Detroit, Mich. – Here we go again.
Obama’s Auto Task Force continues its War on Capital this week as it sets up bondholders to be the fall guy for GM’s bankruptcy. “The reorganization, as envisioned by the automaker with support of the federal government, is complex,” claims a clueless New York Times this morning. Actually, the feds are in the driver’s seat and their plan is quite simple.
As with Chrysler, the task force union is lining up “concessions” from the UAW this week that will isolate bondholders as the scapegoat for a GM bankruptcy. In fact, the feds scheme is a power grab to give Democratic Party-favorite United Auto Workers 39 percent of GM and the government 50 percent — even as bondholders holding $27 billion in debt (versus the $15.4 billion Washington has put in thus far) are left with just 10 percent of the company.
As usual, the UAW and feds are tight-lipped about details. But a parallel deal worked out this weekend by the Canadian Autoworkers is a useful reference to the “sacrifice” of auto unions. “According to the CAW,” reports AP, “starting pay rate for new hires will be 70% of the established rate, with increases of 5% per year for 6 years. The deal . . . ends tuition assistance for workers joining the company.”
Meanwhile, a bondholder — say, Debra June, a substitute teacher from Florida, reports today’s Wall Street Journal – will see her $70,000 in GM bonds swapped for GM stock worth about $280.
“The Chrysler bankruptcy has gone surprisingly smooth,” Automotive News auto analyst Peter Brown said this morning. That’s because the feds ran roughshod over Chrysler debt-holders, forcing them to accept 29 cents on their investment dollar while handing over to the UAW most of the company value they didn’t keep for themselves.
Chryler’s secured debt-holders were demonized as “hedge funds” by the media, but the press is finding GM bondholders harder to ignore.
“Dennis Buchholtz, a 67-year-old retired tool-and-dye supervisor from Warren, Mich., has $98,000 in GM bonds,” continues the Journal story.
Mr. Buchholtz, who gets no pension, uses interest from the bonds that amount to about $600 a month to supplement his social security payments. About 10% of Mr. Buchholtz’s life savings is invested into GM bonds. Chris Crowe, a retired electrician from the Denver suburb of Lakewood, Colo., planned to use the returned principal to eventually send his 13-year-old son to college. He recently flew to Warren for a rally supporting small GM bondholders.
“ ‘Bonds are a loan, they are not a speculative stock,’ says Mr. Crowe.”
These are the people Obama wants to stiff-arm as uncaring about the plight of the working man. The Pensioners v. Big Labor. Let the battle begin.