CNN's Bill Tucker reported that "some economists" say the Chrysler restructuring deal is a "straight payback" to the UAW from the Obama administration. But Tucker did not note any of the numerous concessions the union has reportedly made as part of a related deal.
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On the April 30 edition of Lou Dobbs Tonight, CNN correspondent Bill Tucker reported that "some economists" claim a proposed Chrysler restructuring deal -- under which the United Auto Workers (UAW) are "expected" to become "Chrysler's single biggest shareholder, owning 55 percent of the company" -- is a "straight payback" to the union from the Obama administration. But Tucker did not note that as part of a related deal between Chrysler, Fiat, and the U.S. Treasury Department that was intended to avoid Chrysler's bankruptcy, the UAW reportedly agreed to a suspension of cost-of-living pay raises and performance and Christmas bonuses, and the elimination of dental and vision coverage, among other concessions. According to an April 30 UAW press release, the union "will join with the U.S. government, Chrysler and Fiat in urging the U.S. Bankruptcy Court to give immediate approval" to those agreements.
During the segment, Tucker reported that when Chrysler emerges from bankruptcy, the UAW "is expected to be Chrysler's single biggest shareholder, owning 55 percent of the company," adding: "Some economists are blunt in their observation, saying the deal is a straight payback" to the union. Tucker then aired University of Maryland professor Peter Morici's claim: "Obama's deal gives the lion's share of the benefits to the union over the creditors. This is clearly a payoff to the UAW for their support during the recent presidential campaign." Tucker further reported, "Other financial analysts don't see it as a straight union play, however. They argue the situation is the result of a bad combination of industry lobbying and union power."
In an April 27 article on the restructuring of the Chrysler company, The Associated Press outlined the numerous concessions agreed to by the UAW in an attempt to avoid Chrysler's bankruptcy:
The Obama administration required that equity fund at least 50 percent of Chrysler's $10.6 billion obligation to a union-run trust that will take over retiree health care costs starting next year, according to the summary.
It also said that under the agreement, workers will no longer get most of their pay if they are laid off. Instead, they will get supplemental pay from the company equal to 50 percent of their gross base pay.
Under the deal, which was reached with Chrysler, Fiat and the U.S. Treasury Department, cost-of-living pay raises will be suspended through the contract's expiration in 2011, and it adds a provision for binding arbitration on a new contract through 2015. If no agreement can be reached on a new contract, the arbitrator must base total hourly labor costs on a rate comparable to Chrysler's U.S. competitors, including foreign-owned manufacturers.
The union also agreed to consolidate nonskilled labor job classifications into a team concept at all factories. Performance and Christmas bonuses will be suspended this year and next to help pay health care costs.
Under the health care trust, retirees will no longer have dental and vision coverage, according to the summary sheet. The union says it likely will have to make additional benefit cuts in 2010 and 2011 because of uncertainty over the value of the Chrysler stock.
From the April 30 edition of CNN's Lou Dobbs Tonight:
DOBBS: The deal to save Chrysler means the United Auto Workers union could own as much as 55 percent of the company, all of this with the help of billions upon billions of dollars in taxpayer money. The federal government has already given Chrysler $4 billion in loans.
Bill Tucker has our report.
[begin video clip]
TUCKER: President Obama sold bankruptcy for Chrysler as the best possible deal for the company, the workers, and the taxpayers. Critics say Chrysler should have been allowed to fail last December. When all is said and done, the United Auto Workers union is expected to be Chrysler's single biggest shareholder, owning 55 percent of the company.
Some economists are blunt in their observation, saying the deal is a straight payback to the United Auto Workers union.
MORICI: In bankruptcy court, the creditor's rights would be superior to the union. But Obama's deal gives the lion's share of the benefits to the union over the creditors. This is clearly a payoff to the UAW for their support during the recent presidential campaign.
TUCKER: Other financial analysts don't see it as a straight union play, however. They argue the situation is the result of a bad combination of industry lobbying and union power.
OLIVIER GARRET (Casey Research CEO): Unfortunately, because they represent a lot of voters and a lot of lobbying power, the politicians have responded by delaying the process that was, in my mind, unavoidable. And by delaying it, they're going to -- it's going to cost more jobs and there will be more American workers that will lose their jobs as a result.
TUCKER: And management will be getting a bone. With the closing of Chrysler Financial, GMAC will take over as the preferred lender to buyers of Chrysler cars. GMAC is owned by GM and Cerberus, the private equity group which owns Chrysler. And while Chrysler CEO Bob Nardelli will be losing his CEO job, he will remain as a consultant to Cerberus.
President Obama calls the deal orderly and controlled. One congressman who represents many union members says it is now anything but that.
REP. THADDEUS McCOTTER (R-MI): Now you're in bankruptcy, and the very UAW workers and the very retirees that people talk about continue to face a cruelly uncertain future in a process of bankruptcy, which is indeterminate and defies any expiration date on a -- with unknowable bounds.
TUCKER: The phrase, "quick-rinse bankruptcy," could be anything but.
[end video clip]
TUCKER: And ironically, the small hedge fund investors that the president took sharp aim at, at his news conference, are secured investors. Under bankruptcy law, that puts them, Lou, at the front of the line.
DOBBS: Well, the taxpayer's obviously at the end of the line.
DOBBS: We -- a lot of unanswered questions. How much taxpayer money does Cerberus walk away with? That is the private equity firm that owns Chrysler. How much of the money that the United Auto Workers union receive both in health care benefits and retiree pensions will be paid for by the American taxpayer? And what happens if this doesn't work? Huge questions.
TUCKER: It's a big question.
DOBBS: All right. Thank you very much -- Bill Tucker.