UAW and GM Get Covert Bailout Through ObamaCare

The Obama Administration continues to find ways to funnel taxpayer funds to General Motors and the UAW. A hidden bailout was recently uncovered buried within the Obamacare bill. This latest giveaway goes by the name of “Early Retiree Reinsurance Program” or ERRP for short. Washingtonexaminer.com reported last week that the program was discovered by investigators for the House Energy and Commerce Committee.

ERRP’s price tag to taxpayers is $5 billion. The goal of the program is to provide subsidies to unions, states (for public employees) and corporations for health care coverage for retirees aged between 55 and 64. To date, over $2 billion has been given away. And who’s the biggest recipient? The UAW cashes in at number one receiving about $207 million of political payback. That was more than the states of New York, California and Texas, combined, received. Bailed out GM also gets a piece of the pie, …

Why is Bailed-Out GM Paying Out Bonuses?

autoworkerGeneral Motors will pay its factory workers bonuses of $4,000 each. AP reports that more than $189 million will be paid to UAW workers in addition to salaried workers (management and engineers) bonuses of up to 50% of pay. It is interesting to read the decidedly negative view of GM’s actions in comments that are submitted by readers at the end of the AP article. It remains a “tale of two cities”, however, when it comes to media coverage (particularly from television journalists) with many commentators refusing to acknowledge the public outrage as GM spends millions of dollars on bonuses while taxpayers and GM bondholders continue to have their rights subordinated to the politically powerful UAW.

During auto bailout congressional hearings, many representatives expressed indignation when then General Motors’ CEO, Rick Wagoner, spent thousands of dollars to fly on a private jet to the meetings. Where are these congressmen now …

UAW Makes Out (Again) on GM Bankruptcy

autoworkerThe New York Times reports that the auto industry “overhaul” (AKA General Motors’ bankruptcy) is about to “pay off handsomely” for UAW workers at GM. GM, along with Ford, is expected to announce profit-sharing checks for hourly workers this month. UAW president, Bob King, states that workers expect to get a piece of GM’s profits.

There was a time when publicly traded companies were expected to deliver profits to shareholders in the form of dividends or increased share price. This model seems to have been subordinated at General Motors where the desires of politically favored union members seem to take precedence over other stakeholders. In a particularly egregious example of the wealth redistribution scheme at GM, Old GM bondholders have yet to receive their equity distribution as laid out in the  bankruptcy proceeding. It is likely that additional stock offerings will dilute the bondholders’ share while their equity is held …

Don’t Pop the Corks for GM Just Yet

Most news we hear regarding General Motor’s IPO this week proclaim the event as a huge success.  It would be prudent to consider whether the process leading up to and following the auto industry restructuring should be a template for future restructurings, as Al Koch (head of Motors Liquidation or “Old GM”) has stated. While some may argue the positive aspects of the GM bailout, it is more than just sour grapes or GM hating that contributes to a desire to have a continuing dialogue on the precedent setting procedures that may lead to a subversion of contract law that has governed for over 200 years in this country.

First, there should be recognition that some creditors were favored over others in the GM bankruptcy process.  It can be spun any way apologists want, but the facts are clear that politically favored groups, i.e. the UAW, were favored over bondholders. …

GM IPO is Wealth Redistribution Scheme

UAW/GM logosThe term “wealth redistribution” has been used by political pundits on the right who accuse Democrats of having a misguided agenda wherein the wealthiest Americans will be able to subsidize a government spending spree in order to redistribute wealth to the less affluent populace. General Motors, through its reorganization plan, has contrived its own version of wealth redistribution. This action was orchestrated by the Obama Administration as it took control of the GM bankruptcy process. Old GM shareholders and bondholders, along with taxpayers, lose out as new wealth is created for bankruptcy attorneys and advisers, investment banks and the politically connected UAW.

During the bottom of the latest economic cycle, auto industry sales plummeted far below normal levels. President Obama recently explained that Ford was able to ride out this rough patch by borrowing $23 billion to shore up their balance sheet prior to the downturn.  For a short (and …