Corporate Welfare

Strings Attached

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Industrial policy, Democratic-style: The goverment will spend billions to help your company if you make yourself more green. Industrial policy, Republican-style: The government will spend billions to help your company if you do something about those damn unions.

Provisions of General Motors' and Chrysler's $17.4 billion in federal loans automatically places them in default if union workers go on strike.

A General Motors Corp. filing this week with the Securities and Exchange Commission detailed the provision as part of its $13.4 billion in federal loans.

A person briefed on Chrysler LLC's $4 billion loan, who didn't want to be identified because the company is in talks with the United Auto Workers union about concessions, confirmed Thursday that the Chrysler deal also has a similar provision.

The UAW isn't a party to the deal and hasn't threatened a strike, its most potent weapon against the Detroit automakers.

[Hat tip: quasibill.]

Update: Down in the comments, R.C. Dean writes:

I don't see that as anti-union, I see it as giving the union even more leverage in the upcoming negotiations.

Under different circumstances I would agree. But right now the UAW is as desperate for that money as the companies are—maybe more so, since it has more to lose in the event of a bankruptcy.

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  1. At least union workers will have some presidential protection now that someone of substance is coming into office.

    Card check is the only thing left standing in the way of fair union expansion. Corporatists will not be able to pressure workers into staying out of the unions any more.

  2. That is… awesome. The story, not the troll’s nonsense (whoever thinks this sockpuppetry is funny, could you please give it a rest?).

  3. I wish one of the two choices was “The government will not spend anything to help your company. That’s why it’s called ‘your’ company. Mind your own damn business.”

  4. I would prefer a provision allowing them to immediately hire permanent replacement workers in the event of a strike. Let ’em throw their tools down.

  5. P Brooks,

    Why do you hate the workers?

  6. Provisions of General Motors’ and Chrysler’s $17.4 billion in federal loans automatically places them in default if union workers go on strike.

    I don’t see that as anti-union, I see it as giving the union even more leverage in the upcoming negotiations.

    Gettlefinger has already said that he thinks the unions have given plenty in the last few years, and strongly implied he doesn’t think they should make any additional concessions. This “bond covenant” just means that the government agrees that GM shouldn’t insist on any concessions.

  7. What R C Dean said.

    This only strengthens the union’s hand. And what does it mean to place them in default anyway. Doesn’t that mean we need to loan them more money? Obviously we can never ever let them go bankrupt. Bankruptcy would have been the best way to deal with the union. I don’t see anything but tools of corruption here.

  8. It’s not like they will ever be able to repay the “loans” if they trigger a default provision.

  9. I wonder if “default” implies some sort of automatic bankruptcy and re-organization process.

  10. R.C.: Under different circumstances I would agree. But right now the UAW is as desperate for that money as the companies are — maybe more so, since it has more to lose in the case of a bankruptcy.

  11. I recommend the use of the Indisputably Non-Coercive Idiot Filter (INCIF) in conjunction with Firefox and Greasemonkey to relieve yourself of having to read undesirable posts. I haven’t tried it myself, but apparently it is a thing of beauty.

  12. But right now the UAW is as desperate for that money as the companies are — maybe more so, since it has more to lose in the case of a bankruptcy.

    I think we all know that there is no way a Dem Congress and President simply allow GM and Chrysler to file a Chapter 11 and let the courts do their work unmolested. No, there will be a government subsidized and overseen workout that will have plenty of protections for the unions, and Gettlefinger knows it.

    The unions, of course, know that GM and Chrysler need truckloads of cash to stay in operation. They apparently don’t feel the need to make any concessions to help GM and Chrysler get the cash so far, and indeed, they haven’t been required to give any, so far.

    They’re much better off (and they know it) negotiating with a Dem government on any concessions than with GM and Chrysler, and that’s exactly who will say yea or nay on any concessions that are required to keep the money coming. The bond covenant just confirms and entrenches that.

    Lets say GM and Chrysler suddenly and unexpectedly grow spines, and tell the unions to take it or leave it on a major rewrite of their contracts.

    The union can now say no, and not only will our strike close down production (not much of a threat, given that plants are closing anyway), it will also force you into default on your loans, which in turn will trigger a Congressional reorganization of the auto industry. The losers in that reorganization will certainly be management and shareholders, with the unions likely to cut a better deal with the people they put in office than they could get anywhere else.

  13. “Gettlefinger has already said that he thinks the unions have given plenty in the last few years, and strongly implied he doesn’t think they should make any additional concessions.”

    The problem as I’ve read about it is not that the current workers are asking for so much relative to the non-union foriegn automakers in the US (of course those foriegn automakers that are not doing so bad have plenty of hunion workers in plants in other nations without their utter collapse for defying the Gods of the Market in doing so), but the legacy costs. What can today’s unions give to make up for the promises of the companies to past union employees when times were fat? I’ve usually found many libertarians to have, let us say, a rather “enthusiastic” emphasis on people keeping contractual promises and so the past promises probably can’t be dealt with.

    The funny thing here is how the Southern GOPers are dealing a death blow to their party becoming a national party again anytime soon. A lot of the Reagan Democrats were union men and women, who won’t take kindly to the rather obvious attempt by the GOP to bending over and screwing them and their jobs. McCain banked quite a bit on taking Michigan, good luck next GOP nominee!

  14. I’ve usually found many libertarians to have, let us say, a rather “enthusiastic” emphasis on people keeping contractual promises and so the past promises probably can’t be dealt with.

    Of course, many libertarians are also quite comfortable with unsustainable contracts becoming null and void when one party goes out of business.

    Some are even comfortable with cramming down unsustainable contracts in bankruptcy.

    And, of course, we are always comfortable with the parties to a contract (the unions, after all, not their individual retirees) renegotiating the deal if necessary to prevent either of the above.

    So no, the legacy benefits are not graven in stone forevermore.

  15. Jesse,
    R C Dean is right on point. Bankruptcy is off the table, unless you mean the whole economy going bankrupt, which is becoming increasingly less unlikely.

  16. Under different circumstances I would agree.

    Disagree with your disagreement.

    +1 for RC Dean’s view.

    They apparently don’t feel the need to make any concessions to help GM and Chrysler get the cash so far, and indeed, they haven’t been required to give any, so far.

    Which is kind of a circular explanation of why they don’t feel the need to offer concessions. They’re much more comfortable making the evil companies the boogeymen, and they’re just the poor workers trying to make a buck while sitting on their asses earning only 95% of what they’d do working.

    Seriously, you’ve got work rules like this. You’ve got an incoming administration who thinks you can do no wrong. You’ve got a default clause in a financing contract, which will put management out on the street and perhaps in legal trouble if you strike. What need would you have to offer any concession whatsoever?

  17. I’m in favor of any provision that torpedos the bailout.

  18. i agree with r.c. dean. the republicans just gave the union a nuclear weapon. what does this say about the intelligence of republicans?

  19. Lets say GM and Chrysler suddenly and unexpectedly grow spines, and tell the unions to take it or leave it on a major rewrite of their contracts.

    That (the contract) is certainly a big part of it- the fucking “jobs bank” absolutely positively needs to go away. I think the more likely trigger for a strike threat would be plant closings, which are absolutely necessary if these guys have any hope of surviving.

  20. Look, it’s already been said, by the GOP administration no less, that GM and Chrysler are not going to be allowed to fail. Why would the UAW give up a damned thing when they know the company can’t fail as it’s backed by the taxpayers. Is AMTRAK out of business yet? This 14.7(?) billion is just the tip ofd the iceberg folks. I prdicet that by the end of 2015, we will have sunk 500 billion into the big 2.5 as they continue to hemorrhage cash.

  21. But right now the UAW is as desperate for that money as the companies are — maybe more so, since it has more to lose in the event of a bankruptcy.

    No they don’t. Worst-case, the Dems will just use the government to pay them whether they work or not. They’ll call it stimulus.

    Go on, tell me it can’t happen.

  22. Provisions of General Motors’ and Chrysler’s $17.4 billion in federal loans automatically places them in default if union workers go on strike.

    Tough call on this one. I can definitely see the Republicans drooling over the chance to ‘stick it’ to the UAW. But then again, these guys (and these companies) are now quasi-government employees.

    I agree with RC Dean, I don’t see this as necessarily anti-union, but an attempt to protect the entire process. Because let’s face it, sometimes being in a union is signing on to a suicide pact.

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