Sunday, August 26, 2012

In An Internet Littered With Misinformation About The GM and Chrysler Bailouts Some Useful Links

In An Internet Littered With Misinformation About The GM and Chrysler Bailouts Some Useful Links

The restructuring of the bankrupt General Motors Corp. and Chrysler LLC in 2009 through the creation of new companies formed with assets purchased from the bankrupt firms was highly successful. Today, they are profitable, investing in America and creating jobs.

The decision to save GM and Chrysler prevented an economic catastrophe that would have thrown the nation into a full-blown depression, resulting in dozens of additional bankruptcies in the auto industry and across industrial America. Instead, today the auto industry is helping lead our nation's economic recovery.

When people insist that GM and Chrysler should have been restructured with private funds, we must remember that no entity besides the U.S. Treasury would provide financing. Without the Treasury, "Let Detroit Go Bankrupt" would have become "Force Detroit to Liquidate."

U.S. Bankruptcy Judge Arthur J. Gonzales found exactly that when authorizing the sale of Chrysler LLC's assets to the new Chrysler: "The Sale Transaction is the only alternative to liquidation available to the Debtors."

Likewise, the claim that Chrysler's secured creditors got less than they were entitled to is laid to rest by the judge in the Sale Order: "The Sale Transaction will provide a greater recovery for the Debtors' creditors than would be provided by any other practical available alternative, including, without limitation, liquidation whether under Chapter 11 or Chapter 7 of the Bankruptcy Code."

The Chrysler creditors group agreed, with over 90 percent supporting the sale as ordered, while the U.S. Appeals Court and the Supreme Court rejected challenges to the Sale Order.

That hasn't stopped critics like the Heritage Foundation from repeating the rejected claim that the UAW retiree health care trusts received more than they were entitled to under the principles of bankruptcy when compared to unsecured creditors.

But the comparison is hardly apt. The creditors' recovery is still occurring as a part of the bankruptcy process, while the health care funding was approved by the court under the specific part of the bankruptcy code that deals with retirees.

GM and Chrysler prudently bargained new contracts with the employees (and suppliers) they needed to be successful as newly formed entities. That amounts to good business judgment that is difficult to second guess when both companies are performing better than they have in decades.

Critics also like to forget the significant sacrifices made by UAW members. Plants were closed, and tens of thousands lost their jobs. Experienced workers gave up raises, cost-of-living increases, bonuses, vacation pay, overtime pay, holidays and break time, while those hired since 2007 work for lower pay and benefits. Retiree health care liabilities were shifted to the retiree trusts; retirees lost vision and dental coverage, and face increased out-of-pocket costs.

In 2011 UAW members approved new collective bargaining agreements with the domestic automakers that contain no raises but the possibility of increased at-risk compensation through profit sharing.

In return, the companies are investing in U.S facilities to create at least 20,000 new direct jobs, resulting in tens of thousands of jobs at businesses supported by the auto industry nationwide.

Who knows here or how they start, but a favorite myth of the anti-American conservatives web sites is that the gov'mint gave Chrysler to Italian automaker Fiat. Sounds crazy, because it is - Truth Squad: Did government give automakers to UAW, Fiat?

Obama Auto Bailout Has Created 10 Times More Jobs Than Romney Ever Did

Assessment of Tax Revenue Generated by the Automotive Sector (pdf) - "In 2010, the production, sales and service, and use of the automobile contributed $91.5 billion to state government tax revenues and at least $43 billion to federal government tax revenues.". Sometimes links go dead. If that should happen try using Google to search for the title of the hyperlink.

Another myth: Bush and Obama should not have helped out Detroit auto makers because auto workers make too much money. These critics think that Mitt Romney's vulture capitalism and offshore bank accounts are fine. So we're talking about critics who have their facts wrong and some wacky unpatriotic values. Auto Worker Salaries. If unions by nature of just being unions make bad cars and make car companies less competitive than conservative critics need to explain why Germany and japan has stronger unions than the U.S. Governments in both both countries have also helped out their auto industries.