How long before the Teamsters or Machinists move in to organize Government Motors workers into a company-independent union?
Off topic, Karl, but what do you plan to do with martiansunset.com?
That pretty little thing is the property of my brother who along with his beautiful wife are space buffs as well. I might be able to weasel some blogging space (with suitable compensation to my brother), but I have no serious plans as of yet.
“What I don’t understand is why Fiat would want a 35% stake in a company that is owned by the UAW.”
Why not? They’re getting it for free. If the company makes money, they win. If the company loses money… no skin off their backs.
Why not? They’re getting it for free. If the company makes money, they win. If the company loses money… no skin off their backs.
It seems odd for a foreign company to get a free ride like that. They probably coughed up significant money to get that share. It’s also odd that I can’t find details on why Fiat has a share. Does anyone know any details of this?