GOP Myopia
No, that's not a new car from GM, it's a comment on the GOP's handling of the ongoing negotiations to prevent the collapse of the U.S. auto industry.
In the blink of an eye, the Senate Republican caucus has gone from principled to partisan. The bill that came out of the House was deeply flawed and rightly opposed by Republicans in the Senate. It did little to nothing to drive the considerable and requisite restructuring of the Detroit Three. Senator Corker (R) of Tennessee stepped up and led an effort to ameliorate legitimate GOP concerns by brokering a deal that addressed substantive obstacles in the path of long-term viability. He apparently was able to secure agreement from the industry's major bond holders to accept in the neighborhood of 30 cents on the dollar—a herculean achievement. That major concession would have greatly reduced the enormous debt burden on the balance sheets of GM, Ford, and Chrysler, and, along with additional 11th hour concessions from the UAW (further closing the compensation parity gap with the foreign transplants) , would have gone a long way toward delivering the material restructuring I've been calling for on this Blog. It might not have been as good as what could be accomplished via a pre-packaged Chapter 11 process, but it should have been sufficiently workable, nevertheless.
Unfortunately, it seems that Corker did not have the full support of his caucus. The Republicans apparently backed away from the tentative agreement. From the reports, one can presume that the GOP was reflexively looking to either break the union or inflict as much damage as possible. If so, pragmatism was blinded by partisanship. The UAW, from all I've heard and read, has been an honest broker in this ongoing negotiation, yet, the GOP has responded in its traditional anti-union fashion, ignoring the fact that this time organized labor may actually be making real and material concessions.
Treasury should now step in and commit enough TARP dollars to backstop GM and Ford (Chrysler should be Cerberus' responsibility) until the next administration takes control. They should do so on the exact terms that were tentatively agreed to last night before the Republicans backed off—assuming they are as UAW President, Gettelfinger, communicated during his press conference this morning.
In the blink of an eye, the Senate Republican caucus has gone from principled to partisan. The bill that came out of the House was deeply flawed and rightly opposed by Republicans in the Senate. It did little to nothing to drive the considerable and requisite restructuring of the Detroit Three. Senator Corker (R) of Tennessee stepped up and led an effort to ameliorate legitimate GOP concerns by brokering a deal that addressed substantive obstacles in the path of long-term viability. He apparently was able to secure agreement from the industry's major bond holders to accept in the neighborhood of 30 cents on the dollar—a herculean achievement. That major concession would have greatly reduced the enormous debt burden on the balance sheets of GM, Ford, and Chrysler, and, along with additional 11th hour concessions from the UAW (further closing the compensation parity gap with the foreign transplants) , would have gone a long way toward delivering the material restructuring I've been calling for on this Blog. It might not have been as good as what could be accomplished via a pre-packaged Chapter 11 process, but it should have been sufficiently workable, nevertheless.
Unfortunately, it seems that Corker did not have the full support of his caucus. The Republicans apparently backed away from the tentative agreement. From the reports, one can presume that the GOP was reflexively looking to either break the union or inflict as much damage as possible. If so, pragmatism was blinded by partisanship. The UAW, from all I've heard and read, has been an honest broker in this ongoing negotiation, yet, the GOP has responded in its traditional anti-union fashion, ignoring the fact that this time organized labor may actually be making real and material concessions.
Treasury should now step in and commit enough TARP dollars to backstop GM and Ford (Chrysler should be Cerberus' responsibility) until the next administration takes control. They should do so on the exact terms that were tentatively agreed to last night before the Republicans backed off—assuming they are as UAW President, Gettelfinger, communicated during his press conference this morning.
Your point is well taken. I do take issue with the UAW. If Sen Corker was correct and the UAW did not want to chip in until 2011 then the bill died an unfortunate death and the UAW missed a lifetime opportunity to become a big stake holder in two of the big three. If I were negotiating for the UAW I would have made concession but asked for a significant percentage of convertible preferred in the ownership structure. Furthermore the preferred stake could have been structured with a guaranteed dividend. My guess is that within five years their ownership stake in these two companies would have been worth more than enough to offset the current shortfall in the "fund" which has no chance in hell to recover at this rate.
Sometimes history will repeat itself. It wasn't so long ago that the steel industry in this country and especially Pittsburgh suffered from the same fate.
Then again the UAW and the Republican caucus suffer from the same intellectual partisan. The Dems, even though, beholding to the unions will come out of this stronger than before. What the hell has happen to the republican base?
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Joey B,
Your comments are right on the mark. No doubt it would have been nice if the UAW had agreed to accelerate the concessions in question from 2011 to 2009. I, however, thought there was still enough in the Corker package to get a deal done, particularly considering the UAW had previously given ground on a number of key items.
I felt that getting the enormous debt burden of the Detroit Three dramatically reduced was the single biggest possible boost to long term viability prospects, especially when that was coupled with commitments to achieve cost parity with the foreign transplants (albeit 2 years later than desired).
The other factor I really liked (similar to your point above) was that Corker's proposal called for the UAW to take equity rather than dollars as part of the pre-existing plan to turn over healthcare funding to the union. As you state, one of the best ways to get management and labor on the same page is to tie compensation to ownership interest. Labor should have an opportunity to share in the upside of any turnaround. Equity participation is the best way to achieve that end.
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