The Wall Street Journal reports the terms of the United Auto Workers (UAW) deal with the feds re: their payoff to join post-bankruptcy “good” GM. Uncle Sam will “contribute” $10 billion worth of stock to the union’s Voluntary Employee Beneficiary Association (VEBA) health care superfund, paying off half of GM’s unfunded obligations in one fell swoop. The Treasury Department will also give the UAW a $2.5 billion promissory note. GM (i.e., the federal government) will pay off the note in cash, in three installments (2013, 2015, and 2017). And just in case that’s not enough to entice the union to join “good” GM, the UAW will also receive 17.5 percent of the new post-C11 GM (no longer a controlling interest) AND stock warrants for an additional 2.5 percent of the reorganized company. The $6.5 billion in preferred stock includes a nine percent cash dividend—that will pay out $585 million annually. Saying that, this is all subject to a federal bankruptcy judge’s approval.
And the rest of us get ……..?
So the taxpayer eats half of that damn VEBA deal?
Welcome to the USSA comrades!
The mother of all political payoffs. The UAW greatly assists GM go under and they come out of the crap pile with massive government bailouts. I hope no true American will ever buy another product made by a Michigan car company again (that is if they are even around).
“And the rest of us get ……..?”
You must not belong to a primitive political tribal gang…You are going to have to do your own stealing.
The Taxpayer is the world’s greatest phule.
I am a believer in fair play, and so is our government supposed to be.
Well, sort of.
So, how does all of this government cash towards GM and Chrysler put Ford,and all other auto competition at a dissadvantage?
This whole affair smells.
I think I shall check into the Unibomber’s vacant cabin.
Well sure, everyone know full time government employees get good benefits.
Not being a lawyer myself, or an expert in the ERISA laws; can someone comment on whether the US treasury, by law, would have had to pony up and pay the GM retiree pensions no matter whom was President?
http://www4.law.cornell.edu/uscode/29/usc_sec_29_00001305—-000-.html
Lost in the whole bankruptcy debate has been the question of what would be owed, by law, to the employee health plans and other benefits packages. Some seem to have taken it for granted that GM could simply walk away from these obligations. I do not believe that is the case.
@ carlos
What I post below is pre-Obama:
NONE of the retiree benefits are covered by govt guarantees, only promised in the 2007 GM/UAW contract.
Some of the pension would be covered by the federal PBGC, only the unfunded part would be needed to be made up by govt, about 80% funded as of January. However the “Social Security supplement” part which makes up about half of what the average pre-62 UAWer gets in pension is NOT covered by PBGC.
Why does the union get 17.5% of good GM while their bondholders are only being offered 10%?!? I guess I don’t understand how the government is allowed to just completely fuck over anybody they want and plow through any and all laws protecting consumers, investors, debtors, etc. and do whatever the hell they want to do. We are stuck watching as billions of our tax dollars are pissed into a bottomless pit, never to be seen again. Do we have any recourse at all, and are we ever going to be compensated for this?
My opinion is that right now American taxpayers are all victims of the greatest fraud ever committed. There is no way GM or Chrysler will ever repay all of the money they’ve “borrowed” from us. We’re being pitched, promised that this is going to save American jobs and keep manufacturing alive on our soil. Meanwhile we see tens of thousands of people losing their jobs due to plant closures, thousands more being laid off as dealerships are shut down, and plans from GM to move more jobs out of the country to save money.
We all get to support companies that have failed because of their own ineptitude while hundreds of businesses, large and small, fail through no fault of their own, with no bailouts from Savior Obama in sight. This whole situation is sickening, and I think that anyone who decides to not to support either company is completely justified until our money is paid back in full. I may decide to join that group as well.
Next time on the Bush-Obama Privatization of the Treasury: Citizenship buyouts!
But seriously, none of this would have been an issue if companies weren’t allowed to raid their employee pension funds and leave them underfunded.
@AG
Perhaps it’s cutting too fine a line, but there has been no raid on the pensions. The pension funds were in good shape until the market fall-off and are still near 80% funded.
Health benefits is another story.
Love that vacuum cleaner picture, but I’m having a hard time deciding on the metaphor. Does it represent the world’s biggest sucking-up? The gummint’s gargantuan spending to clean up a titanic mess? Or maybe that the contents of that vacuum cleaner’s huge bag will eventually become the responsibility of the taxpayers?
Say, my 401K didn’t do so hot last year. Who do I write to in Washington to get the fund restored to the amount I expected?
Bush had the one in a life time opportunity to stick it to the UAW last December.. He chose not to… I mean what did they think was going to happen?
indi500fan: What is your source?
All I know is that in the past, when companies failed to provide for pension obligations, the gov’t has stepped in. Why would that not be the case with GM?
Obviously, this would not apply to 401K accounts, in cases such as Enron. But a traditional pension, such as the one in GM, is supposed to be insured.
I found this tidbit regarding auto sector pension plans.
http://www.pbgc.gov/workers-retirees/auto-sector.html
But it seems that the pbgc is $35.5 Billion in the hole as of mid-year.
http://www.pbgc.gov/media/news-archive/news-releases/2009/pr09-30.html
This seems to imply some measure of gov’t backing for GM pensions, if I understand this correctly.
“And the rest of us get ……..?”
Government Cheese!
GM’s pensions would be covered by PBGC if the company could demonstrate that they could not continue to operate while funding them.
PBGC has a maximum limit, which is $54k this year, if you’re age 65. It gets reduced drastically for age. This is where the union was wound up, because so many UAW types retire at ridiculously early ages – like below age 50.
PBGC is substantially underfunded – but no matter – the gov’t will just print more money to back them. PBGC is in no danger of failing.
Half a billion dollars in dividends per year. That makes the “absolute priority rule” issue in the Chrysler case seem trivial by comparison.
“Half a billion dollars in dividends per year”
Not a real issue, dividends can only be paid out of profits.
Wishing for your money back while promoting a boycott of the product will not get it back any sooner. One cannot walk away from a goal and expect to get closer to it.
And before you jump on me for this, I drive a Nissan.
Why not just give them Medicare? Government bailout gives you Government grade health insurance.
I nominate ” superbadd75’s ” post as the post of the month, it says it all.
So, where are Companies going to find investors in the future? Investors used to buy a bond in no small part because in law, it had the security of being in priority to other forms of debt. Without that there is no reason to accept inferior yields or more risk, or indeed even bother investing there at all.
Now that Ohobo is about to do an end run around the law and given too much of a percentage to his friends, openly challenging the courts to defy him, why would anyone buy any corporate bond any more? And the jury is still out on whether the Chinese will invest in bonds, government or corporate, and if they do, how much higher returns will they insist on receiving in this revised ‘landscape’?
This whole thing sickens me. I’m just hoping for some political change in 2010 and a bigger one in 2012. If not, we are well and truly f’ed! High hopes, low expectations.
Without a subscription, I can’t read the WSJ article. But I think the $10 billion reference is the existing amount in the GM VEBA that was originally to be turned over the beginning of 2010. Does the article specifically state the the Treasury is going to supplement that fund with another $10 billion?
Yes.