Tales from Bailout Nation Pt. XXVIII

And the beat goes on...

General Motors Co.'s recent stock offering was staged to start paying back the government for its $50 billion bailout, but one group made out much better than the taxpayers or other investors: the company's union.

Thanks to a generous share of GM stock obtained in the company's 2009 bankruptcy settlement, the United Auto Workers is well on its way to recouping the billions of dollars GM owed it — putting it far ahead of taxpayers who have recouped only about 30 percent of their investment and further still ahead of investors in the old GM who have received nothing.

The boon for the union fits the pattern established when the White House pushed GM into bankruptcy and steered it through the courts in a way that consistently put the interests of the union ahead of many suppliers, dealers and investors — stakeholders that ordinarily would have fared as well or better under the bankruptcy laws.

The union's health care and pension trust fund earned $3.4 billion through the sale of one-third of its shares in GM last week. Analysts estimate that it would break even if it sells the remaining two-thirds of its shares at an average price of $36 — close to where the stock traded shortly after the offering hit the market. GM shares closed at $33.45 on Wednesday.

Analysts predict that stocks will have to rise anywhere from $52 to $103 a share for the U.S. taxpayer to break even. Currently, the U.S. taxpayer is $9 million in the hole.


At the bottom of the linked article, we get this:

John Paul McDuffie, a professor at the Wharton School of Business, said the full funding of the union's pension and health care trust fund through the bankruptcy process represents progress because it helped solve one of most "persistent and difficult" bones of contention between GM and its union.

GM and the UAW had been at loggerheads for years over how to deal with GM's so-called "legacy" costs — funding the generous worker health care and retirement benefits it promised in earlier eras.

The bankruptcy settlement enabled GM to proceed with a hard-won 2007 plan it negotiated with the union to spin off those huge liabilities and let them be funded in the future by the trust fund that received the stock.

If this plan was already "won" then why was it part of the sweetheart bankruptcy deal?

Translating McDuffie then: Thorny legacy cost issue? Wave magic wand and give union trust fund exceedingly favorable stock treatment regardless of what had been negotiated previously. Problem solved.


We suppose that what is also part of the outrage with respect to this tax-payer funded bailout is that even if you tried to justify this unholy arrangement, where is the evidence that the federal government will not simply swoop in again to salvage a poorly-run business that makes horrible business decisions and manufactures products that no one wants to purchase?

Oh, and did we mention no guarantees against a tax-payer funded bailout with the attendant arm-twisting and smearing of those voicing objections to the bankruptcy proceedings and the lying about how the bailout money was paid back?

Tell it to this guy.

Craig Coffey, a retiree in Nevada who invested $55,000 in bonds in the old GM that are now worthless, was outraged that the union is on its way to recovering all its money before investors get even a cent of compensation.

"We just sat and watched [the stock offering]. We got nothing," he said. "Screwed again."