TTAC Commentator 70 Chevelle SS454 raises some good points about rumors (perpetually perpetuated here) that the feds’ plan to combine Chrysler and GM into “American Leyland.” The clever member of our B&B wrote his analysis in response to John Horner’s comment, which addressed the UAW’s role should they parlay their (allegedly) forthcoming shares in Chrysler and GM into shares in the combination of the two.
100% mergers of competing companies are happening all the time, so I don’t think one entity having major ownership stakes in two competitors is going to run afoul of whatever is left of anti-trust enforcement.
70 Chevelle SS454‘s reply
No. That’s not how DOJ/FTC review of mergers goes. They look to see whether the resulting company would have power over price, or market power. There’s actually a formula that’s used to combine market shares and calculate the resulting company’s market power, called the Herfindahl-Hirschman Index (HHI). Anything with an HHI score above 1800 is considered “highly concentrated,” and is rarely approved.
A merger of GM (~20% market share) and Chrysler (~13% market share) would result in an HHI of about 5200. There is no way in creation that DOJ (Department of Justice) or FTC (Federal trade Commission) would ever approve a merger of GM and Chrysler. The UAW would have power over price in the U.S. auto market.
That said, UAW’s antitrust problems are the least of its concerns, because it has MAJOR tax problems. The simple fact is that UAW is incorporated as a 501(c)(5) tax-exempt organization. That means that the UAW doesn’t pay taxes on income related to its tax-exempt purposes, namely, labor representation. There is no way any independent review of the UAW owning the companies its members work for would ever fly as encompassed within its tax-exempt purpose.
UAW will be stepping over a serious line, and since loss tax-exempt status means you owe tax on all income going back 7 years, this won’t be cheap. Watch for UAW to try to spin off the ownership interest into some face-saving vehicle, but that vehicle to still be controlled by the UAW leadership. They won’t be able to stop themselves from trying to control those companies.
That said, the ONLY reason this is being allowed to happen by Federal regulators is because Obama has instructed them to ignore the law. It will be interesting to see how the False Claims Act lawsuits against the UAW pan out. Of course, Obama will order Eric Holder to oppose the claims, but the courts will see right through his purpose, and as long as the cases aren’t brought in the Ninth Circuit, they will proceed, and Obama will lose. After all, Obama can’t order the courts not to enforce the law, can he?
Good eye. That comment merits its own discussion.
Obviously, there’s no way (legally) the UAW should be able to maintain its status as a Labor Union, and all the advantages it derives from that. But realistically this has never been about what’s legal, it’s always been about protecting the UAW for political reasons.
This whole deal stinks. I hope the Courts throw it back in Obama’s face.
paris-dakar said it perfectly.
“After all, Obama can’t order the courts not to enforce the law, can he?”
Didn’t seem to worry the last guy…
Does anyone think such legal matters will get in the way of this deal? It’s about worker empowerment and control.
Ayn Rand is laughing beyond the grave. She may have been an atheist but some where she is smiling.
The exceptions for when such mergers are approved does include situations where everyone in an entire industry is losing money, or especially where both companies involved will go into total liquidation without a merger. Even if a merger will result in monopoly profits, if the alternative to a merger is one or more companies going out of business and not selling products at all– and the market being more concentrated anyway– it will often still get approved.
That was one of the two rationales for the (much delayed, still, while being studied) Sirius/XM merger. Even if a monopoly satellite radio provider would be created and be able to extract monopoly profits, if satellite radio otherwise could not survive at all without being a monopoly, merging was an acceptable to waiting for one to liquidate or go bankrupt, and the inevitable result of only one or zero companies anyway.
The other rationale was that satellite radio was not its own market, but competed in a larger market against all radio.
This case is a little different because there will still be other car companies even if GM and Chrysler go bankrupt, and total liquidation apparently still looks unlikely in the government’s view. The antitrust law is only concerned with the impact on the consumer (and the market concentration as a result), not any unfairness to other firms by allowing them to merge instead of failing and haviing their bones picked.
Even if the merger would technically fail to pass muster under the antitrust guidelines, that doesn’t mean the merger can’t go ahead. I mean, really, the DoJ and FTC approved the Boeing/McDonnell Douglas merger, which was an even greater concentration of marketshare in a single player. The only way I could see antitrust issues becoming a problem is if GM and Chrysler continue to be operated as separate companies and then collude with each other on price, market division, etc. Then Ford and other automakers might have a Sherman Act Section 1 antitrust conspiracy claim.
If GM or Chrysler had pricing power, they wouldn’t be in this situation. There is no shortage of competition in the US auto market.
There was more of an issue here when GM had half the US market, or when Ford had more than that. This is a non-issue today, when both of these firms can’t sell cars even when they mark them down as low as can be. GM has been dumping cars for years, and it still flopped.
Like his motto goes…”Yes, he can.”
Unfortunately.
You only have to hark back to the sprayed words of Barney Frank berating Prof Edward Altman during the Nov hearings;
“We can write some more laws to fix that….”
(Paraphrasing).
That picture makes me want to cry. Baby, I miss you…
Regarding this:
That said, UAW’s antitrust problems are the least of its concerns, because it has MAJOR tax problems. The simple fact is that UAW is incorporated as a 501(c)(5) tax-exempt organization. That means that the UAW doesn’t pay taxes on income related to its tax-exempt purposes, namely, labor representation. There is no way any independent review of the UAW owning the companies its members work for would ever fly as encompassed within its tax-exempt purpose.
Is it addressed by this? (This excerpt is from an editorial in The Wall Street Journal.)
The UAW finally will end up having a direct stake in the survival and prosperity of General Motors and Chrysler — even though the union’s shares in the companies will be held by special trust funds instead of by the UAW itself. (emphasis added)
UAW Comrades,
What tax problem?
You can deliver 70% vote to glorious worker’s party. Da?
See, you have no tax problem.
The combined XM-Sirius enjoys 100% share of the satellite radio market. Most of AT&T was put back together through mergers to form the present AT&T, and certainly enjoys far more than 33% share of the US telecom market. Cisco has more than 50% share in the various markets it competes in, and has not been prevented from acquiring dozens of competitors (http://en.wikipedia.org/wiki/Cisco_Systems_acquisitions). Even a fully combined GM-Chrysler would still face a broad array of very agressive competitors. In fact, letting both companies dissolve via C7 would be more anti-competitive (from a consumer’s point of view) than would integrating them. The anti-trust argument is a red herring. Sure lawyers would argue about it, but at the end of the day the merger would not be stopped on anti-trust grounds.
Tax exempt organizations owning tax paying for profit companies is not illegal or unprecedented. Reader’s Digest was long controlled by a family foundation (since sold to private equity). The Ford Foundation and related charities long held big blocks of FoMoCo stock. Non profit organizations are free to own stakes in for profit companies as long as those for profit entities pay taxes as for profit companies and as long as any profits which are passed up to the non profit are used to provide benefits and services consistent with the non profit’s charter. So, another red herring.
Whether or not the deals on the table are a good idea or not is certainly worthy of argument. However, the notion that they are ipso facto illegal and would likely be struck down by any court (other than the 9th circuit, lol) steps over the bright red line into the land of talk show conspiracy theories.
I think the judges involved know what Obama and Co. want out of this. If I know politics like I think I do, this will lead to two outcome. They’ll either…
1) kowtow to him or
2) grandstand against him
…regardless of the law. Lovely.
The anti-trust argument is a red herring.
It really is. We have had minimal antitrust enforcement since the Reagan administration. Philosophically, they preferred having companies that were large enough to compete globally, as fear of unregulated monopolies were set aside. No president of either party has changed this course since.
The simple fact is that UAW is incorporated as a 501(c)(5) tax-exempt organization. That means that the UAW doesn’t pay taxes on income related to its tax-exempt purposes, namely, labor representation.
Assuming that this is accurate — I wasn’t aware of any rule that barred non-profits from owning stock — this would still be a no-brainer. Just create a new for-profit entity to hold the stock. An attorney could do this before lunch.
The WSJ seems to be on a slide downhill. I’m reading it less and less; the analysis is just not very good these days.
After the largest petroleum company, Exxon, was allowed to merge with the second largest pertroleum company, Mobil, did you really think that anti-trust regulations had any teeth?
They exist to provide the appearance of a level playing field but if you’re big enough you can buy yourself out of it. Unfortunately, the mergers of the big players are where anti-trust regulation is needed the most.
This is just another punchline to the joke that capitalism has become
The WSJ seems to be on a slide downhill.
Gee, do you suppose that has anything to do with its acquisition last year by Rupert Murdoch?
The only problem is that 70 Chevelle SS454 is wrong about everything he is talking about.
1) Even if GM and Chrysler were to be merged, 70 Chevelle SS454’s calculation of the Herfindahl-Hirschman Index is completely wrong.
Here is an HHI calculator if anyone cares to find the correct number, it is much lower:
http://www.unclaw.com/chin/teaching/antitrust/herfindahl.htm
And there is no black letter rule that prohibits mergers with an HHI above 1,800, as Pch101 said there are many exceptions.
Thinking that GM/Chrysler could have any pricing power is delusional.
2) There is no prohibition on a non-profit organization owning shares in a for profit company, it happens all the time. Non-profit organizations invest their excess money. Maybe some of you have heard of university endowments.
Chrysler, as a separate entity from the UAW, only partially owned by the UAW, will pay taxes if it every makes a proft (Ha!). If Chysler is ever able to pay dividends (Big Ha!) then the dividends paid to the UAW will not be be taxable.
The anti-trust argument is a red herring. Sure lawyers would argue about it, but at the end of the day the merger would not be stopped on anti-trust grounds.
It most assuredly is not a red-herring, mergers with much less clear cut market power get shot down all the time, political arguments to the contrary. But I absolutely agree with you that President Obama and his Attorney General will ensure that this transaction is not stopped on antitrust grounds.
Non profit organizations are free to own stakes in for profit subsidiaries as long as those for profit entities pay taxes as for profit companies and as long as any profits which are passed up to the non profit are used to provide the benefits and services consistent with the non profit’s charter. So, another red herring.
Uh, no. A nonprofit can claim unrelated business income and pay tax on it (UBIT), but that doesn’t fly when that nonprofit has a controlling stake in a company. Especially when the supposed “UBIT” eclipses the income of the organization. (Sure, UAW will claim it’s created some “independent” investment vehicle, but who here really believes that will be more than a paper-thin sham of independence?)
First off, when the nonprofit has a controlling stake in a for-profit that is competing against other firms, allowing that nonprofit tax-exempt status is grossly anti-competitive. A number of commenters hit on this from a common sense standpoint, and I’ll back them up. The tax code doesn’t allow nonprofits to play in the for-profit arena (usually).
Aside from that, the UAW will never be able to argue that its primary purpose is still labor relations. Sure, GM’s been losing money for a few years, but when they make money, their revenue is in the hundred plus Billion range (2003 was $185,000,000,000!). Chrysler probably had a bunch of revenue at some point, too. Last I checked, UAW’s highest revenue year was something like $1 Billion. Even if you just compare the current losses to the UAW budget, the losses are still many multiples of the UAW’s labor-related revenues.
Sooooo, how is the UAW going to argue that ownership of two companies which, combined, probably total more than 300 times the UAW’s labor-related revenues has no effect on its fulfillment of its tax exempt purpose? No IRS agent in his right mind (or allwoed to be in his right mind) is going to conclude that the UAW’s “UBIT” isn’t actually its new primary organizational purpose. I’ve seen much less clear-cut cases (ratios of, say 1:2) get shot down by the IRS. If the IRS is silent in the face of this, that isn’t based on an objective analysis of the tax law.
p.s. And if UAW argues that it’s holding these controlling stakes in GM and Chrysler to benefit its labor negotiations, don’t even get me started on the inevitable shareholder suits for violations of their duties of good faith…
I’d love to know Microsoft’s HHI.
John Horner: Gee, do you suppose that has anything to do with its acquisition last year by Rupert Murdoch?
It’s more of a problem with American journalism in general these days. There is very little analysis – or even serious, honest questioning of official statements – presented in major publications anymore.
Our local newspaper – which ISN’T owned by Rupert Murdoch – seems to get thinner with each passing month.
Even the new version of Special Interest Autos – I believe the name is now Hemmings Classic Cars – features articles on old cars that present very little background information on why the cars were developed, the personalities behind them and how they fared in the market. Special Interest Autos did provide this information (which is why I still have my old issues dating back to 1977).
Now, the articles basically consist of “Wow, this old car is so cool” hype.
Between the editorials and the comments, this site provides more analysis than virtually any publication out there.
“Watch for UAW to try to spin off the ownership interest into some face-saving vehicle, but that vehicle to still be controlled by the UAW leadership. They won’t be able to stop themselves from trying to control those companies.”
The UAW’s VEBA trust will technically hold the union position in Chrysler. ChryCo owed money to the VEBA fund, not the UAW per se. We’re starting to get a picture of Chrysler’s new ownership structure, but the governance structure is still up in the air. UAW allies are saying things like “the UAW will get at least one seat on the board,” but they emphasize that the ownership is based on VEBA’s fiduciary interest (rather than the UAW’s).
The jokes about the D3 being health care companies that build cars have really matured well. Legacy costs are literally running the show now.
It most assuredly is not a red-herring
It is, because you don’t know the proposed ownership structure or the entity that would hold it, and don’t seem to recognize the multitude in ways that this deal could be structured to avoid it.
This is just a non-issue. And if Mr. Niedermeyer is correct in his statement above, then it’s even less of an issue.
The union had a big problem, because it was debatable whether the VEBA would be treated as debt or equity in bankruptcy, due to its convertibility provisions. Whether the union got hoodwinked or had no choice at the time is debatable, but either way, the VEBA was really a lousy deal for them, and was designed to be underfunded with little consequences to the auto companies. VEBA was a great way to avoid paying them, and it worked.
Assuming that Fiat enters this deal, as seems likely, you can bet that Fiat will control the company, regardless. Share ownership and control don’t flow together, nor do cash flow.
Unless Fiat can turn the company around, the union’s equity stake is about as valuable as a loaf of stale bread. I’d probably take the bread.
70 Chevelle SS454: ” … mergers with much less clear cut market power get shot down all the time … ”
Name names please. I have plenty of counter examples. Oracle/Peoplesoft, Boeing/McD, XM/Sirius, Oracle/Sun, Cisco/Linksys, Abitibi-Consolidated/Bowater merged with a combined share of the US newsprint market of 43% … the list is very long. Occasionally the DOJ demanded the spin-off a certain assets, but even that requirement is rare in recent decades.
Hello? Hello? Is anyone home? No one is talking about about a GM/Chrysler merger. This is just academic. It’s going to be a FIAT/Chrysler merger.
The part of about the UAW being 503c, now that is something to talk about. But here is a link that says just because the UAW retirement fund is going to own 55% doesn’t mean that they are going to have operating control:
http://www.detnews.com/article/20090429/AUTO01/904290344/UAW-trust-won-t-get-control-of-Chrysler?imw=Y
I don’t know enough about this to comment. Any opinions from the B&B on this?
Sooooo, how is the UAW going to argue that ownership of two companies which, combined, probably total more than 300 times the UAW’s labor-related revenues has no effect on its fulfillment of its tax exempt purpose? No IRS agent in his right mind (or allwoed to be in his right mind) is going to conclude that the UAW’s “UBIT” isn’t actually its new primary organizational purpose. I’ve seen much less clear-cut cases (ratios of, say 1:2) get shot down by the IRS. If the IRS is silent in the face of this, that isn’t based on an objective analysis of the tax law.
Exactly. It will be funny watching people tie themselves into knots trying to defend the UAW maintaining its Non Profit status in this. The UAW represents Labor interests at companies with 40% of the market, exercises controling interest in 2 separate companies with 30% of the market, manages the health benefits for a significant portion of the industries retirees and yet has a Non Profit interest in the business?
Alot of people are going to sacrifice any last shred of credibility they have defending this monstrosity.
It will be funny watching people tie themselves into knots trying to defend the UAW maintaining its Non Profit status in this.
You don’t follow the point. VEBA is an entity, and it can own the stock. The union doesn’t have to own any of it.
There is more than one entity here, and you are making assumptions that are mistaken. Any possible drama, as has been so badly misdiagnosed by the Wall Street Journal, is easily avoided. This is a non-issue.
You don’t follow the point. VEBA is an entity, and it can own the stock. The union doesn’t have to own any of it.
I follow the point perfectly. I just don’t accept the tactic of using a pension/benefit fund as a front to exercise control of a company without paying taxes.
I just don’t accept the tactic of using a pension/benefit fund as a front to exercise control of a company without paying taxes.
Well, for one, without earnings, there will be no tax liability.
For another, if VEBA is a for-profit and there are earnings, it will pay taxes. So Treasury will be getting its money; no loss to you.
And yet for another, this sort of mingling between for- and non-profit happens all the time. This wouldn’t be unique at all.
There is also precedent for unions having board representation. That wouldn’t be unique, either.
If this is just yet another excuse to dislike the UAW, fine. But let’s be honest and admit that, and not pretend that there is something drastically different or uniquely egregious about this when it is not different nor unique.
For another, if VEBA is a for-profit and there are earnings, it will pay taxes. So Treasury will be getting its money; no loss to you.
Fail. “VEBA” stands for “Voluntary Employee Beneficiary Association,” which is a specific type of tax-exempt organization found in section 501(c)(9). To reiterate, the name VEBA comes from the tax code, and it is a tax exempt organization. The VEBA will not pay taxes, nor will they be independent from UAW management, as it exercises control over two for-profit companies.
Nor is there ANY precedent for an American public company to provide controlling Board representation to unions or pensions of unions. Ever. Period. There’s a reason for that, it’s a blatant, massive, conflict of interest. American law does not allow directors to violate their duty of good faith to the company and shareholders that openly.
Try again.
“VEBA” stands for “Voluntary Employee Beneficiary Association,” which is a specific type of tax-exempt organization found in section 501(c)(9). To reiterate, the name VEBA comes from the tax code, and it is a tax exempt organization.
If that’s the case and it acts as a passthrough entity, then the recipients of the benefits will pay the taxes. Taxes will get paid by somebody.
Nor is there ANY precedent for American companies to provide controlling Board representation to unions or pensions of unions.
Again, you’re assuming that the union would have a controlling interest. That’s a big assumption. Share ownership and control don’t necessarily fall together.
Union representation on boards is far from unprecedented. This is much ado about nothing.
I wonder if these deals will impact the contract of the UAW and Ford?
If I was Ford, I certainly would not want to be forced to negotiate or employ UAW workers who own my direct competitors and are in charge of operations and directly benefit from ford losses.
Seems like that kind of conflict would dissolve the existing Ford/UAW agreement and make Ford an open shop.
This entire boondoggle will probably end up killing ALL of the domestic automakers. Rewarding failure is THE antidote to capitalism.
Here come the trabants!
Taxes will get paid by somebody.
Just not by the UAW. In any form. Nothing to see here, folks. Move along.
Seriously, I wonder about the folks who were screaming for confiscatory tax rates on the bonuses Cerebrus paid itself for gutting Chrysler. Will they be just as angry about UAW picking over the bones and paying no tax, whatsoever?
Union representation on boards is far from unprecedented.
One guy from a pension is fairly common. Controlling, union-held blocks of shares or Director slates with enough power to run a Board are very common…in Germany. Here in the States, it’s unheard of. As in, not ever. Never. No way. No How.
But seriously, if there is an American public company with a union voting a controlling block of shares somewhere, I’d be interested to see how they dealt with the glaring, incontrovertible conflict of interest between the unions labor interests and what is best for the company and shareholders. The only way I could possibly see this working would be to completely deny union management any input whatsoever over: (1) the shares’ voting rights, and (2) the decision whether to hold the investment or sell it. (oops, forgot to mention (3) whether the investment vehicle manager keeps his job or gets a raise!) And no union manager doing his duty to his members would allow this much money to get tied up in an investment he had no control over.
I simply don’t see a way around the conflict, here. Call the vehicle anything you want, VEBA, independent trust, whatever. UAW will vote those shares through a proxy, and will hold the threat of sale over the heads of management 24/7. This is going to end badly for everyone involved.
I wonder if these deals will impact the contract of the UAW and Ford?
If I was Ford, I certainly would not want to be forced to negotiate or employ UAW workers who own my direct competitors and are in charge of operations and directly benefit from ford losses.
Seems like that kind of conflict would dissolve the existing Ford/UAW agreement and make Ford an open shop.
Never happen. The Ford Family has too much invested in their image as the Friend of the Working Man.
Pch101:
“Again, you’re assuming that the union would have a controlling interest. That’s a big assumption. Share ownership and control don’t necessarily fall together.”
Did you read the article referenced above in the Detroit News?
“Equity stake doesn’t translate into voting control,” said Harley Shaiken, labor professor at the University of California Berkeley… The governance structure of a revamped Chrysler is not yet known, but the expectation is the union will be offered at least one seat on the board.”
Did you read the article referenced above in the Detroit News?
I did. The professor apparently agrees with me. I made this comment — “Share ownership and control don’t flow together, nor do cash flow.” — before you posted your link.
I’ve been saying this here now for days — equity and control are not synonymous. People are getting riled up about shares that won’t be worth anything unless things go really well. The union is basically getting the shaft, taking worthless stock in the hopes that things get better.
I highly doubt that VEBA would get the same class of stock as the government or Fiat. The control comments made by posters on this thread are highly presumptuous, and go against the grain of what usually happens in these sorts of arrangements.
Eyes are being kept on the wrong ball here. The decisive factor over the long run will be whether the deal is structured in such a way that Fiat has enough skin in the game to keep this ball in the air long enough to make it work.
My fear is that the more time that goes on, the more likely it is that Fiat will get a deal that doesn’t include enough motivation through downside risk. The government may not care, though — the government’s primary goals are to reduce/ avoid the pension obligations and to stall the failure of the company, not necessarily to ensure the long-term success of the business.
“Equity stake doesn’t translate into voting control,” said Harley Shaiken, labor professor at the University of California Berkeley… The governance structure of a revamped Chrysler is not yet known, but the expectation is the union will be offered at least one seat on the board.”
I can’t believe that people are quoting a Professor of Labor Law at UC Berkeley as an unbiased authority on the legality of this. Why not just quote Jennifer Granholm? She’s a lawyer too.
I can’t believe that people are quoting a Professor of Labor Law at UC Berkeley as an unbiased authority on the legality of this.
Good lord, he’s not saying anything controversial. If you know the first thing about corporate structures, this is fairly elementary stuff. He’s just stating a fact that no one who knows about these things would even argue with.
It’s not as if we’re making it up. There is a lot of flexibility here in how to structure it. We’ll see whether they do well with it, or not.
# PeteMoran :
April 30th, 2009 at 9:07 am
You only have to hark back to the sprayed words of Barney Frank berating Prof Edward Altman during the Nov hearings;
“We can write some more laws to fix that….”
(Paraphrasing).
Rep. Frank is at least adhering to the Supreme Court ruling against Pres. Truman’s Korean wartime seizure of the steel industry. The President can only do what the Constitution and Congress permit him to do.
If Ford challenged the PTFOA’s actions in giving a gov’t/labor consortium controlling interest in two of the three domestic automakers as violating not the Sherman Anti Trust act but rather as violating Youngstown Sheet & Tube v. Sawyer, they might very well win, particularly with this Supreme Court.
At best it’s unclear if the president has the authority to leverage gov’t loans into equity stakes in private enterprises.
I hope the bondholders hang tough and push both companies into bankruptcy with no government ownership. The B&B know that I value the domestic auto industry, but I’d rather see GM and Chrysler liquidated and the Tech Center plowed into the ground than for the government to own GM and Chrysler. Without a provision that stakes any profits to be used to buy back shares from the gov’t, Michigan is better off with GM and Chrysler dead. At least Ford would still be in business as a business, not the gov’t.
Like I said the other day, a worse clusternsfw every nsfwing day.
John Horner,
Where does the Constitution permit the government to hold stock in, as opposed to the debt of, private enterprises? I’m not even sure the Constitution permits stuff like SBA loans, but since there’s enabling legislation, it’s legal.
I’m not convinced that TARP or other legislation gives the President the sweeping powers he is attempting to use in nationalizing the banking and automobile industries.
How will the stock that the gov’t owns be accounted? Will it get dividends? If so where do those dividends go? If the government sells those shares will the profit be taxed (I know, it’s absurd, but we live in absurd times)? Seriously, though, will the profits be put into the Treasury or will the be given to the company to retire debt? If the stock is sold at a loss, will that increase the federal debt?
The tax code doesn’t allow nonprofits to play in the for-profit arena (usually).
Usually. Veterinary associations have unsuccessfully challenged the tax status of Humane Societies that generate revenue from spaying and neutering animals.
paris-dakar: I can’t believe that people are quoting a Professor of Labor Law at UC Berkeley as an unbiased authority on the legality of this.
Harley Shaiken is pretty well known, and is a “go-to” guy for quotes about labor issues, particularly as they relate to the auto industry.
If I recall correctly, he was quoted in The Reckoning by David Halberstam, and that book was published over 20 years ago. His name wasn’t picked out of a hat…
I hope the bondholders hang tough and push both companies into bankruptcy with no government ownership. The B&B know that I value the domestic auto industry, but I’d rather see GM and Chrysler liquidated and the Tech Center plowed into the ground than for the government to own GM and Chrysler.
Here’s the hypocrisy of the situation in the US. It’s OK to shaft labor in the deal with equity, but it’s a crime to short bondholders (or any owners of capital).
Also, it’s better to have all the employees unemployed that to have the gov broker a reasonable deal.
It really goes to show where these people’s interests are.
–
How will the stock that the gov’t owns be accounted? Will it get dividends? If so where do those dividends go? If the government sells those shares will the profit be taxed (I know, it’s absurd, but we live in absurd times)?
No, everything should be privatized, like Social Security. I don’t hear much lately about how well that plan would’ve done.
@ geeber
As it happens, military history and technology is something that interests me even more than cars, and I have backfiles of some magazines in this area which go back 30 years or so.
And I can see even for these magazines that there is “less” in them in terms of sustained analysis and writing reflecting genuine critical thinking. So it looks like this may be a general problem of ‘dumbing-down’.
If, in the current economic climate, I did not have a lot more horrendous disasters about which to worry, I think I would worry a little about this!