How the Detroit "Bailout" will break the union contract

[Sen. Walter Sobchak]

I posted this as a reply in another topic, but was encouraged to repost it, I don't claim to be objective about Detroit or unions, but this is where the money is going.

I have worked on dozens of corporate bankruptcies and the truth of the matter is that none of the Detroit automakers have adaquate funds to see through a successful Chapter 11 re-organization with cash-on-hand and given the present liquidity crunch the bankrupt automakers would not be able to obtain debtor-in-possession financing.

The funds from the "bailout" will be used to finance those Chapter 11 re-organizations in which the UAW labor contracts and other liabilities will be discharged by the courts. In effect Washington won't be providing a bailout to prevent bankruptcies - Washington will be providing the debtor-in-possession financing so the automakers can file for Chapter 11.

Anyone who believes this "bailout" will be any less criminal than the last one is naive.

To understand how bankruptcies are financed watch Chapter Two of the Frontline episode "Can You Afford To Retire" which goes over the bankruptcy of United Airlines in detail, start at 8:00 in but find time to watch the whole thing. http://www.pbs.org/wgbh/pages/frontline/retirement/view/

[Ian David]

1. I don't know enough about it to know if you're right or not.

But I'm gonna K&R the thread to see what others think.

[Indiana_Dem]

2. Can't they just file Chapter 11 without the bailout?

That's what happened to my husband's factory and they got their wages cut in half but didn't lose their jobs.

[Sen. Walter Sobchak]

3. Chapter 11 is very expensive

and the larger the company the cost grows exponentially, the professional costs alone for just one of the Detroit automakers bankruptcies could be a billion dollars.

[BlooInBloo]

19. Really? The cost grows exponentially in company size? Really?

[Sen. Walter Sobchak]

35. sarcasm?

Larger companies are much more complicated, more subsidiaries and foreign subsidiaries, more labor agreements, more complex financial instruments in play. Thousands of court dates, a re-organization plans longer than Warren Report. It adds up.

[Greyhound]

4. I guessed this would be the case. Shit. K&R

:kick: & R

[backscatter712]

5. Class warfare at work - read Greg Palast's Armed Madhouse.

There's a reason why the automakers are going bankrupt, and that's because the rich assholes running them WANT them to go bankrupt. They know Obama won't let them get away with their thieving shit, so they're doing their damage now, while Bush is still president.

That's because in bankruptcy, they can steal. With bailouts, they can steal. Quoth Randi Rhodes "In chaos, they can steal." With bankruptcies, they can get the judge to yoink union contracts. They can yoink pensions, and leave the retirees with a fraction of the money they've earned and put away, on the backs of the taxpayers. With bailouts, they just steal tax money directly. And with the bailouts, they can legislate the unions away - legislating onerous contract terms that they couldn't get through direct negotiation.

They want their bailout now, and they're creating an artificial sense of urgency, again to beat Obama to the punch before he can take office, and also, it's classic shock-doctrine strategy. Make us fearful, make us afraid, and they can rob us blind.

Remember, they're trying to rob us. Rob us of money, and also rob us of power, rob us of the ability to make a decent middle class living. After all we must all make sacrifices so they can afford their Learjets and 200 ft. yachts.

[doc03]

6. You have a very good point. A few years ago a local steel

company was in that condition. They didn't have enough money to file Chapter 11 a foreign company ended up taking them over for pennies. And believe me if a company files Chapter 11 the Union contract is gone, pensions gone and health care gone. The employees are the absolute bottom of the pecking order. I've been through 2 bankruptcies and lost two Defined Benefit Pension plans.

[Indiana_Dem]

9. My husband's company, Wilson Foods, filed Ch 11 in the 1980s,

their wages were cut in half but they didn't lose their health care or their pensions. The company eventually ended up selling to a new owner a couple of times until they finally closed and then re-opened non-union as IBP. My husband worked for Wilson Foods for 23 years, by the way. He was <48 years old and couldn't retire yet. Then IBP sold the company to Tyson's and they have UFCW again but still make only a few dollars more than the wage we lost our jobs under. My husband and I both worked for the factory when it was Wilson Foods. We still will have a pension and some health care option when we retire from Wilson's. We got a severence package, too. Had the option of job re-training through paying for college.(We both no longer work there)

My husband next got a job with another factory which closed and he receives a small retirement (worked there for 10 years) now. He received health care for 2 years after the factory closed. He now works for the local school system as a custodian and makes more money than he ever did in the factory. He lost the last job at 58 years old. He is now 61.

We feel like the government never bailed us out. The auto-workers have had it extremely well while all of this went on for us in the last 20 years. It's their turn. However, we also feel like letting the automakers fail will hurt a lot of connected businesses, too. We also feel that the auto workers need to make some sacrifices. They make too much money and have better benefits than anybody else in the country. We would only say bailout if there were some stipulations that they will change the way they're doing things.

I also think it will be more costly to let the big 3 fall on their own via unemployment, handing over pensions to the government as happened to the railroaders, and in job re-training. The job re-training technically could be paid for in Obama's plan to create 5 million new green jobs, though. Some form of national health care could also help the big 3 in that they wouldn't have to worry about health care if the government was handling it. Same goes for almost any other business.

Those are just some of the things going around in me and my hubby's minds. We don't know for sure what would work the best. Those are just our thoughts and wishes.

[doc03]

13. If I understand you and I feel about the same, The steel,

rubber, textile, electronics, meat packing and countless other industries have been taking a beating the last 30 plus years. The American public and Unions has sit back and let it happen, what do they care as long as they have a job and they can buy cheap imported products. Us in steel we watched the textile, electronics , meat packing and others go under and didn't support them. In the late 90s we hit bottom and the auto industry was willing to let us die and actually testified in Congress to stop tariffs on imported steel, they said let them die. In the late 90s early 2000s 40 some steel companies went bankrupt and we lost 100s of thousands of jobs, took concessions and lost pensions or had them reduced while the UAW got fat. Sometimes I would like to see the auto industry punished and other times I think of the pain the workers will suffer is unfair. The auto industry is our last manufacturing industry if it goes under that's it we will then be a third world nation dependant on other countries for our survival.

[Indiana_Dem]

23. Yes, I do feel the same even though I was having a hard time expressing it in a few lines! lol eom

[earth mom]

38. So piss on the Auto Workers Union because you didn't get yours?

:wtf:

That's the biggest pile of crap I've heard on DU in a long time!

Btw, you would have absolutely NOTHING right now-no pension, no health care-if it wasn't for the Union your husband was a member of.

I am blown away that you forget that important fact and don't support other Unions-no matter what-to the max.

[Indiana_Dem]

41. I didn't say I don't support them--I'm a Democrat

No other unions ever supported us when we were in trouble as I recall. We still don't know if we will continue to get the health care by the time we are eligible.

Think what you want. I'm just sharing our experiences. That said, I do support some government intervention at this point.

[earth mom]

42. Frankly, you sound jealous of what the auto workers make to me.

These are your words:

"We also feel that the auto workers need to make some sacrifices. They make too much money and have better benefits than anybody else in the country. We would only say bailout if there were some stipulations that they will change the way they're doing things."

Sorry, but auto workers DO NOT make too much money. Who are you to decide that? Or have you been brainwashed by the media who has feed everyone that line for years?!

You know, it's a shame that you and your husband were screwed over by the powers that be, but that doesn't mean that the auto workers deserve the same fate.

The truth is is that you are angry at the wrong people here. Your anger should be directed at the bastards who have systematically destroyed unions for decades.

We should fight as much as possible to save the auto workers jobs, and to stand up to the powers that be who are trying to turn us all into peons living in a 3rd world country.

[Indiana_Dem]

44. I am not so jealous as to what they make but it's their sense of entitlement attitudes that bug me.

I live in a very strong Chrysler and old Delco stronghold. The people I know that work there are some of the most arrogant, pioused factory workers I know....and they don't even vote in their own interests!

Aside from my experiences with them and my view points about them, I am and I do take my anger primarily out on those who deserve it more. I saw it begin in the Reagan era when I first started working in the meat-packing industry, and have watched things steadily decline to where we are now. None of those Chrysler workers fought as much as possible to save our meat-packing jobs in the early 90s nor did they try to stand up to the powers that be. Now, since it is affecting the whole country everyone is saying it's time to do something. Well, I was on the bandwagon probably long before many of you. Where was everyone back then?

Nonetheless, I saw the writing on the wall back then and quit before it all came down. I only had 6 years in but my poor husband had 23 years in one meat-packer...and then 10 years in another auto-industry factory before IT closed down. I sacrificed for about 5 years with a family of 5 and a husband who lost his job with this closing and returned to school and became a Registered Nurse. I have been one for 11 years now. Now I have a skill and some knowledge that nobody can take away from me.

Yes, I feel bad for the auto-workers and their families as a whole, and I do support a bailout but that still doesn't make me sympathize over the arrogant, self-entitlement attitudes of those who've never suffered and work at my area Chrysler/Delco plants. Seriously, a great majority of them give an aura that their sh*t doesn't stink, they have to have the best of everything or else. Some of those workers would die an early death if they had to work on the kill floor of a hog slaughtering plant for TOP pay of $9/hr--with a union to boot!

Fortunately, with my RN license now, even if my hospital goes belly up I can take my skills anywhere in almost any setting. I can even be a home sitter for the very rich if the jobs get too tight if I have to.

[nc4bo]

7. We moved from large union'd state (NJ/PA) to a right to work state (NC) - it ain't all that

I can see the reasoning in wanting to destroy union backbones. Unions protect workers' rights to work and can hold an employer accountable for any misbehavior against an employee but it comes at a cost ($$). Right-to-work seems to mostly protect the employer usually at the employees expense and disguised as being an advantage to the employee.

Personally I'd love to see some sort of unionizing here, it's needed - but I don't think NC's economy would be able to afford it and many folks I've talked to about unions here are afraid unions will cost them their jobs.

But, maybe I've got it all wrong - wouldn't be the first time.

ETA: apologies for going OT.

[Indiana_Dem]

11. What the U.S. needs is a really good Labor Secretary to ensure the things

that the unions have given us. That Chao woman who has been Bush's Labor Secretary has been horrible! I say the Labor Secretary is key to good labor relations to corporations (since Reagan slashed all the union power in the 80s).

[TahitiNut]

8. A rare, sane post. Thanks. It's nothing more than war against the blue collar middle class.

The antipathy toward virtually the last remaining manufacturing labor force in the U.S. that earns a living wage ... the "American Dream" of hard work and decent wages to send children to college and live a decent life ... is palpable, even on DU.

I remember when the "Democrats" were the de facto Labor Party in the U.S.

http://images.google.com/hosted/life/l?imgurl=2ad6458e219bb48d

The man to the viewer's right of Dr. Martin Luther King, Jr., on the steps of the Lincoln Memorial in August 1963 is Walter Reuther, at that time the President of the UAW. Walter Reuther was a friend and neighbor to my family. He was a decent man that risked his life, most notably at The Overpass, so thousands and thousands of hard-working people could earn a living wage in a safe workplace.

It's ironic. The administration (and 'opposition' party) fell all over itself to give TRILLIONS to a financial services industry in which the product has become almost unregulated, throwing money at a SYMPTOM of the problem of a decimated working class ... and they're displaying almost unbounded vitriol for the WORKERS in one of the last remaining manufacturing industries with a product that's regulated from seat belts to emissions to mileage to bumper height. Nobody seemed to care much about the Masters Of The Universe hauling down millions in annual bonuses for selling out the working class ... but God Forbid organized labor be allowed to survive!

The irony is compounded by the fact that the CEOs and senior executives of the auto companies have been "bean counters" (from the financial side of the business) for the last 20 years. I remember when the struggle for management control of GM was between the engineering/operational "career track" and the bean counters. Well, the bean counters "won" and made it look good on paper only to fail in the plants. Assholes.

If the auto industry fails, the net impact will be about ONE MILLION JOBS ... that's one million jobs at a wage of about $30/hour ... or SIXTY BILLION A YEAR just in wages. That's the income taxes and Social Security taxes those incomes pay.

Good fucking luck.

[Indiana_Dem]

10. So how do we get transitioned to create the 5 million new green jobs?

It's all a mixed up mess right now. How can we transition from the focus on autos to the 5 million new green jobs that need to happen? We'll need workers for rebuilding infrastructure with mass transit being a large part of the transition. Yeah we need the tax base that these people bring with their being employed but unless the auto world changes its focus on large gas-guzzling vehicles it is a lost cause.

[Romulox]

12. The OP is actually expressing the "let them die" speil. nt

[Sen. Walter Sobchak]

14. so you are willing to pay $25 billion for the same end result?

well?

[Romulox]

15. Absolutely not! AIG may need that cash!

:eyes:

[MiniMe]

16. If they file chapter 11, that will allow them to renegotiate the pensions

and the union contracts.

Another case of screw the retiree, screw the worker, save the executive pensions and salaries.

[gravity]

17. A bailout will save the unions

It will be much worst if GM is forced to file chapter 11 and especially chapter 7.

[Sen. Walter Sobchak]

18. it won't save them because GM et-al will still file for chapter 11

Detroit can't afford to file for Chapter 11 without the bailout

[gravity]

20. The want to avoid chapter 11 at all costs

This bailout is suppose to help them avoid that, until the Obama administration can have some real economic policies.

And without the bailout, they will be looking at chapter 7, which will be a whole lot worst.

[Sen. Walter Sobchak]

21. They don't want to avoid Chapter 11

They just can't afford Chapter 11 and want to use the "bailout" in liu of debtor-in-possession financing they couldn't obtain on the open market.

[gravity]

24. I don't understand your logic.

If there is no bailout, the big three, especially GM, will face liquidation and bye bye jobs and pensions.

[Sen. Walter Sobchak]

26. This isn't a "bailout"

Chapter 11 re-organizations are obscenely expensive and a corporation going into Chapter 11 needs to have enough money to see the entire process through, very few large companies in trouble have this type of capital and the financing for the bankruptcy is obtained through debtor-in-possession financing which covers the ongoing opperation of the business and the expenses of the bankruptcy. It is in this bankruptcy where liabilities and contracts can be discharged.

Even before the liquidty crunch it would have been very difficult for Detroit to obtain debtor-in-possession financing for a Chapter 11 re-organization and today it would simply be impossible. None the less the Detroit automakers want to use Chapter 11 to break the union contracts and discharge legacy liabilities (watch the video in the link to see how United Airlines did it)

Since Detroit has no prospect of financing their own re-organization or obtaining 3rd party debtor-in-possession financing they are demanding a "bailout" these funds will be used to finance their respective Chapter 11 re-organizations where the contracts and liabilities will be discharged. So bye bye jobs and pensions.

These bailouts are the largest theft of assets and capital since the fall of the Soviet Union where state enterprises and assets were simply stolen by gangsters, expecting a better result here is naive.

[Romulox]

29. "DIP" = "Debtor in Possession". "3rd party DIP" makes no sense.

I think you mean "third party DIP financing".

[Sen. Walter Sobchak]

30. Sorry, clumsy abbreviation

fixed

[rucky]

28. Pretty sure that "Debtor in possession" means they have working capital to operate

with their existing ownership structure intact and a clean slate to work from.

Otherwise, the creditors take control of the operation.

http://www.usdoj.gov/ust/r07/sanantonio/Guidelines.htm

The Debtor in Possession ("Debtor") is required to comply in all respects with the Bankruptcy Code, Federal Rules of Bankruptcy Procedure ("FRBP"), and applicable Local Rules.



B. The Debtor must pay all obligations arising after the filing of the petition ("post-petition") in full when due. This includes not only general business expenses, but all post-petition obligations including but not limited to:



1. Wages;

2. FICA, both employee and employer share;

3. Tax deposits withheld from wages;

4. Federal and State employment taxes;

5. Sales tax;

6. United States Trustee Quarterly Fees; and

7. Any other taxes (ad valorem, property etc.).

[rhett o rick]

22. The bailout will not stop the car makers from filing chapter 11. This is their goal.

They want cheaper labor. They want to be rid of their retirement obligations. They don't give a shit about their workers or the American taxpayers. We are witnessing the biggest robbery in history.

[ColbertWatcher]

25. Why are there only 6 recs for this ? n/t

[Romulox]

27. Because the OP is dumb. Union workers won't be better off if GM files Chapter 7

vs. Chapter 11. So, the OP, even if true, isn't meaningful.

Even accepting the premise, 3 million workers will be better off working under renegotiated contracts than unemployed.

[ColbertWatcher]

31. "working under renegotiated contracts than unemployed"

Why do people have to choose?

[doc03]

32. I don't see anywhere that the OP is advocating Chapter 7

or Chapter 11 he is just saying the way it stands now if the industry doesn't get the money they will go Chapter 7. If the government gives them the money they will have the funds to reorganize rather than go into liquidation. I've seen it done in the steel industry, there were some companies that used the Byrd Bill (program of loans to help steel) as funds to keep them out of Chapter 11 and once they burned through that money they were forced into Chapter 7 liquidation because they didn't have the funds to file Chapter 11. In the case of the company I work for we were already in Chapter 11 and our company got a $115m loan to build a new furnace and we turned out to be the only one out of 40 some companies that successfully emerged from Chapter 11.

[Sen. Walter Sobchak]

33. what I am saying is

that those are are supporting the "bailout" because they believe the "bailout" will preserve the union contract are naive and that the only thing that has kept Detroit out of Chapter 11 is the fact they can't afford Chapter 11. Once the "bailout" is in their hands they will be able to successfully go through Chapter 11 and in the process they will romper stomp the UAW. I would imagine the game plan then calls for a lockout and ultimately decertifying the UAW.

[Romulox]

37. The OP is an anti-union zealot. Read any of his other posts on DU. nt

[Sen. Walter Sobchak]

43. only selectively

There are quite a few unions I think can goto hell - but I don't really have a problem with the UAW or the Teamsters.

[cliffordu]

34. K&R.

[Occam Bandage]

36. If they don't renegotiate those contracts, they're sunk, bailout or no.

Detroit cannot be competitive when their labor and health-care costs are thousands of dollars more per car than Toyota's and Honda's.

[earth mom]

39. Workers everywhere need to support Unions. Otherwise EVERYONE will be making minimum wage. nt

[ContinentalOp]

40. Is there any way to save the union?

It seems like some people are saying the bailout is merely a scheme to crush the union and others are saying the Republicans are opposing the bailout because bankruptcy will crush the union. It seems like either way the workers are screwed.