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April 21, 2009
More money down the auto company black hole
Rick Moran
I know this information is going to make your day. It appears that Obama is going to give $500 million to Chrysler to "tide it over" until its merger deal with Fiat is finalized and another pittance - only $5 billion this time - to GM so that it can last long enough to be declared a total failure and file for bankruptcy:
Separately, the United Auto Workers (UAW) union urged its members to lobby the White House by phone or email to ensure that workers and retirees are treated fairly in negotiations at both companies on new concessions, which are considered vital for the automakers' to survive.
"We need President (Barack) Obama and his auto task force to stand up for the interests of workers and retirees in these restructuring negotiations," the union said in an appeal on its Web site to members.
The UAW represents about 26,000 workers at Chrysler and 62,000 at GM.
The union is under pressure along with bondholders and banks to help Chrysler and GM slash debt so they can restructure. The central issue for the UAW and the car companies is reaching an accord on restructuring the finances of a multi-billion-dollar retiree health care trust.
The administration's task force does not believe Chrysler can stand alone and is brokering meetings this week in Washington and Detroit to see if a deal with Fiat is possible.
The government has indicated it will finance the Chrysler-Fiat merger with up to $6 billion more in cash.
The interesting thing is asking what the unions are so worried about? Do they actually believe Obama is not going to do everything in his power to make sure they maintain most of their goodies? My guess would be that health care trust will remain as is while salaries and some other benefits may be reduced.
But it won't be enough and GM will likely find itself back in a few months or a year with hat in hand, weeping that it is "too big to fail" and more billions will be sent to oblivion. Obama and the car companies are now joined at the hip and even if he wanted to rid himself of the problem, he is trapped with no way out. It is the mindset of government that if you've thrown billions at a bad investment, the only thing you can do is keep throwing billions at the same failed project until someone comes along and takes their ice cream away.
Fiscal sanity is a long way off in Washington.
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