The Detroit News reveals that page 60 of the Loan and Security Agreement between GM and the U.S. Treasury Department commits GM and Chrysler to a Catch-22. “They would be in default of federal short-term loans if the United Auto Workers [UAW] or another union engaged in a strike or work stoppage.” At the same time, the loan agreement requires GM and Chrysler to bring their labor costs in line with the transplants’ (by February 17 no less). So the UAW is carrying the football; they can nuke GM’s call on the public purse simply by striking. “I can’t see that a strike would serve any benefit right now,” analyst Aaron Bragman of IHS Global Insight told the News. “It sounds like maybe some Republican union-busting language got in there, which would not surprise me.” And it sounds to me like Aaron, and perhaps the Treasury Department, got it exactly backwards. Will the UAW strike GM? No, but they could. And when it comes to negotiations, potential power is as real as it gets.
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Wow – it’s a case of mutually assured destruction.
The whole default threat aspect of Bush’s bailout is just window dressing. In fact, the whole notion that these are “loans, not bailouts” is silly.
Say March comes and the Treasury declares GM and/or Chrysler in default. What next? Does the US government become the lead creditor on the creditors committee for an involuntary chapter 11 or 7 filing? Politically, does anyone think any administration wants to be the one to pull that trigger?
Maybe this will make them both finally realize that they have been playing MAD all along. Chicken hasn’t really been the game, no matter how hard they tried to play by those rules.
Gonna be fun to watch… Since everyone has expected a Ch. 11 filing for years, I’m guessing most people (including the UAW) have prepared for it.
So I’m thinking that everyone has the common goal to grab as much cash from Obama as possible and when the money runs out, they go Ch. 11.
I except the $1T spring bailout (vs. the next $1T in the fall of 2009) to update a few bits of this deal.
That would be a fitting demise to the UAW. Its just crazy enough to actually happen.
The union will fight to survive. PERIOD. On top of that NO ONE in the union executive thinks that they are even partly to blame for this mess, they made that very clear when they talked during the Senate hearings… So lets look at two options being offered to the UAW.
1) Sign a deal and offer concessions on par with NON-UNION organizations. And GM lives and you keep your basically nonunion job OR
2) Fight and GM dies and everyone losses their union job…
What most fail to realize is that to a union official, as crazy as it seems, those are EQUAL options.
The first option basically kills the union. And so does the second option. If you paint ANY union into a corner they will fight to the DEATH and do anything to kill the Company that is attempting to kill the Union.
Long story short… I don’t think this will go well.
WOW.
Beyond comprehension.
Nice job of reporting.
Wow. Wagoner should just toss them the keys to the plants on his way to Bermuda.
Wagoner should just toss them the keys to the plants on his way to Bermuda.
THAT would be an extremely interesting social experiment. Co-workers would soon sharpen up work practices like;
Ford Pays UAW Bosses to Get Haircuts, Bowl, Buy Booze
John Horner:
Does the US government become the lead creditor on the creditors committee for an involuntary chapter 11 or 7 filing? Politically, does anyone think any administration wants to be the one to pull that trigger?
You’d think Bush would have the guts to do so. GOPers typically are NOT Oprah-style emotional hand-wringers.
Heck, I think Dick Cheney’s famous, “So?”, comment was stand-up and honest.
At this point, a strike would likely cause more pain for the UAW in the form of bad press than it would cause GM (Chysler isn’t worth mentioning) in lost production. It isn’t like there is any shortage of inventory out there whereby customers would be demanding cars that couldn’t be produced because of the strike. It would be at least partially beneficial to GM in helping to draw down those lots full of cars waiting for that lucky buyer.
A greater loser would more likely be the auto suppliers who mostly provide their products on a just-in-time basis to the OEMs. Depending on the contracts they may get some support in the case of a strike, but they still don’t have the U.S. Treasury backing of GM – some would likely fail.
I completely disagree. This is the exact opposite of leverage. If GM really wanted to, they could unilaterally act against the union. The Union would normally strike. This time if they strike, GM goes under and everyone loses their jobs. I know you guys think GM can survive bankruptcy, but I think that’s the end of the game. GM may at the end be around, but it’ll be a shell (probably sold off to some Chinese company).
Obama has the power to void the MAD clause, which he will exercise when the UAW leans into him. Then they’ll strike and it’ll be the same shit all over again.
So if the UAW doesn’t strike GM and Chrysler are gonna pay this loan off?
“They would be in default of federal short-term loans if the United Auto Workers [UAW] or another union engaged in a strike or work stoppage.”
What other unions? Does that mean this counts if it’s a supplier strike like the American Axle one last year. Or if a local decides to strike without the national unions OK, say like a stamping plant with 100 union guys pissed off about the 2 tier wages. Didn’t that happen in a few places last year?
But this means for once the UAW has to show REAL concessions. They are now in the position where they have to give back for the future. If anything this is a get out clause for GM management, and they must know it too.
Imagine if RW etc had done all they can (yeah sounds strange but what if they have), they show it to congress and the public, but it came down to the UAW not doing their bit. Imagine the publicity that will go against Ron and co when its shown they brought themselves down. Public opinion is already against them. Are they really that stupid to strike and begin the final demise of the UAW.
This is the perfect opportunity for GM to go as far as possible at weakening the union, they won’t get this chance again without a full chapter 11, god i hope they take it for all our sakes here.
TTAC, take a deep breath, let the anti-GM venom wear off, and when your vision returns, see that this is actually something in GM’s favor. Too bad the bill didn’t have some fair-trade laws in it…
As much disrespect as I have for Gettelfinger, I don’t see him pulling an Arafat. However, if he does, I suspect the press would mostly balk at nailing him for it.
Unions are anything but sensible. The union I belong to has been offered basically a 10% cut in wages with a corresponding 10% cut in work hours and an additional 10% in layoffs to cut labor by ~20%. They are fighting this proposal and trying to enforce our contract, which expires at the end of this year anyway. The other option is 20% layoffs. Which option do you think the actual employees favor? Getting two extra days off each month in exchange for a 10% reduction in wages, but you actually get to keep your job. Or, losing your job? Even the people who don’t fall into that bottom 20% who would lose their jobs mostly are fine with a 10% reduction in wages as long as it comes with a corresponding reduction in hours worked. Does the union care what its members want though?
Yeah having re-read all this you need to re-do the title, “GM holds secret trump card”.