Gasparino: GM’s Devil’s Bargain

GM’s devil’s bargain - Still stuck with Uncle Sam

The Obama campaign raves about how it “saved the auto industry” — that is, the government’s bailout mainly of General Motors — and so preserved millions of jobs.

But if it was such a success, why is the bailout losing so much money — and why do current GM managers want nothing to do with Washington as they try to save the company?

The answer: They know that with the lefties in the Obama administration breathing down their necks, their chances of ever restoring GM to its past glory are anywhere from slim to none.

Of course, it’s hard to feel sorry for GM’s management, which news reports and my own sources say has been prodding the administration to sell off its remaining 26.5 percent stake in the company. GM’s bosses invited Uncle Sam in — tough luck for them that he doesn’t want to leave.

For way too long, the Big Three — GM, Ford and Chrysler — kept on cutting generous wage and benefit deals with their unionized workforce as if it was still the 1950s and ’60s, when foreign competition didn’t exist. By 2009, that heyday was long, long past — and the Great Recession brought their highly flawed business model crashing down.

The $17 billion in loans from the Bush administration in its waning days wasn’t enough. GM and Chrysler came hat in hand to the President Obama for a little more hope and change.

An easy solution would have been to let the companies reorganize under Chapter 11 of the bankruptcy code. They’d have had a good chance to survive; plenty of other companies have restructured under bankruptcy protection and emerged later as viable businesses. American Airlines is doing it right now, and without major disruptions in service, or mass layoffs.

As it turned out, Chrysler and then GM did declare banktuptcy — but the resolution wasn’t the normal court-overseen reorganization. Under Obama, the feds dumped in tens of billions more into the companies and took controlling stakes in an industry that was once a bedrock of free-market capitalism.

In the administration-overseen restructuring, bondholders got hit hard in what many legal experts say was a violation of bankruptcy laws, and dealerships around the nation got slammed

.

But the president’s buddies in the United Auto Workers largely feasted. Sure, the absurd “jobs bank” — Detroit’s version of a “no show job,” where the auto companies basically handed fired workers free money — got shut down. And new hires lost out on the old guaranteed pensions for the market-driven 401-k plan that most of the rest of us rely on for retirement.

Via: New York Post

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The Delphi Debacle Union members were made whole at the expense of non-union employees in auto bankruptcy

Fred Arndt and his brother Dave came to General Motors straight out of high school.

They spent their entire careers building the engine cooling systems that increase the lifespan of Cadillacs and other vehicles. Dave worked in assembly; Fred, one year younger, qualified for GM University, which propelled him to work as a draftsman and engineer. They worked the line side-by-side. Dave built the parts Fred had designed.

The brothers made their way to Delphi, an auto supplier spun off from GM that builds components—seats, instrument panels, steering and suspension systems—for cars.

After more than 30 years with the company, the brothers retired in their native Michigan. They watched as Delphi’s growing labor costs dragged it into Chapter 11 bankruptcy in 2005. It would not emerge until 2009 when the government stepped in with $50 billion for GM.

And then the Arndt brothers’ paths diverged. Fred, 64, lost his health, dental, and life insurance, along with 70 percent of his pension. Dave lost five percent of his health insurance and some dental coverage.

His pension, however, was made whole.

The difference: union membership. Dave is a member of United Auto Workers—the labor group that financially backs the Democratic Party. Fred was considered management.

“I worked for GM and Delphi because I thought I had security; I worked my buns off to be a ‘company guy,’ and to be treated this way in retirement is incredible,” he said. “I knew there would be a price to pay, but I expected everyone to take a cut—not just the salaried guys.”

When GM separated from Delphi in 1999, Fred travelled far from Michigan. He worked all over Ohio and in company plants in upstate New York. As he neared retirement, he returned to Saginaw, Mich., and commuted 100 miles each day to Delphi headquarters in Troy. He retired a bit earlier than he had expected—the daily drive took its toll. He never had children, so he had plenty of savings to supplement his pension. Now he has been forced to use the money to pay for his home, groceries, and gas.

Via: WFB

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EDITORIAL: Labor Day Is No Holiday Without a Job

AP Graphics

EDITORIAL: Another bummer Obama day
Labor Day is no holiday without a job

By The Washington Times

For 23 million Americans without jobs, the Labor Day holiday is not a day off but just another day without work. It’s a fitting hash mark for the presidential campaign kickoff, reminding Americans of President Obama’s tragic failure to deliver.

In 2009, Mr. Obama promised to lower unemployment to 5.5 percent by 2012. It’s stuck at 8.3 percent. In his first budget, hopefully titled “A New Era of Responsibility,” he projected current growth in the gross domestic product would be a red-hot 6.3 percent. Instead, the country creeps along at a miserable 1.5 percent. One measure of the Obama administration’s desperation is Labor Secretary Hilda L. Solis applauding the latest youth unemployment figures, which dipped all the way to 17.1 percent. When numbers that high make officials “excited,” you know things are terrible.

From the White House perspective, this isn’t all bad news. The Obama administration thinks unemployment actually can be healthy for the economy. Obama press secretary Jay Carney said last year that jobless benefits somehow boost consumption and “every place that, that money is spent has added business and that creates growth and income for businesses that leads them to decisions about jobs, more hiring.” By that confused illogic, Mr. Obama should be cheering the worst sustained unemployment rate since the Great Depression. Congratulations, that’s a heckuva job, Barack. Apparently, the president’s re-election slogan, “Forward,” actually means “Reverse.”

Labor Day also draws attention to the role of organized labor in American public life. A new Gallup survey shows 52 percent of the public approves of unions while 42 percent disapproves. A lot has changed since the 1950s, when old Big Labor — the United Auto Workers, the United Mine Workers, the Teamsters — had a 75 percent approval rating. Back then, workers built things. The new Big Labor — the American Federation of State, County and Municipal Employees and the Service Employees International Union — represents the service sector and public employees. Their influence grows through securing sweetheart deals from governments populated with the politicians they helped elect. Eventually, the cost of these deals becomes too great for states and municipalities to sustain. Even with these jurisdictions on the brink of bankruptcy, the unions refuse to give on any aspect of their plush compensation packages. Their answer is always the same: Raise taxes and fees; do anything it takes to extract more money from the public to keep alive the government golden goose.

Via: The Washington Times

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TARP and GM

In December of 2008, GM approached Congress and asked for a bridge loan to allow them to restructure. While the House passed legislation to accomplish this, it was not passed through the Senate. Days later, the Bush administration initiated a loan through the TARP program which would provide $14 Billion in loans and stock purchases to GM and follow many of the guidelines that were sought in that legislation. This included a restructure plan that would have to be approved by the Obama administration.

In February of 2009 GM presented their plan to the Obama administration. The plan was seen as preferential to union workers by bondholders and many stated their intention to oppose it. In March of 2009 President Obama announced that he was not accepting the viability plan put forth by GM, but that he was authorizing more funds to keep the company afloat. President Obama also initiated programs to provide funds to companies that supply parts to GM and Chrysler.

GM was placed into bankruptcy on June 1, 2009 and the company was supplied with an additional $30.1 Billion dollars, bringing the total loans and stock purchases to $50 Billion. The company was made a private entity at that time.

The bankruptcy restructuring plan agreed upon by the government and GM gave the US government a 60% share in the company and gave the Canadian government a 12% share. The United Auto Workers gave up a health and savings plan worth $20 Billion in exchange for a 17.5% share in the company and over $8 Billion in debt and preferred stock. Bondholders held $27 Billion in stock prior to the collapse and received only a 10% equity share in the new GM company. 

Throughout the bankruptcy process, President Obama stated that he had not desire to run a car company and would not interfere with daily GM business. This is at odds with numerous actions taken before and after the bankruptcy filings.

• Days before GM was placed into bankruptcy, the Obama administration demanded and received the resignation of company CEO Rick Wagoner.
• The Obama administration pushed for the closing of numerous GM dealerships
• The substance of the bankruptcy settlement was heavily tilted to favor unions - a result that many people suggest would not have occurred without political motivations
• The bankruptcy settlement allowed the US government, the Canadian, and the UAW Union to appoint chairs of the board - an action that would directly change the direction of the company for years

The TARP program established specific rules on what could be purchased with the funds. These rules stated that only Preferred Stock or Common stock without voting rights could be purchased. The reason for this was to prevent the government from controlling a company it purchased stock in through TARP funds. President Bush violated those rules when he used the money to provide a loan to GM. President Obama further violated those laws when he purchased stock in the company and used the ownership of that stock as authority to appoint board members. The creation of programs to give funds to companies simply because they depended on GM and Chrysler for business was also not allowed in TARP documents.

Via: The Political Guide

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House Ways and Means chairman demands Delphi pension termination documents from Obama administration

Republican House Ways and Means Committee chairman Dave Camp demanded Wednesday that the U.S. Treasury Department and the Obama administration release records connected to an emerging scandal surrounding autoworker pensions terminated during the auto bailout. The Pension Benefit Guaranty Corporation (PBGC) and the Treasury Department axed pensions in 2009 for 20,000 non-union salaried retirees who worked for Delphi.

Those workers’ pension plans lost between 30 and 70 percent of their value, while similar plans covering members of the United Auto Workers and other labor unions were preserved and made whole.

Camp fired off letters to PBGC director Josh Gotbaum, Treasury Secretary Timothy Geithner and White House Counsel Kathryn Ruemmler, asking for dosuments by September 7. His committee seeks internal documents and communications relating to the decision-making process that resulted in those pension losses for non-union Delphi retirees.

From the PBGC, Camp demanded Gotbaum provide “all records, including but not limited to electronic mail to or from PBGC, the Departments of Treasury, Labor and Commerce and the Executive Office of the President of the United States” that relate to Delphi and General Motors’ interest in Delphi “for the period of January 1 through December 31, 2009.”

He demanded similar documents from Geithner and Ruemmler.

Via: The Daily Caller

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