Why is Bailed-Out GM Paying Out Bonuses?
General 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 that GM is spending hundreds of millions of dollars in bonuses to UAW members and others less than two years after receiving $50 billion of taxpayer bailout money? The public is rightfully incensed. A past Rasmussen poll showed that the auto bailouts were less popular then bank bailouts and Obamacare. You would not know that based on the coverage GM is receiving. Politicians, many of whom receive political support and contributions from unions, are not speaking out on behalf of the majority of their constituents who do not support the continued UAW payoffs. Television networks may not want to bite the hand that feeds them, considering the massive spending spree GM has been on which includes taxpayer funded ad campaigns.
Apologists for General Motors and the UAW justify the bonuses by claiming that the UAW sacrificed much in the GM bankruptcy. I have not seen where the UAW has made much in the lines of sacrifice. Of the $20 billion that the UAW forgave in benefit obligations, the UAW received 17.5% equity in New GM now worth approximately $10 billion, $2.5 billion in cash and $6.5 billion in preferred preferred shares for a total of $19 billion. Add to that the recently contributed $6 billion of cash and equity by GM in to a UAW benefits' fund. Compare this to the $28 billion the GM bondholders sacrificed. Bondholders have yet to receive their payout, but current bond pricing puts the value of outstanding bonds at about $9 billion. Even though contract law puts bondholders on equal standing to other creditors, the disproportionate returns demonstrate President Obama's crony capitalism whereby politically connected groups like the UAW benefit at the expense of less favored groups. Taxpayers, as well, are nowhere near having their money paid back in full.
General Motors should be free to pay its workers and management whatever they want to, AFTER the taxpayers no longer have a stake in GM. Until that time our representatives should show some of the indignation they displayed during the auto bailout hearings when GM decides to be overly generous with taxpayer money. The public should expect this from its representatives along with unbiased reporting by the media.