Last week, President Barack Obama lambasted Chrysler bondholders for torpedoing his efforts to keep the company out of Chapter 11 by refusing to accept the deal he offered them to retire their outstanding debt. He condemned them as “speculators” – the arch villains in Obamanomics it seems. “They were hoping that everybody else would make sacrifices, and they would have to make none,” he glowered before the cameras.
At the same time, he lavished praise on the UAW for everything it had done to keep Chrysler out of bankruptcy. “The UAW, who had already made painful concessions, agreed to further cuts in wages and benefits – cuts that will help Chrysler survive,” he cooed.
So what noble sacrifice did the UAW make to merit such love from the president?
Nada, by historic standards.
The New York Times – the New York Times! – reported this weekend that for the UAW, the bankruptcy deal could turn out to be “the Cadillac of Bankruptcies.”
The Treasury has given it upfront protection for its pension plan and the fund that will take over responsibility for retiree medical benefits – which means that even if the company goes under -- hardly a remote possibility given swooning car sales -- UAW workers will continue to draw a huge chunk of their pension and benefits from taxpayers. What’s more, that medical fund, called the voluntary employee beneficiary association, or VEBA, will control 55% equity in the new Chrysler once it emerges out of bankruptcy, and hold a seat on the Chrysler board. When all is said and done, I would guess that UAW could theoretically end up with over 60 cents on the dollar for what the company had promised it.
“This is extraordinary, truly extraordinary,” Mary Jo Dowd, a partner in the financial and bankruptcy restructuring practice at Arent Fox told the Times. And David L. Gregory, a labor law professor at St. John’s University, when asked if he could recall any other union that fared as well replied: “Nobody’s even close.” Airline and steel workers unions suffered far deeper cuts in benefits and pensions when their companies went into bankruptcy. For instance, workers at Bethlehem Steel, United Air Lines, Delta Air Lines and US Airways lost all or most their traditional pension benefits. Indeed, clearing out these obligations was the main reason these companies filed for Chapter 11.
Meanwhile, what did the president offer the dissenting bondholders? In all, $2.25 billion (which has now been cut back to $2 billion since they spurned the offer) for a $6.9 billion debt – or 32 cents on the dollar. (GM bondholders have so far been offered 5 cents on the dollar compared to 76 cents for the UAW).
In other words, the president praised the UAW for its self sacrifice even as he allowed it to make out like a bandit – and he ripped bondholders as greedy even as he screwed them over big time.
How did the UAW become the president’s personal panda bear? By donating about $25.4 million to Democratic federal candidates over the last 20 years, according to another New York Times story. The union ranks 16th on OpenSecrets.org, a Web site that tracks campaign contributions, in terms of the size of its political donations. Meanwhile, Chrysler did not even make the list and GM, that gave $10 million in that period, came in 73rd.
This will surely go a long way toward eliminating the influence of special interest groups from politics. You go, BO!